For a future
made possible
by science
.
IP GROUP PLC
ANNUAL REPORT & ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2023
REGISTRATION NUMBER: 04204490
STOCK CODE: IPO
CONTENTS
.
BUSINESS OVERVIEW
Highlights
01
At a glance
04
STRATEGIC REPORT
Chair’s statement
06
CEO review
08
Business model
10
Market environment
12
Strategic progress
17
A culture that contributes to
our purpose
19
Portfolio review
21
CFOO review
31
Key performance indicators
36
Meaningful impact
38
Task Force on Climate-related
Financial Disclosures
46
Risk management
60
Working with the Group’s stakeholders
74
OUR GOVERNANCE
Governance at a glance
86
Board of Directors
88
Corporate governance framework
92
Corporate governance statement
93
Nomination Committee Report
102
Directors’ Remuneration Report
111
Audit and Risk Committee Report
129
Directors’ Report
137
Statement of Directors’ responsibilities
140
OUR FINANCIALS
Independent auditor’s report
141
Consolidated statement of
comprehensive income
152
Notes to the consolidated
financial statements
156
Company balance sheet
204
Notes to the Company
financial statements
206
Company information
IBC
At IP Group, we understand science.
We understand its impact today and its
potential to shape the future.
With more than 20 years’ experience evolving
great ideas into world-changing businesses,
we also understand that progress takes
patience. That is why we choose partners
with purpose, who, like us, are committed to
impacting the world’s greatest unmet needs.
Together, we accelerate the impact of science
to transform ideas into impact, at scale. We
see a future transformed by human ingenuity.
And we look to make it happen by spotting the
opportunities others miss.
We are one of the most active investors
in university and other research-based
companies in the world, with a proven track
record in backing and nurturing science
and technology-based businesses to deliver
impact and returns. Since the Group was
founded, IP Group and Parkwalk Advisors
have backed over 500 companies whose
compelling ideas, products and services
will meaningfully contribute to a healthier,
tech-enriched and regenerative future.
We aim to accelerate the impact of science
for a better future.
IDEAS
POWERED
.
IMPACT
.
PORTFOLIO
.
EXPERTISE
.
TRACK RECORD
.
PERMANENT CAPITAL
STRUCTURE
.
INTERNATIONAL
RELATIONSHIPS
.
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR FINANCIALS
OUR GOVERNANCE
HIGHLIGHTS
.
Total portfolio
1
£1,164.9m
2022: £1,258.5m
2023 portfolio
1
investment
£73.2m
2022: £93.5m
2023 total funds raised
by portfolio companies
£667m
2022: £1,014m
2023 cash proceeds
from realisations
1
£38.6m
2022: £28.1m
1
Note 28 details the Alternative Performance Measures (“APMs”).
Maturing portfolio with multiple
near-term value
creation opportunities
Financial
strength maintained
during challenging
markets
Continued commitment to
shareholder returns
Hysata recognised
as Energy Transition
Changemaker by
COP28 Presidency
Istesso completed
recruitment in
Phase 2b trials on
rheumatoid arthritis
Leading scores
for ESG from MSCI,
Sustainalytics and ISS
Maintained high eNPS
employee engagement
scores
The market environment for early-stage investing remained
challenging in 2023. In response we have prioritised and
heavily focused our activities and capital on developing
leading portfolio opportunities in the high-growth sectors
where our teams have deep expertise. The Group’s portfolio
successfully raised a total of £667m, with the Group
investing £73.2m alongside more than fifty co-investors.
Having appropriately managed our level of portfolio
investment, the Group finished the year in a strong financial
position with £227m gross cash, an important strategic
asset in the current environment.”
Greg Smith
CEO
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR FINANCIALS
OUR GOVERNANCE
01
IP GROUP PLC ANNUAL REPORT 2023
IP GROUP PLC ANNUAL REPORT 2023
01
2023 HIGHLIGHTS
.
FINANCIAL HIGHLIGHTS
Net Asset Value (“NAV”)
£1,190.3m
2022: £1,376.1m
NAV pence per share
1
114.8p
2022: 132.9p
% return on NAV
1
(13%)
2022: (20%)
Return on NAV
1
(£172.2m)
2022: (£341.1m)
Loss for the year
(£174.4m)
2022: (£344.5m)
Total portfolio
1
£1,164.9m
2022: £1,258.5m
Gross cash and deposits
1
£226.9m
2022: £241.5m
Cash proceeds
1
£38.6m
2022: £28.1m
Portfolio investment
1
£73.2m
2022: £93.5m
Dividend
0.51p
2022
2
: 1.26p
1
Note 28 details the Alternative Performance Measures (“APMs”).
2
Dividend figure for 2022 includes both interim dividend (paid in 2022)
and final dividend (paid in 2023).
02
IP GROUP PLC ANNUAL REPORT 2023
IP GROUP PLC ANNUAL REPORT 2023
02
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR FINANCIALS
OUR GOVERNANCE
2023 HIGHLIGHTS
.
PERFORMANCE HIGHLIGHTS
Maturing portfolio with multiple
near-term value creation
opportunities
•
Significant portfolio inflection points, including
over ten companies now in clinical studies
and expecting key data by the end of 2025,
expected to evidence strong value creation
•
Capital allocation prioritised to high-growth
sectors where we have deep expertise
and experience
–
Healthier future (Life Sciences): Istesso on
track to deliver Phase 2b data for Leramistat
(MBS2320) in rheumatoid arthritis in H1 2024;
Pulmocide Phase 3 study of novel anti-
fungal for invasive pulmonary Aspergillus
underway
–
Tech-enriched future (Deeptech):
Featurespace posts double-digit revenue
growth, significant fundraisings completed
for Quantum Motion, Accelercomm and
Garrison, portfolio poised to benefit from
growth in 2024
–
Regenerative future (Cleantech): Significant
capital ($15m) committed to Hysata Series
B fund raise, which will complete in 2024.
Technical milestone achieved in 2023
•
£0.7bn of total capital raised by portfolio
in 2023 alongside leading co-investors
including Bosch Ventures, BP Ventures, Clean
Energy Ventures, L&G, M&G, Merck Ventures,
Morningside, Pfizer, Roche and Sofinnova
(2022: £1.0bn)
•
Decisive action to focus on the highest-growth
opportunities, deprioritising future investment
in our US platform and cessation of plans for
China growth fund
Financial strength maintained
during challenging markets
•
Strong balance sheet and liquidity with gross
cash of £226.9m (2022: £241.5m)
•
£73.2m portfolio investment into 33 companies
across our three high-growth sectors
(2022: £93.5m; 46 companies) representing
around 10% of capital raised by our portfolio
(2022: 9% of total capital raised)
•
Cash proceeds in line with expectations at
£38.6m (2022: £28.1m)
•
NAV per share declined to 114.8p (-13%), driven
primarily by adjustments to the carrying
values of First Light Fusion, our US platform,
Hinge Health and Akamis Bio and reflecting
a fair value decrease of listed holding Oxford
Nanopore. Since year end, further reduction in
listed portfolio of £45.4m
•
Third-party managed funds of £650m
(2022: £700m), with more than £100m
available for investment
Continued commitment to
shareholder returns
•
Launched further £20m share buyback fulfilling
our commitment to regular cash returns from
realisations
•
As announced on 18 December 2023, future
cash returns are expected to be in the form of
share buybacks when the share price discount
to NAV exceeds 20%
•
Over £75m of total cash returned to
shareholders through dividends and share
buybacks since 2021
NAV/share p
1
Net Assets divided by the number of
outstanding shares in issue. A useful
measure to compare to the Group’s
share price.
107.8
125.3
167.0
132.9
114.8
2023
2022
2021
2020
2019
Return on NAV £
1
Profit for the year excluding
share-based payment charges.
Shows a summary of the income
statement gains and losses that
directly impact NAV.
(73.7)
189.5
452.2
(341.1)
(172.2)
2023
2022
2021
2020
2019
Link to strategy
Link to strategy
Link to remuneration
Yes
Link to remuneration
Yes
1
Alternative performance measure. See note 28 for definition and reconciliation to IFRS primary statements.
OUR GOVERNANCE
OUR FINANCIALS
03
IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
BUSINESS OVERVIEW
C
O
M
M
E
R
C
I
A
L
O
P
P
O
R
T
U
N
I
T
Y
.
S
O
C
I
E
T
A
L
N
E
E
D
.
I
P
G
S
T
R
E
N
G
T
H
S
.
Healthier
future
Life Sciences
Cleantech
Deeptech
Tech-enabled
future
Regenerative
future
AT A GLANCE
.
IMPACT POTENTIAL
Impact is in our DNA. We aim to be the leading value-add
backer of impactful early-stage innovation, differentiated
by our track record, access to innovation, risk appetite,
flexibility, technical and commercial acumen, sector
expertise and long-term partnership model.
Inspiring partners
We form long-term partnerships
with our companies, bringing them
our deep technical expertise and
access to networks; our decades of
experience nurturing and building
high-growth businesses and our
access to capital.
Read about our
business model
on pages 10 to 11
International profile
Our international footprint gives us
access to a range of opportunities
and provides valuable insight and
resource to support our portfolio
companies as they scale and grow in
the UK, US, Australia and New Zealand.
Innovative people
Our purpose drives a deep, intrinsic
level of commitment from our
team. We look to be a home
for exceptional and innovative
talent, and have built a unique
and attractive culture to support
our goals.
Read about our
culture
on pages 19 to 20
A future enhanced by the impact of transformative businesses we have identified,
backed and grown as long-term partners.
Deliver class-leading internal processes, services and controls.
Accelerating the impact of
science for a better future
.
Have an
impact on
the world
that counts.
Build a truly
differentiated
reputation.
Accelerate
value
creation.
Develop
our unique
insights,
expertise
and access.
Be a
home for
exceptional
talent.
Our strategy
Read about our
strategy
on pages 17 to 18
Three thematic focus areas:
Read about
Life Sciences
on pages 22 to 27
Read about
Deeptech
on pages 25 to 26
Read about
Kiko Ventures
on pages 27 to 28
04
IP GROUP PLC ANNUAL REPORT 2023
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR FINANCIALS
OUR GOVERNANCE
AT A GLANCE
.
IMPACT POTENTIAL
Top 20 investments by fair value
Oxford Nanopore
Technologies plc
£173.6m
Istesso Limited
£113.8m
Featurespace
Limited
£73.0m
US platform
(managed by
Longview Innovation)
£46.0m
First Light
Fusion Limited
£64.9m
Hysata Pty Ltd
£70.0m
Oxa Autonomy Ltd
£65.7m
Bramble Energy
Limited
£20.9m
UCL Technology Fund L.P.
£20.7m
Oxford Science
Enterprises plc
£18.3m
Pulmocide Ltd
£19.2m
Ieso Digital
Health Limited
£18.9m
Microbiotica Ltd
£16.1m
Crescendo
Biologics Ltd
£19.6m
Artios
Pharma Ltd
£17.4m
Centessa
Pharmaceuticals
plc
£15.7m
Garrison
Technology Ltd
£31.6m
Ultraleap
Holdings Ltd
£31.0m
Hinge Health,
Inc.
£34.0m
Mission
Therapeutics
£15.8m
KEY
Life Sciences
Platform investments
Deeptech
Cleantech
Priority companies
We place meaningful focus on a dynamic list of companies which we
believe can be material in the context of overall Group performance
and underpin our self-sustaining model. These include:
Oxford Nanopore Technologies
: The world’s first and only nanopore
DNA sequencing platform, which is uniquely scalable from
pocket-sized formats through to ultra-high throughput devices,
enabling the genetic analysis of any living thing, by any person, in any
environment. The technology offers real-time data analysis for rapid,
dynamic insights and played a key role in the COVID-19 pandemic.
First Light Fusion
: Inertial confinement approach to fusion, aiming to
create the extreme temperatures and pressures required for fusion by
compressing fuel using a hypervelocity projectile. Fusion power is safe,
clean and limitless with the potential to transform the world’s energy
system. Achieved validated world-first fusion event in 2022.
Hysata
: Hysata’s unique capillary fed electrolyser technology promises
an efficiency gain in the production of green hydrogen.
Istesso
: Immunometabolism drug discovery and development aimed
at reprogramming metabolism to treat autoimmune disease. Expects
Phase 2b data for its lead drug Leramistat (MBS2320) for rheumatoid
arthritis in the first half of 2024.
Featurespace
: Machine learning solutions to prevent fraud and
financial crime. A well-developed business with enterprise-grade
solutions delivering significant revenue.
Hinge Health
: The world’s first digital clinic for back and joint pain with
an expanding customer base.
Garrison Technology
: Anti-malware solutions for enterprise cyber
defences. Recently launched new Ultra cloud-based delivery model.
Pulmocide
: Treatment of respiratory diseases through a novel
approach to inhaled medicines. Phase 3 study of its novel anti-fungal
for invasive pulmonary aspergillus underway.
Oxa
: Global leader in autonomous vehicle software based on artificial
intelligence engineering, machine learning and modular software design.
Beyond this list, we also focus on 8 additional companies that we
believe have the potential to become priority companies over the next
few years.
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR FINANCIALS
OUR GOVERNANCE
05
IP GROUP PLC ANNUAL REPORT 2023
Sir Douglas Flint
Chair
CHAIR’S STATEMENT
.
Rarely has the expression ‘may you
live in interesting times’ been more
apposite than when applied to the
world in which we live today.
Often expressed as a ‘curse’ to denote times
of trouble and uncertainty, its accuracy in
describing the geopolitical, economic and
market backdrops that set the context for our
activities in 2023 and our expectations for the
current year is indisputable. The carry-over
from 2022 of the re-rating downwards of
listed technology companies, outside of those
involved in AI, was progressively reflected in
reduced appetite for venture investment in
private market funds. This impacted valuations
as funding rounds became more challenging
to close, with fresh money able to negotiate
advantageous terms often to the detriment of
existing investors unable to fund
follow-on investment.
Fortunately, the balance sheet strength
that we established in mid-2022 through
raising long-term debt capital ahead of the
subsequent series of interest rate rises in
the UK, provided the capacity to support our
portfolio companies selectively where required.
Once again, we progressively pared back our
initial investment plans to ensure we retained
capacity to support our priority portfolio
companies into 2024 and ended the year with
£227m gross cash.
The mix of our portfolio, substantially in life
sciences and energy transition, plus leading
companies in virtual reality, cyber resilience
and fraud detection, remains highly relevant to
the future desired by the societies we serve.
Increasing public policy support
for science and innovation
We are increasingly encouraged by evidence
of growing public policy support for science
and innovation, given that we are one of
the UK’s leading companies supporting
the transition of academic discovery and
innovation to successful commercial
realisation. We welcomed the Chancellor’s
announcement in June of a comprehensive
package of policies spanning regulation,
research and development (“R&D”),
infrastructure, skills and planning, all aimed at
driving investment, growth and innovation.
Investment capital to meet these objectives
is key to delivering the economic growth and
jobs needed to secure the improved lifestyle we
desire to leave for future generations. Investing
to enhance existing technologies and to bring
through transformative new technologies aligns
fully with our mission to deliver a better future
for people and the planet.
Thus, we are also highly supportive of the
initiatives announced by the Chancellor in the
Spring Budget, the Autumn Statement and the
Mansion House reforms to increase investment
through UK retirement savings schemes into
unlisted equities. The UK has an enviable,
indeed leading, position in academic-led
innovation and these reforms have highlighted
the opportunities available both to scale-up
investment support for such business and
increase returns to retirees over their investment
horizon. Once implemented, we stand to gain
from the resulting investment flows.
Investment and Financial
Performance in 2023
Notwithstanding the ‘risk-off’ sentiment across
much of the market in 2023, we enjoyed some
significant successes and achieved a number of
critical milestones; let me draw attention to two.
In our energy transition portfolio, Hysata marked
a year of outstanding progress, culminating in
being recognised by the COP28 Presidency with
an Energy Transition Changemaker award.
We are increasingly encouraged by
evidence of growing public policy support
for science and innovation, given that we
are one of the UK’s leading companies
supporting the transition of academic
discovery and innovation to successful
commercial realisation.”
06
IP GROUP PLC ANNUAL REPORT 2023
06
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
OUR FINANCIALS
STRATEGIC REPORT
BUSINESS OVERVIEW
CHAIR’S STATEMENT
.
Hysata’s revolutionary high-efficiency electrolyser
is designed to deliver the world’s lowest cost
green hydrogen, a key enabler of the clean energy
transition. In December, the Group committed
US$15m (£11.8m) to the first close of a fresh funding
round for Hysata, which was externally priced at
a substantial uplift to its previous round, resulting
in our existing stake almost tripling in value, with a
fair value uplift of £46.5m.
Istesso completed recruitment for its Phase 2b trial
of Leramistat (MBS2320), its lead drug in rheumatoid
arthritis, which represents a $25bn market, and
expects the data by the first half of this year.
There were also disappointments; Oxford
Nanopore (“ONT”), in which the Group owns a 9.8%
stake, saw its share price fall markedly over the
year, notwithstanding revenue growth just below
the lower end of guidance. While the price decline
reduced the value of our holding by £31.9m, we
remain convinced of the long-term value of this
investment.
Finally, First Light Fusion, which had successfully
achieved fusion in 2022, has not yet completed a
planned funding round given market conditions
and, as a result, we wrote down our investment by
£49.6m, or 43%, essentially reversing much of the
unrealised gain recognised in 2022 following their
announcement of achieving a fusion result.
Driven by write-downs in the portfolio, we
recorded a loss of £174.4m for the year; (2022:
£344.5m loss). As at 31 December 2023, our Net
Asset Value stood at £1,190.3m (2022: £1,376.1m)
or 114.8 pence/share (2022: 132.9pence/share). In
2023 we invested £73.2m into the portfolio, out of
a total amount raised by the portfolio of £667m
and we realised cash from disposals, including
deferred cash from prior year disposals of £38.6m
(2022 comparatives were respectively £93.5m,
approximately £1bn and £28.1m). Our share price
ended the year at 58.1p, marginally lower than its
entry point to the year of 61.2p.
Addressing the discount to
Net Asset Value (“NAV”)
The Board set one of its objectives at the outset
of 2023 to take steps designed to narrow the
discount at which our shares trade, versus
the stated NAV per share. We recognise that
continuation of this discount is of considerable
disappointment to our shareholders.
In conjunction with our advisors and brokers,
management significantly increased the outreach
made to current and potential shareholders,
both in the UK and internationally. Additionally,
the Board considered a wide range of alternative
structures through which we could conduct
our business and discussed these with advisers
and, in principle, with a number of our larger
shareholders. The outcome of these actions
was successful in broadening interest in the
Group from those who were not already invested
but that has not yet resulted in material new
investment. It was also clear that structural
change did not offer an obvious route to a
valuation uplift, and we concluded, with broad
shareholder support, to continue to concentrate
management effort on working with our priority
portfolio companies, given the many critical
events and milestones expected over the coming
year. That concentration also resulted in scaling
back on some of our international activities and
Greg discusses this more fully in his report.
We also concluded that we should pause paying
a dividend while our shares stood at a significant
discount to NAV and should embark upon a
modest share buyback programme, both to
capture the discount and evidence whether
such market intervention would meaningfully
narrow the discount. We announced a buyback
programme of up to £20m on 18 December 2023.
To date we have bought 5,225,207 shares at an
average price of 51.4p.
Director retirement
Our Non-executive colleague, Dr. Elaine Sullivan,
will this year have (substantially) completed
her third term of three years and, accordingly,
the Company announces that she will not be
standing for re-election at its annual general
meeting (“AGM”) on 12 June 2024 and will step
down from the Company’s Board of Directors
effective from the close of the AGM.
Looking forward to 2024
2024 sees elections in more than 50 countries
representing close to half of the world’s
population and GDP, with many outcomes likely
to bring significant change. Two major wars are
continuing with no sign of resolution and indeed
risk drawing others into conflict. Inflation seems
to have peaked in major Western economies,
but expectations now are for a more measured
pattern of interest rate reductions. Cost of living
challenges remain elevated and all of the above
contribute to migration patterns that are difficult
to control.
As a result, it is likely that risk appetite will remain
cautious until at least the electoral map has
settled and potential policy changes are digested.
The areas in which we invest remain critical to
building the future we desire to leave to future
generations so we will continue to ensure that
we have the people and financial resources to
support our portfolio companies as they scale
up their contributions to that future. Once again,
I look forward to updating you on progress at the
end of a year that we anticipate will see many
milestones reached.
Sir Douglas Flint
Chair
12 March 2024
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
07
IP GROUP PLC ANNUAL REPORT 2023
Greg Smith
CEO
CEO REVIEW
.
The overall market environment for growth companies and early-stage
investing remained challenging during 2023, as Douglas has articulated
above. In this context, the Group has made encouraging progress, focusing
our capital and time on the most promising opportunities within the three
high-growth sectors where we have deep expertise and experience,
maintaining our financial strength and taking further action to deliver
shareholder returns. Our overall financial performance for the year, a
negative return of 13% on NAV per share, was disappointing and below our
longer-term aspirations.
Our recent strategy has been one of increased
focus, under which around half of our
investment over the last two years has been
into eight priority companies, while we have
deprioritised future investment in the US and
ceased plans to raise a fund in China. Nearly
80% of our portfolio value is now concentrated
in 20 companies and more than 90% in
40 companies. I remain confident that this
increased focus, combined with a significant
number of portfolio inflection points in 2024
and beyond, has the potential to deliver
compelling returns.
The market opportunity for our
investment themes
The Group’s overall investment thesis remains
that scientific and technological innovation
with a clear focus on the three thematic areas
where the Group has deep expertise and
experience, will address significant societal
need and market opportunity allowing us to
deliver financial returns with real-world impact.
For a healthier future (life sciences),
rapid advancements in biotechnology,
pharmaceuticals, and healthcare delivery
are driving transformative changes in how
we understand, treat, and prevent diseases,
presenting a huge economic opportunity
for innovation. Worldwide prescription drug
sales are estimated to be $1.4tn in 2026,
with the well-documented ‘patent cliff’ for
blockbuster drugs putting $10bns of this at
risk. EY estimates Biopharma companies
have a record-equalling $1.4tn ‘firepower’
for business development and licensing of
potential new drugs. IP Group is strategically
positioned to capitalise on this megatrend,
with over ten companies now in clinical studies
and expecting key data by the end of 2025,
including a number of later stage clinical trials.
For a tech-enriched future (Deeptech), the
global “digital transformation”, characterised
by the comprehensive integration and
relentless increase in sophistication of
digital technologies in every aspect of
society and business, is the most profound
and pervasive megatrend shaping the
future of our world. Spending in this area
is forecast to reach $3.4 trillion by 2026.
IP Group has been investing for many years in
the fundamental technologies enabling this
transition including artificial intelligence, future
computing, human-machine interface and
next generation communication innovations.
Embracing the digital transformation
megatrend not only presents lucrative
investment opportunities but also reinforces
our commitment to fostering innovation and
driving positive change in the global economy.
Scientific and technological innovation with
a clear focus on the three thematic areas
where the Group has deep expertise and
experience, will address significant societal
need and market opportunity.”
08
IP GROUP PLC ANNUAL REPORT 2023
08
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
OUR FINANCIALS
STRATEGIC REPORT
BUSINESS OVERVIEW
CEO REVIEW
.
For a regenerative future (cleantech), the global trajectory continues to
converge towards adoption of clean energy solutions. Global investment
in the energy transition hit $1.8 trillion in 2023, up 17% on the previous year.
Our foresight in recognising this market opportunity has positioned us to
capitalise on the accelerating transition towards clean energy, resource
efficiency, and environmental sustainability. Leveraging our expertise and
networks through our Kiko Ventures brand, we are actively identifying and
nurturing disruptive startups and visionary entrepreneurs driving impactful
solutions that generate attractive financial returns.
Portfolio focused on high potential opportunities
reaching maturity
As noted in our RNS on 30 January 2024, we have made a number of fair
value reductions in the portfolio, primarily as a result of a more difficult
funding environment. This resulted in a negative return on NAV of 13%
or £172.2m (2022: negative return of 20%; £341.1m). As of 31 December
2023, the value of the Group’s portfolio was £1,164.9m (2022: £1,258.5m).
This is summarised as follows, with further commentary in the Portfolio
Review below.
All £m unless stated
Invested
Cash
proceeds
Net portfolio
gain/(loss)
Fair value at
31 December
2023
Simple
return on
capital (%)
Healthier future: Life
Sciences (ex ONT)
33.9
3.7
(73.9)
393.8
(17%)
Healthier future: ONT
–
–
(31.9)
173.6
(16%)
Tech-enriched future:
Deeptech
11.9
33.2
(4.9)
231.4
(2%)
Regenerative future:
Cleantech
(Kiko Ventures)
17.6
0.1
(8.7)
275.3
(3%)
Platform investments
9.8
1.6
(41.1)
90.8
(33%)
Total Portfolio
73.2
38.6
(160.5)
1,164.9
(13%)
•
Healthier future (Life Sciences)
: Disappointing financial performance in
a difficult funding environment for life sciences companies was balanced
by underlying progress within the portfolio, with ten companies expecting
key clinical data in the next two years. Most notable is Istesso, which
expects Phase 2b data for Leramistat (MBS2320) in rheumatoid arthritis
in the first half of this year, and Pulmocide, whose Phase 3 study of its
novel anti-fungal for invasive pulmonary Aspergillus is well underway.
Key notable non-clinical milestones included Genomics plc’s £35m
financing (which closed in 2024) to help develop its advanced genetic
screening business build-out, and Apollo Therapeutics’ $227m Series C
financing. The largest fair value reductions were Oxford Nanopore and
Hinge Health where, despite continued double-digit revenue growth for
both companies, lower revenue multiples applied.
•
Tech-enriched future (Deeptech)
: Our most valuable deeptech holding,
Featurespace, continues to impress, posting double-digit revenue
growth even at a time of a slowdown in the market more generally.
Our early, maturing portfolio of assets attracted large amounts of growth
capital including Accelercomm in a £21m series B and Quantum Motion
Technologies closed the largest ever funding round for a European
quantum computing start-up with over £40m raised. The portfolio did see
some impairments caused by specific issues but as 2024 progresses it is,
on the whole, well placed to capture growth.
•
Regenerative future (Cleantech)
: the majority of the Kiko portfolio
performed well this year, with successful funding rounds for C-Capture,
OxCCU, Hysata and Mixergy despite worsening funding conditions. We have
grown the Kiko team in anticipation of softening prices for new cleantech
investments and anticipate an attractive environment for new investments
in the coming year. First close of Hysata Series B generated a fair value
uplift of £46.5m in our holding, following significant technical progress.
First Light Fusion has not yet completed its planned Series C funding round,
and we have reversed the fair value increase from 2022 to reflect this, while
noting that the inertial confinement fusion landscape remains buoyant.
We take the outcome of COP28 climate conference as broadly positive,
with agreement to transition away from fossil fuels entering the final text
for the first time and agreement to triple renewables capacity by 2030.
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
09
IP GROUP PLC ANNUAL REPORT 2023
BUSINESS MODEL
.
01
Inputs and resources
02
Investment life cycle
Our self-sustaining business model,
coupled with our strategy, enables us
to systematically build businesses to
maximise long-term financial and societal
return from our capital and expertise.
We identify, co-found or create
companies based on fundamental
scientific innovation, and provide capital
and expertise in return for a shareholding
in the company. We work with the teams
at our companies to grow the value of
our holding over time, before selling down
in whole or over a period to generate
funds that enable us to both re-invest
in the portfolio and make returns to
shareholders.
The science and innovation on which
our companies are based has often
been generated at one or more of the
world’s leading universities or research
institutions. Our model and expertise de-
risks investment in early-stage companies
for partner capital providers.
Resources
Intellectual capital
We work with some of the world’s best
scientists and entrepreneurs in our chosen
territories and thematic focus areas.
Financial capital
We combine our balance sheet capital
with third-party capital to accelerate the
progress of promising companies.
Human capital
We look to be a home for exceptional
talent – attracting the best people to IP
Group and our portfolio businesses.
RE-INVESTMENT AND RETURNS TO SHAREHOLDERS
We re-invest realised funds into new opportunities and growth
of our priority companies alongside returns to shareholders.
3
-
1
5
+
Y
E
A
R
S
0
-
3
Y
E
A
R
S
R
E
I
N
V
E
S
T
M
E
N
T
E
X
I
T
I
N
G
M
A
T
U
R
E
B
U
S
I
N
E
S
S
Potential
opportunity
We take a
consistent
and deliberate
approach
to making
investments,
aligned to
our purpose
and ethical
investment
framework. We
focus capital,
resources and
expertise on
investments
that can make
a positive
difference
and where we
can optimise
returns through
leveraging our
existing strengths
and adding value
to the growth
journey.
EXIT
We hold investments until
they mature so that we can
maximise the return we
generate. Investing from our
balance sheet enables us to be
patient and realise value at the
most appropriate time.
SCALE-UP
As companies mature,
we proactively source
co-investment. We
continue to take an
active role in company
development, commonly
through continued
Board presence and by
working directly with the
management team, to
help grow value over time.
Resources and capital
are focused on those
opportunities that are the
most attractive from a
risk/reward perspective.
PRIORITY COMPANIES
We focus resource on companies which
we believe have the potential to scale
at >£1bn in value in the next three to five
years. Additional resources and capital
are allocated to these opportunities to
accelerate development.
START UP
When investing in start-up
opportunities, our specialists
work in partnership to identify
promising research and
help create and develop
business start-ups. Time and
a limited level of capital are
then deployed by IP Group,
often alongside grant funding,
to develop ideas to early
commercial and technical
validation using stringent
milestones. As incubation
opportunities show signs of
traction, an investment case
is developed for seed funding
to accelerate technical and
commercial developments.
10
IP GROUP PLC ANNUAL REPORT 2023
10
IP GROUP PLC ANNUAL REPORT 2023
IP GROUP PLC ANNUAL REPORT 2023
10
OUR GOVERNANCE
OUR FINANCIALS
STRATEGIC REPORT
BUSINESS OVERVIEW
BUSINESS MODEL
.
03
Our key differentiators
04
Outcomes with impact
Purposeful thematic focus
Our purpose focuses us on impact. We are focused on
backing and supporting businesses in our three investment
themes where we can add value through our expertise and
experience.
Access to unique opportunities
We are a global group with a strong network and relationships
with world-leading academic research institutions, giving us
differentiated access to an exciting portfolio of high-growth
companies.
Expert teams
We aim to be a home for exceptional and highly motivated
talent. Our investment teams are experts in their fields with
a deep understanding of science and technology, as well as
decades of experience in identifying, nurturing and exiting
unique high-growth businesses.
Track record
We have a track record built over more than 20 years of
turning great ideas into world-changing businesses and
creating value.
Permanent capital structure
Investing from our balance sheet is a significant advantage,
enabling us to be flexible and patient. This allows us to co-
found and build companies, and realise value at the most
appropriate time.
Imagination and flair
We are entrepreneurs at heart, bringing imagination and flair
to supporting our portfolio companies through all stages of
their development.
Addressing the
world’s greatest
unmet challenges
•
Genetic sequencing in any
environment (Oxford Nanopore)
•
Treatment of autoimmune and
respiratory diseases (Istesso and
Pulmocide)
•
Preventing fraud and financial crime
(Featurespace)
•
Cybersecurity (Garrison)
•
Autonomous vehicle software (Oxa)
•
Clean energy to address climate
change (First Light Fusion and Hysata)
Economic growth
and innovation
500+
companies created
~14,500
jobs created
10
new portfolio
investments
in 2023
Financial returns
£551m
cash realised from
the portfolio over
five years
£75m
returned to
shareholders via
dividends and
share buybacks
since 2021
ESG
•
Leading the conversation by co-convening
a working group for VC firms focusing on
impact
•
Partnered with the Value Balancing Alliance
to co-create an impact framework and
approach for developing impact KPIs for VCs
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
11
IP GROUP PLC ANNUAL REPORT 2023
11
IP GROUP PLC ANNUAL REPORT 2023
11
IP GROUP PLC ANNUAL REPORT 2023
MARKET ENVIRONMENT
.
Macroeconomy and public markets
2023 saw a continuation of themes emerging in
2022, with the trajectory of inflation and interest
rates having a significant impact on investor
sentiment over the period. The Bank of England
base rate continued to rise in 2023, from 3.5%
at the start of the year to 5.25% in August. In
the second half of the year, following declining
inflationary indicators, market commentary
became increasingly focused on the specific
timing and profile of central bank interest rate
cuts in 2024.
Public markets, which had seen significant
falls in 2022, responded to the improving
macroeconomic outlook by posting solid gains
for the year, with the S&P 500 up 24% in 2023,
boosted by a market rally in the last quarter of the
year reflecting hopes of an earlier than previously
expected Fed rate cut. The other widely noted
feature of public markets in 2023 was a focus on
AI-related stocks, which drove a particularly strong
performance within the tech 100-Technology and
Cybersecurity segments of NASDAQ, which were
up 67% and 39% respectively in the year, whereas
the Healthcare, Biotechnology and Clean Edge
Green Energy segments of NASDAQ saw little or no
growth (up 7% up 4% and down 11% respectively).
Our portfolio exposure across three thematic
areas continues to diversify our exposure to
market sentiment within specific areas.
One notable market issue in 2023 was the sudden
collapse of Silicon Valley Bank (“SVB”). The Group’s
financial strength was highlighted during the
short period of heightened volatility prior to the
announcement of rescue deals for SVB in the US
and UK, 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.
From a longer-term perspective, VC investment across the
US and UK continues to be an area of strong annual growth,
with megatrends across our thematic areas expected to be
highly supportive of disruptive science-based companies.”
Greg Smith
CEO
VC market
Moving to the private VC market which represents
the majority of our portfolio exposure, 2023 saw a
decline in VC investment globally of around 40%
1
,
which compares with a reduction in total capital
raised within our portfolio of 34%. Late-stage VC
median valuations dropped 16% year on year,
based on Pitchbook data.
In terms of broader market trends, 2023 saw many
tech sector names announce job layoffs, with
over 250,000 announced job cuts in the year
2
as
the sector responds to the difficult market and
funding environment. More positively, 2023 saw a
high level of activity in M&A deal values, with total
deal values of over $230bn, up by 50% compared
to 2022. Market commentary predicts similar
levels of activity in 2024, which we believe will
represent an attractive environment for our life
sciences companies completing clinical trials in
the next two years.
From a longer-term perspective, VC investment
across the US and UK continues to be an area
of strong annual growth, with megatrends
across our thematic areas expected to be
highly supportive of disruptive science-based
companies. IP Group is one of the most closely
aligned companies to the UK government’s
‘science superpower’ ambition, and we are also
well-placed to benefit from expected changes
to the UK pensions market which will see a
larger proportion of pension capital invested in
high-growth UK private companies.
1
Pitchbook data show US VC stage capital invested fell from
$322bn in 2022 to $205bn in 2023, a 36% year on year decline
and UK VC investment fell from $28bn to $22bn, a 44% year on
year decline.
2
Source: Layoffs.fyi.
12
IP GROUP PLC ANNUAL REPORT 2023
12
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
OUR FINANCIALS
STRATEGIC REPORT
BUSINESS OVERVIEW
•
Genetic analysis expands into population
screening, testing and applied markets
•
Emergence of digital healthcare and
personalised medicine
•
Government intervention into drug pricing
favours newly approved therapies
Megatrend focus
•
Understanding risk from a patient to
population level
•
Reprogramming cells to change
their behaviour from diseased to
healthy modes
•
Reconditioning tissues to improve
response to existing therapies
•
Redirecting patient behaviour to
reduce risk
Addressable markets
•
DNA sequencing
$30bn
market by 2030
•
Rheumatoid arthritis market
$25bn
in 2023
•
Numerous other multi-$bn disease
indications in which IP Group has clinical
trial readouts in the next two years
•
Billions of connected devices requiring
real time and remote processing
•
Data growth outstripping economic
growth by multiple factors
•
Growth of the metaverse
•
Energy hungry data centres
•
New technologies and powerful
computing multiplying cyber threats
Megatrend focus
•
Applied AI to solve problems in
underserved application areas including
cybersecurity
•
Next generation ultra-reliable networks to
deliver mission critical new applications
•
Hardware and software that evolve
and enhance human interaction with
machines
•
Future computing systems for complex
problem-solving including analogue,
neuromathic and quantum computing
Addressable markets
•
Generative AI market
$100bn
market
by 2026
•
5G network spend reaches
£$100bn
p.a.
by 2030
•
Augmented reality market
$90bn
by 2026
•
Global chip market
$1.07tn
by 2030
•
Global consensus on Paris Agreement
•
National and international regulatory
environments tightening
•
4x increase in investment in clean energy
technology and infrastructure from
today’s levels
•
Government support for climate transition
such as US Inflation Reduction Act
Megatrend focus
•
Energy transformation: electrification and
low/no carbon fuels
•
Energy reduction
•
Water reduction
Addressable markets
•
Green hydrogen
$135bn
market by 2032,
$1.4tn
by 2050
•
Industrial heat,
$1.8tn
market, needs to
decarbonise
•
Liquid fuels
$1.5tn
market with low
penetration of low-carbon fuels
MARKET ENVIRONMENT
.
Megatrends in our thematic business sectors
Healthier
future
Curing and preventing
diseases to enable
healthier lives
Tech-enriched
future
Transformational change
in the digital world
Regenerative
future
Civilisation-risk trajectory of climate
heating driving rapid decarbonisation
and climate-resistant economies
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
13
IP GROUP PLC ANNUAL REPORT 2023
13
IP GROUP PLC ANNUAL REPORT 2023
CEO REVIEW
.
Geographic focus
Over the last 20 years, the Group has played a
leading role in creating a vibrant ecosystem for
science and technology commercialisation in the
UK. We took a pioneering role in partnering with
the University of Oxford, were founder investors
in dedicated investment vehicles such as Oxford
Science Enterprises, Cambridge Innovation
Capital and the UCL Technology Fund and remain
the most active backer of university spin-outs
in the UK, primarily through our market-leading
EIS fund manager, Parkwalk Advisors. To this end,
84% of the Group’s portfolio by value is UK-based,
although many companies provide their products
and services to an international customer base.
Our operation in Australia is much younger.
However, driven largely by the success of Hysata,
a spin-out from the University of Wollongong in
New South Wales, the portfolio had another strong
year and has delivered the strongest returns since
it was established in 2017. Australian portfolio
companies are included within the relevant
sectors in the portfolio analyses below.
In North America, where the Group has a
58% holding in a fund managed by Longview
Innovation, the funding environment for LP funds
has remained difficult. Having been unable to
secure significant additional funding alongside
$10m committed by the Group during 2022, the
Longview team has scaled back its overheads
and is focused on maximising value from its
current portfolio. As part of our strategy, we have
deprioritised any further capital to the US platform.
While there are a number of potential value
inflection points in the Longview portfolio this year,
the Group has reduced the value of its holding
in the US platform by around 50% to reflect these
circumstances.
Further, consistent with our strategy to focus
on the highest-growth opportunities, we have
decided not to proceed with our plans to raise
a fund in China, although continue to actively
pursue co-investment from the wider Asia region.
Financial strength during
challenging markets
The Group has proactively managed its level
of investment during the year and, as a result,
remains in a strong financial position with
gross cash and deposits of £227m at year end.
The Directors took proactive steps to maintain
financial strength by securing a private market
debt issue in 2022 and reducing investment levels
to £73.2m in 2023 from £93.5m in 2022. £38.6m of
cash proceeds were received in 2023. In addition,
the Group’s portfolio remains generally well-
funded, having raised £667m in 2023.
Third-party funds under
management
The Group has a flexible approach to capital
that combines balance sheet monies with
earlier-stage, tax-advantaged funds as well as
later-stage private capital and now manages
or advises £650m (2022: £700m). Having
appointed a new Head of Global Capital to focus
on third-party funds, the team has more than
doubled its engagements with public and private
investors in 2023 and continues to pursue further
capital in our third-party funds platform.
Approximately three-quarters of the Group’s
private capital, £469m, is managed by Parkwalk
Advisors, the Group’s specialist EIS fund
management subsidiary (2022: £477m). This
includes funds managed in conjunction with the
universities of Oxford, Cambridge, Bristol and
Imperial College London. The Group has further
integrated Parkwalk Advisors into the Group as a
source of distinctive deal flow and strengthened
relationships with industry peers to surface co-
investment opportunities. Market data provider
Beauhurst again named Parkwalk Advisors as the
most active investor in the sector.
In May 2023, we received FCA approval for
Parkwalk Advisors to be a full-scope AIFM
(alternative investment fund manager). Parkwalk
Advisors invested £45.1m in 2023 (2022: £57.4m)
in the university spin-out sector across 27
companies (2022: 28). Eight new companies
joined the Parkwalk Advisors portfolio, two
successful exits were completed, returning £24.9m
to investors, while two investments were sold for
a loss and two were written-off. Parkwalk Advisors
liaised closely with BEIS, the newly formed DSIT,
HMT and HMRC on the financial ecosystem for
knowledge-intensive spinout companies and the
UK Government’s ‘science superpower’ agenda.
The majority of our remaining funds are managed
by our Australian team. The IP Group Hostplus
Innovation Fund, managed for top-ten Australian
Superannuation fund, Hostplus, now totals A$310m
(£163m) and has invested in several of the Group’s
portfolio companies including Oxford Nanopore,
Wave Optics, Oxa and Hysata, providing additive
growth capital for companies as they scale.
TelstraSuper is also investing alongside IP Group
through a co-investment mandate.
14
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
CEO REVIEW
.
Impact
The Group’s purpose is to accelerate the impact
of science for a better future, delivering financial
returns alongside positive, real-world impact.
Our strategy to do so is organised around five
pillars of activity – ‘accelerate value creation’;
‘have an impact on the world that counts’;
‘develop our unique insight, expertise and access’;
‘build a truly distinctive reputation’; and ‘be a
home for exceptional talent’ – underpinned by
class-leading internal processes, services,
and controls.
We have successfully refreshed the Group’s brand
identity, aimed at highlighting our expertise and
clearly aligning around our impactful purpose.
In terms of impact, we have partnered with the
Value Balancing alliance to co-create an impact
framework and approach for developing KPIs for
VCs and have built an impact approach for life
sciences and co-convened a working group for
VC firms with the Operating Principles for Impact
Management (“OPIM”), to provide a platform that
will allow for the sharing of best practice and key
learnings around impact. The Group is AAA rated
by MSCI, ranked first for our industry group by
Sustainalytics and has PRIME status in the ISS ESG
corporate rating.
Talent as a key driver of success
The talent and capability within in our
investment teams is a key asset for the Group.
Strengthening the professional capabilities
of our investment teams has been a key
focus since the formation of the investment
partnerships in 2018. Our investment partners
have considerable experience across venture
and in their respective domains of commercial
specialisation, complemented by strong
operational experience. The teams each have
a wide network of co-investors, innovators,
and entrepreneurs, which brings high-quality
pipeline opportunities, complimentary capital
and portfolio management talent. We continue
to work hard to build stronger networks
amongst potential acquirers and to expand our
geographical network to help our companies with
international reach.
We are also improving the external visibility and
reputation of our investment teams, notably
with the Kiko brand but also across all our
divisions by marketing our thought leadership
on social media and speaking at events. All our
investment teams have now worked together for
an extended period. Team processes have been
professionalised and are continuously improving,
with investment decision-making delegated
appropriately to practitioners.
During 2023 the Group has seen exceptionally low
unplanned talent turnover and added a small
number of Investment Associates into our Kiko
team. We have maintained a ‘high’ eNPS score,
completed our ‘values’ project and delivered on
the second year of our employee-led Inclusion
and Diversity (“IDP”) masterplan. The Group was
placed first in the 2024 Honordex Inclusive PE &
VC index.
The Artificial Intelligence opportunity
As outlined above, one of the Group’s investment
areas includes identifying, backing and growing
businesses that apply artificial intelligence
and machine learning to significant market
opportunities as well as the deep technology
solutions that will enable the realisation of these
opportunities, such as future compute and next
generation networks.
We are also taking a proactive approach to the
use of generative artificial intelligence (Gen AI)
within our business processes, both through
the deployment of market leading off-the-shelf
solutions to improve team productivity, and the
development of in-house, proprietary toolsets for
improving efficiency across all our workstreams.
We expect that the development of Gen AI
tools will have a positive impact on opportunity
sourcing, due diligence and market analysis in the
shorter term. As an example, we have developed
a proprietary IP landscaping tool that leverages
the inherent power of large language models
to rapidly analyse and deliver insights from bulk
data, which is being used initially in our Australian
business. We are also actively monitoring the use
of Gen AI across the venture capital ecosystem,
employing our deep understanding of technology
to identify, employ and invest in differentiated
solutions that align with our tech-enriched future/
digital transformation investment theme.
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
15
IP GROUP PLC ANNUAL REPORT 2023
CEO REVIEW
.
Continued commitment to
shareholder returns
The Group aims to deliver returns to shareholders
primarily in the form of long-term capital
appreciation. Subject to the Group’s capital
allocation policy, the majority of cash proceeds
will be typically reinvested with a smaller
proportion used to deliver a cash return to
shareholders. Since the introduction of this
approach in 2021, the Group has delivered more
than £75m of cash returns to our shareholders via
dividends and share buybacks.
Given the continued discount between the
Company’s share price and its NAV per share,
which the Directors believe significantly
undervalues the Group’s portfolio, we launched
a share buyback of up to £20m in December
2023. The Board remains committed to utilising a
proportion of realisations to make regular cash
returns to shareholders, which will typically be
made in the form of share buybacks when the
share price discount to NAV exceeds 20%. As
previously announced, regular dividend payments
will be suspended under such conditions, and
accordingly the Board is not recommending a
final dividend for 2023.
During 2023, the Group purchased 220,302 shares
for £0.1m and a further 5,004,905 shares for £2.6m
have been purchased in 2024. In 2023, the Group
paid the final 2022 dividend of 0.76 pence per
share and an interim dividend of 0.51 pence per
share, a total of £13.0m for the year.
In addition, we have more than doubled
our investor relations activities with further
investor-focused events as well as our flagship
‘Scale it up’ event at London’s Science Museum
in May where we hosted a debate on how the
UK can help support more UK innovation to
become world-leading companies, showcasing
a number of our portfolio companies. We have
also increased the number of roadshows the
Group undertakes, meeting with shareholders and
non-holders in the UK, Europe, US and Middle East.
Outlook
As the UK’s most active investor in university
spin-outs, we continue to see huge opportunity
for the Group to benefit from increasing public
policy support for science and innovation with
£109m capital across our third-party managed
funds including Parkwalk Advisors still to invest
alongside balance sheet funding. While the
current macro environment remains challenging,
we see continued interest in our portfolio and
remain confident that investor appetite for
growth companies will return. The Group and
its portfolio remain well-funded and we are
confident the Group will reap the benefits of
our maturing portfolio given the number of key
milestones anticipated over the next 12-18 months,
particularly in life sciences. The Group is
committed to delivering value for all stakeholders
and anticipates that the next 18 months could be
transformational to fair value growth.
Greg Smith
Chief Executive Officer
12 March 2024
16
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
STRATEGIC PROGRESS
.
Strategy pillars
2023 progress
Link to KPIs
Objectives for 2024
Have an
impact on
the world
that counts
•
Ensure genuine impact is a core
component of our processes
•
Focus on thematic areas driven by the
intersection of commercial opportunity,
societal need and IP Group’s distinctive
strengths
•
Develop industry-leading impact
measurement and reporting
•
Maintain and develop ethical investment
framework and approach
•
A ‘leading’ ESG performer rated AAA by MSCI;
ranked number one in our industry group
by Sustainalytics; PRIME status in the ISS ESG
corporate rating
•
Partnered with the Value Balancing Alliance
to co-create an impact framework and
approach for developing impact KPIs for VCs
•
Developed impact approach for life
sciences currently being validated by major
pharmaceutical companies
•
Leading the conversation by co-convening
a working group for VC firms focusing
on impact. Platform to be provided
by Operating Principles for Impact
Management (“OPIM”) to share best practice
and key learnings around impact, and
further advance ESG and impact practice for
VCs globally
03
05
08
09
10
• Validate our impact approach
by completing build out of
our impact frameworks and
validate with industry experts
and the wider VC community
•
Roll out the ESG platform to our
portfolio companies to support
them with their ESG journeys
and provide insights to facilitate
improvement and growth
• Update our ethics framework
to considering leading practice
and guidance from the UN
Global Compact, and reflect
our values as a responsible
investor in early-stage science
and technology with societal
impact
Develop
our unique
insight,
expertise
and access
•
Build significant knowledge, presence and
investments in thematic areas, maintaining
deep relationships with innovators,
institutions and capital providers
•
Continually develop aligned Group, sector
and geographic investment strategies
•
Capture, develop and share institutional
insight and knowledge
•
Created and invested for the first time in 10
new companies including Parkwalk Advisors
investments
•
Further integrated Parkwalk Advisors into the
Group as a source of distinctive deal flow
•
Strengthened relationships with industry
peers to surface co-investment
opportunities
•
Restructured executive responsibilities to
create a dedicated Investment Group to
share investment plans and performance
across all areas of business
•
Added three Investment Associates to the
Kiko team
05
08
• Maintain deal flow of distinctive
new opportunities
• Continue to build profile as
deep sector experts with
institutions, innovators and
capital providers through deep-
dives and other activities
• Further develop Kiko network
• Further integrate investment
activities through the
Investment Group
KEY
01
NAV/share
02
Return on NAV
03
Total portfolio
04
% return on portfolio
05
Portfolio investment
06
Proceeds from sale of
equity investments and
debt investments
07
Net overheads %
08
Number of new portfolio
investments
09
Third-party funds raised
10
ESG progress
Read about our
KPIs
on pages 36 to 37
OUR GOVERNANCE
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STRATEGIC REPORT
17
IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC PROGRESS
.
Strategy pillars
2023 progress
Link to KPIs
Objectives for 2024
Accelerate
value
creation
•
Drive short-to-medium-term returns
through priority portfolio companies that
disproportionately impact returns and
underpin the business model
•
Develop and apply capital allocation
framework across sectors and
geographies, maintaining financial
strength through balancing investment,
realisations and shareholder returns
•
Further develop access to capital across
the funding spectrum
•
Explore bold ways of creating value
•
Continued to allocate significant proportion
of capital to leading priority companies
including Istesso and Hysata
•
Doubled number of institutional
presentations during the year to tell IP
Group’s story including roadshows and
conferences
•
Appointed new Head of Global Capital to
focus on third-party funds
01
02
03
04
06
07
09
• Delivery of priority company
milestones
• Narrow discount between share
price and NAV/share
• Increase managed and advised
third-party capital
• Deliver investment returns and
portfolio realisations
Build a truly
distinctive
reputation
•
Develop and maintain a distinctive and
authentic brand for shareholders, founders
and co-funders
•
Establish IP Group as an opinion leader
in key ecosystems, including through
category brands
•
Actively promote our financial and impact
track record
•
New brand successfully launched, winning
industry awards; secured national media
coverage on key sector issues
•
Completed IR programme with roadshows
in the UK and Europe, the US and the Middle
East; launched inaugural flagship event and
delivered six capital markets webinars
•
Engaged with MPs and responded to various
Government consultations
05
06
09
• Leverage experts and expertise
to build greater understanding
and awareness of the Group
and its impact
• Help shape the operating
environment through
engagement
• Deliver extensive IR programme
Be a
home for
exceptional
talent
•
Develop, nurture and grow our exceptional
people, building and maintaining the
quality of our relatively small team
•
Maintain an engaging, motivating
employee offer that demonstrates our
uniqueness
•
Strongly align remuneration with the
achievement of our vision
•
Build our culture and values, celebrating
diversity, inclusion, high-challenge/high-
support and regenerating success
•
Exceptionally low unplanned talent turnover
during the year
•
Completed Group Values project
•
Maintained ‘high’ average eNPS score of
across the year
•
Continued progress against the objectives
of our employee-led Inclusion and Diversity
(“IDP”) masterplan
•
Placed sixth out of more than 300 firms in the
Honordex Inclusive PE & VC index
10
• Appoint new Employee
Executives
• Deliver 2024 IDP masterplan
objectives including roll out of
reverse mentoring programme
• Use new Group Values to
continue evolution of employee
offer
KEY
01
NAV/share
02
Return on NAV
03
Total portfolio
04
% return on portfolio
05
Portfolio investment
06
Proceeds from sale of
equity investments and
debt investments
07
Net overheads %
08
Number of new
portfolio investments
09
Third-party funds raised
10
ESG progress
Read about our
KPIs
on pages 36 to 37
18
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
OUR FINANCIALS
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STRATEGIC REPORT
IP Group really looks
after its employees.
It’s a very caring
workplace to be in.”
IP Group’s culture
is awesome and
it translates into
the way we work
together as a team
and the way we
work with people
externally.”
A CULTURE THAT CONTRIBUTES TO OUR PURPOSE
.
During 2023, our major successes have included:
•
Exceptionally low unplanned turnover despite a tight labour market,
demonstrating the ‘true’ engagement of our people with both our core
mission and the quality of our employment offer
•
Maintaining our eNPS score in the ‘high’ or ‘very high’ category through the
year, with scores on the four Voice of IP Group (“VIP”) surveys undertaken
in 2023 between +44% and +27%
•
Continued progress against the objectives of our employee-led Inclusion
and Diversity Masterplan, a three-year programme of improvement which
aims to make IP Group a market leader in inclusion, diversity and equality;
and recognition of our progress through significantly improved external
ratings
Maintaining our focus on
employee engagement
Whilst 2023 has been a challenging year
for both the Group and our people, we are
proud that our average eNPS score over
the year remains in the ‘high’ category.
Despite this sustained high score, we
always seek to improve our employees’
experience of IP Group.
eNPS is measured using responses to “I
would recommend IP Group as a great
place to work” in our quarterly VIP surveys.
The question is answered on a scale of 1–5.
eNPS = % employees answering 5, less %
answering 1, 2 or 3. Outcomes range from
-100 (low) to +100 (high).
Fulfilling our purpose is entirely dependent upon the
quality of our people. Identifying, backing and growing
transformational businesses based on disruptive
scientific innovation can only be achieved by leveraging
the capability and experience of highly motivated
individual experts.
Our culture, and the Values that underpin it, play a significant role in
achieving this by creating an environment which allows us to attract,
retain and engage exceptional people. Our flexible approach to work
and partnership approach to career-long learning then enables them
to do their best work.
We believe our culture is, and will always remain, a key contributor to our
long-term performance and sustainability.
Be a home for
exceptional talent.
We aspire to be best in class in all fields of operation,
developing our people and culture offering in key
areas including learning and development, reward,
inclusion and diversity, and communication to
support this. In developing and delivering our
approach, we place a very high level of importance
on the opinions of employees, which we actively
seek out and listen to across a number of different
channels.”
Anthony York
Group People Director
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IP GROUP PLC ANNUAL REPORT 2023
19
IP GROUP PLC ANNUAL REPORT 2023
A CULTURE THAT CONTRIBUTES TO OUR PURPOSE
.
THE BUILDING BLOCKS OF OUR CULTURE
Inclusion and diversity
Our ambition is to be diverse
and inclusive across all
characteristics and to create
a work environment where all
talent thrives. We believe this
approach is both responsible
and sustainable, and that the
investment decisions we make
and the advice we give are
improved when influenced by a
wide and representative range
of views.
Our efforts in this area are
defined and implemented by
our employee-led Inclusion and
Diversity Project (“IDP”) group
and we have continued to make
progress on our multi-year IDP
Masterplan, which features a
range of initiatives across our
four key areas of focus: Education
& Awareness, Positioning &
Communication, Guidelines &
Toolkits, and Accountability &
Metrics.
Read our
diversity data
on pages 43 to 44
Employee engagement
Ensuring our people remain engaged,
motivated and aligned with our purpose
is as critical as ever. We clearly see the
benefits of engaging with the wider team
regularly via a range of channels and on
a two-way basis insofar as possible.
•
Our IP Connect employee forum
is elected by the employee group
to represent workforce views. It is
consulted regularly for both general
and specific feedback on cultural
development, as well as other matters
•
The small size of our team means
that all of our people have direct
and consistent access to leadership
through formal channels, informally
and at regular all-employee events
•
Employee Executives on our
Executive Committee to bring
more diversity of thought and the
employee perspective into decision-
making processes at the top of the
organisation. See page 42
•
We conduct quarterly Voice of
IP Group surveys and use the
outcomes to inform our focus and
priorities for development
Flexible and open working
We encourage a flexible and adaptable mix
of office and home working. We emphasise
employee choice alongside personal
responsibility to develop a pattern which
enables them to achieve their objectives and
supports effective team operation and wider
collaboration.
Rewarding success
We have a fair, equitable and motivating
reward structure that plays a central
role in inspiring our people to do
exceptional things and contributes
significantly to overall employee
satisfaction.
Every employee participates in a
shareholder aligned Annual Incentive
Scheme with objectives aligned to
those set for our Executive Directors (see
page 113). We also operate an HMRC-
registered SAYE share save scheme for
all UK employees.
Read about
remuneration
from page 111
Talent development
We focus on ensuring our people have access
to an exceptional learning and development
offer. Our approach is based on working
in partnership with individual employees
to ‘curate’ an effective mix of learning
programmes over the short, medium and
longer term, supporting both current role and
future career aspirations. Each individual plan
is based upon an exploration of learning/
development needs in three distinct areas:
•
Build:
Formal learning or professional
training/CPD which is directly relevant to an
individual’s role
•
Empower:
Train and embed the skills
that allow our people to maximise their
professional impact
•
Protect:
Integrate the skills, knowledge and
training that our people require in order to
stay physically and mentally healthy
Physical and mental health
Our overall aim is to ensure that our
employees remain physically healthy
and effectively supported on both a
practical and emotional level. We keep
our people safe and run a range of
wellbeing initiatives, as well as building
an office community that enjoys being
together. Our employees also have
access to acute support services
through our healthcare programme, our
employee assistance programme, and
fully trained mental health first aiders.
Group values
In 2023 our
employees
played a key role
in the definition
and development
of our new
Group Values.
The Values align
with our strategy
and underpin
what it means to
work at and with
IP Group.
Integrity
.
Purpose
.
Growth
.
Committed to doing the right
thing, in the right way.
Bold and focused in the
pursuit of our mission.
Driven by finding a better
way to do things.
Focus
Do the right thing, at the right
time and the right way, even
when no-one is looking.
Dedicated to accelerating
the power of science for a
better future, and to delivering
market-leading returns.
Always looking for new and
innovative ways to do things
better.
Mindset
Set high standards for
yourself and others. Trust your
colleagues to make the right
decisions and to deliver. Genuine
care for all of the stakeholders
impacted by your work.
Perseverance, collaboration
and commitment. Success will
not often come quickly, and
cannot be achieved alone.
Relentlessly curious, open-
minded and keen to learn.
We’re always looking for a
better way to do things or
a new solution to a difficult
problem.
Ethical behaviour
We strive to always conduct our
business activities in an honest, ethical
and socially responsible manner, and
to comply with all laws, regulations
and rules applicable to our business.
We expect our portfolio companies,
co-investors, employees and suppliers
to hold the same high standards
when conducting their respective
businesses. We are committed to acting
professionally and with integrity in all of
our business dealings and relationships,
and with consideration for the needs of
all of our stakeholders.
Read about
ethics
on page 42
20
IP GROUP PLC ANNUAL REPORT 2023
20
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
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PORTFOLIO
.
Portfolio breakdown
Number of
companies
Fair value
£
Fair value movement/
return on opening
portfolio in 2023
£
%
Healthier future: Life Sciences
32
393.8
(73.9)
(17%)
Healthier future: Oxford Nanopore
1
173.6
(31.9)
(16%)
Tech-enriched future: Deeptech
32
231.4
(4.9)
(2%)
Regenerative future: Cleantech (Kiko Ventures)
16
275.3
(8.7)
(3%)
Platform Investments
5
90.8
(41.1)
(33%)
Total portfolio
86
£1,164.9
(160.5)
(13%)
8%
24%
20%
15%
33%
Platform investments are funds or portfolio companies that invest in other opportunities.
Portfolio analysis
Constituent parts of an IP Group share
6.4
37.6
26.9
6.3
6.8
7.0
11.0
16.7
8.9
(6.4)
37.6
26.9
6.3
6.8
7.0
11.0
16.7
8.9
NAV
114.8 pence
per share
KEY
Net cash
Hysata Pty Ltd
Oxford Nanopore
Technologies plc
Oxa Autonomy Ltd
Remaining portfolio
Istesso Limited
Other top 20
Featurespace Limited
Other net liabilities
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IP GROUP PLC ANNUAL REPORT 2023
PORTFOLIO REVIEW
.
HEALTHIER FUTURE: LIFE SCIENCES
Oxford Nanopore continues to underperform on a results and share-price basis, culminating
in a disappointing results announcement in March, having warned that its 2023 revenues
would be lower than its previous guidance range in January 2024.
Company name
Description
Group Stake at
31 December
2023
%
Net
investment/
(divestment)
£m
Unrealised
+ realised
fair value
movement
£m
Fair value of
Group holding
at 31 December
2023
£m
Oxford Nanopore
Technologies plc
Enabling the analysis of any living thing, by
any person, in any environment
9.8%
–
(31.9)
173.6
Istesso Limited
Reprogramming metabolism to treat
autoimmune disease
56.5%
15.0
3.1
113.8
Hinge Health, Inc.
The World’s First Digital Clinic for Back and
Joint Pain
1.8%
–
(19.6)
34.0
Crescendo
Biologics Limited
Biologic therapeutics eliciting the immune
system against solid tumours
14.4%
0.8
–
19.6
Pulmocide Limited
Novel inhaled treatment for life-threatening
fungal lung infections
12.6%
–
4.5
19.2
Ieso Digital
Health Limited
Digital therapeutics for psychiatry
31.6%
0.6
(3.5)
18.9
Artios Pharma Limited
Novel oncology therapies
7.3%
–
(0.9)
17.4
Microbiotica Limited
Gut-microbiome based therapeutics and
diagnostics
17.7%
–
–
16.1
Mission
Therapeutics Limited
Targeting deubiquitylating enzymes for
the treatment of CNS and mitochondrial
disorders
18.2%
3.9
(6.3)
15.8
Centessa
Pharmaceuticals plc
Discovery and development of medicines
that are transformational for patients
2.6%
–
9.2
15.7
Other companies (23 companies)
9.9
(60.4)
123.3
Total
30.2
(105.8)
567.4
With core growth of 16% in 2023, and revised guidance
towards underlying core growth of 20-30% in 2024 and
30% in the mid-term, we continue to believe that the
company’s long-term fundamentals remain intact. We
believe that the company has now rebased its forecast,
margins and growth outlook to what we feel is a realistic
level, with room for outperformance.
The largest transaction in 2023 for the Group was a £15.0m
investment into Istesso, primarily via a convertible note,
with a further £10m convertible loan invested in January
2024. We continue to see good progress at Istesso with its
Phase 2b study of Leramistat in rheumatoid arthritis due
to read out in the first half of 2024. The largest funding
round within the portfolio was Apollo Therapeutics’
$226.5m Series C financing while, in early 2024, Genomics
plc completed a £35m funding round which will help the
company build upon its initial commercial traction in the
field of advanced genetic screening.
Dr Sam Williams
Managing Partner,
Life Sciences
IP Group’s Life Sciences
portfolio comprises
holdings in 33
companies valued at
£567.4m at
31 December 2023.
22
IP GROUP PLC ANNUAL REPORT 2023
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.
HEALTHIER FUTURE: LIFE SCIENCES
In terms of clinical progress across the portfolio, we saw Mission and Artios Pharma announcing
positive Phase 1 data for their lead programmes, and Artios Pharma, Mission, Kynos and Pulmocide
all initiating important clinical studies, including Pulmocide’s Phase 3 study in invasive pulmonary
Aspergillus. We now have ten companies in clinical studies that could provide key value-driving
data over the coming two years. We also saw positive outcomes for Autifony, which announced a
global licensing deal worth up to $770m with Nasdaq’s Jazz Pharmaceuticals which resulted in a
£6.1m fair value uplift.
In terms of NAV performance, the value of the portfolio declined by £73.9m (-17%) over the year,
driven largely by significant fair value reductions in some key assets, including Hinge Health
£17.8m (-33%), Akamis Bio £15.9m (-75%), Oxular £14.1m (-88%), Enterprise Therapeutics £7.9m
(-39%), Mission Therapeutics £6.3m (-35%) and Oxehealth £5.2m (-50%). These write-downs
resulted from independent valuation reappraisals informed by the more difficult funding and
pricing environment, fundraising conducted at depressed prices or, in the case of Oxular, from
clinical setbacks.
We expect a more positive year in 2024, with downward pressure on valuations reducing,
and evidence that the pharma industry’s appetite for acquiring the best clinical assets is only
increasing, as witnessed by some very significant transactions announced in late 2023/early 2024.
Healthier future: multiple clinical readouts
THERAPEUTICS
PORTFOLIO
IP GROUP
VALUE £M*
COMPANY
PHASE 2
PHASE 3
PHASE 1
PRE-CLINICAL
17.4
19.6
9.4
5.3
4.1
7.6
16.1
113.8
15.8
4.0
19.2
15.7
5.0
Oncology
Inflammation
Other
Artios Pharma Limited
Crescendo Biologics Limited
Storm Therapeutics
Akamis Bio
Carisma Therapeutics
Iksuda Therapeutics
1
Microbiotica Limited
2
Istesso Limited
Mission Therapeutics Limited
Kynos Therapeutics
Pulmocide Limited
Centessa Pharmaceuticals plc
Enterprise Therapeutics
WAITING
CLINICAL
READOUT
*
Based on valuation of IP Group’s stake
in company at 31/12/23, including debt
where applicable, and value held in
IP Group’s North American portfolio.
1
Should move from preclinical to Phase 1
within 18 months.
2
Should move from preclinical to Phase 1
within 18 months.
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23
IP GROUP PLC ANNUAL REPORT 2023
Life Sciences portfolio
£33.9m
£(3.7)m
£(105.8)m
£1.9m
£641.1m
£567.4m
Closing
Other
Fair value
movement
Cash
Realised
Invested
Opening
PORTFOLIO REVIEW
.
HEALTHIER FUTURE: LIFE SCIENCES
24
IP GROUP PLC ANNUAL REPORT 2023
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.
TECH-ENRICHED FUTURE: DEEPTECH
The IP Group Deeptech team invests in breakthrough technologies across four high growth
sectors of future compute, applied AI, next generation networks and the human-machine
interface, areas in which the UK excels and is increasingly becoming a dominant global force.
Company name
Description
Group Stake at
31 December
2023
%
Net
investment/
(divestment)
£m
Unrealised
+ realised
fair value
movement
£m
Fair value of
Group holding
at 31 December
2023
£m
Featurespace Limited
Leading predictive analytics company
20.1
–
8.8
73.0
Garrison
Technology Limited
Anti-malware solutions for enterprise
cyber defences
23.6
3.9
–
31.6
Ultraleap
Holdings Limited
Contactless haptic technology
“feeling without touching”
16.9
–
(6.9)
31.0
Accelercomm Limited
Developing a high-performance decoding
solution for 5G mobile communication
26.5
3.6
0.4
12.5
Other companies
(28 companies)
(28.8)
(7.2)
83.3
Total
(21.3)
(4.9)
231.4
While 2023 was a challenging year for the global
technology venture market, impacting both the
availability of new capital as well as the price of funding
rounds, the technology portfolio proved resilient, and
we were pleased to have completed all of our key
targeted transactions at uplifted or flat valuations.
These included a £42m round for Quantum Motion
Technologies, the largest ever single investment into
a quantum computing startup in the UK, a £21.5m
series B round for Accelercomm and a £15.5m round
for Garrison Technologies. While there were some
impairments to valuations, either where comparator
valuation benchmarks reduced and/or where progress
was a little slower than planned, we are pleased with the
overall performance and firmly believe the deeptech
portfolio remains poised for growth in 2024 and stands
to benefit both from the continued acceleration of digital
transformation across the economy and specifically
from the huge potential of new technologies such as
generative AI.
In 2023, Featurespace continued to deliver healthy
growth with double-digit increases to revenue, a trend
which was replicated elsewhere in the portfolio in
companies including Itaconix. Garrison, which eliminates
cyberthreats 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 four years, compounding revenues
at 64% year on year over this period, with continued
attractive growth expected this year.
It was also pleasing to see the completion of a £21.5m
series B investment round at our portfolio company
Accelercomm, which is supercharging the world’s
wireless infrastructure. The round was led by Swisscom
Ventures and Parkwalk Advisors alongside Hostplus
with follow-on funding from all the existing investors.
Accelercomm’s technology, which can halve the cost
of spectrum and power in 5G networks by increasing
Mark Reilly
Managing Partner,
Technology
IP Group’s Technology
portfolio comprises
holdings in 32
companies valued at
£231.4m at 31 December
2023.
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IP GROUP PLC ANNUAL REPORT 2023
PORTFOLIO REVIEW
.
TECH-ENRICHED FUTURE: DEEPTECH
throughput and reducing latency, is already being used by several of the
world’s largest corporates, and the company continues to grow through
evolving partnerships with the likes of AMD, Vodafone and Lockheed Martin.
Quantum Motion Technologies closed a £42m funding round, the largest
ever single investment into a quantum computing startup in the UK. The
investment, which the company will use to develop its silicon-based
approach to building a cost-effective and scalable quantum computer,
was provided by Robert Bosch Venture Capital alongside Porsche SE and
British Patient Capital. IP Group and Parkwalk Advisors participated alongside
all of the company’s other existing investors (Inkef, NSSIF, Octopus Ventures
and OSE). Another of our quantum computing portfolio companies, Oxford
Quantum Circuits, announced its $100m funding round and the public
availability of “OQC Toshiko”, the world’s first enterprise-ready quantum
computing platform. IP Group was instrumental in the formation of both
these quantum computing companies, and we are proud of their progress in
this pioneering field that has the potential to shape the future of computing.
Elsewhere in the portfolio, Audioscenic launched its first commercial
product at CES 2023 as the power behind Razer’s latest gaming soundbar,
the Leviathon V2 Pro (which won a dozen awards), and they showcased
new products in both laptops and PC monitors at CES 2024. Intrinsic
Semiconductor Technologies, a game-changing company with technology
aiming to revolutionise the $100bn non-volatile memory market, far
exceeded its technical milestones and will now greatly accelerate its
commercial development.
In terms of fair value reductions, we reduced the value of our holding in
Teya by £4.5m due to stronger than expected market headwinds although
we continue to believe the business has strong growth prospects and
excellent fundamentals. Ultraleap also faced challenging conditions in the
key eXtended Reality (“XR”) market which has been slow to materialise,
and we have reduced the fair value of our holding by £6.9m. Ultraleap has,
nonetheless, secured several key licence agreements in the period with
well-recognised names and we remain bullish on the longer-term adoption
of XR technologies.
In 2023, the team backed two new opportunities including one in Australia
as well as a £3m investment into DeepRender which is developing the next
generation of image and video compression technology using an AI-first
approach. DeepRender already has commercial engagement with several
of the world’s top content streamers and looks set to significantly disrupt this
market in the years to come. As 2024 unfolds, we expect to see strong growth
across our focus portfolio as software sales rebound in the more mature
assets, and technologies deployed into new products in our mid and early-
stage portfolio. Together this positions the asset base well for value accrual
provided the market provides continued access to additional growth and
expansion capital.
Deeptech portfolio
£11.9m
£(33.2)m
£(4.9)m
£30.4m
£227.3m
£231.4m
Closing
Other
Fair value
movement
Realised
cash
Invested
Opening
26
IP GROUP PLC ANNUAL REPORT 2023
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.
REGENERATIVE FUTURE: CLEANTECH (KIKO VENTURES)
An early highlight of the year was the $140m Series C fund raise by autonomous vehicle
pioneer Oxa in January 2023.
Company name
Description
Group Stake at
31 December
2023
%
Net
investment/
(divestment)
£m
Unrealised
+ realised
fair value
movement
£m
Fair value of
Group holding
at 31 December
2023
£m
Hysata Pty Limited
Developing a new type of breakthrough
hydrogen electrolyser and accelerating
the global transition to net zero
36.8
4.7
46.5
70.0
Oxa Autonomy Limited
Software to enable every vehicle to
become autonomous
11.8
–
(0.2)
65.7
First Light Fusion Limited
Solving fusion with the simplest possible
machine
27.5
–
(49.6)
64.9
Bramble Energy Limited
The fuel cell company with Gigafactories
31.4
–
–
20.9
Nexeon Limited
Silicon anodes for next generation
lithium-ion batteries
5.2
–
(4.7)
11.8
Other companies (11 companies)
12.8
(0.7)
42.0
Total
17.5
(8.7)
275.3
The fundraising, which saw new investor Google join
the share register, was the largest by a cleantech
company in IP Group’s history. Google and Oxa have
already worked together on simulation and testing
technology, and it was highly encouraging to see one
of the world’s most valuable technology companies
take a stake in one of our cleantech assets. Another
highlight was electrolyser company Hysata achieving its
Series A technical milestone months ahead of schedule,
triggering the second tranche of its oversubscribed
£24m Series A. The technical progress was impressive
with Hysata demonstrating stacks operating at the
same exceptionally high 95% efficiency as the single
cell experiment reported in Nature in 2021. Hysata
subsequently launched its Series B funding round,
achieving a first close in January 2023, supported by
both Kiko and IP Group Australia. The round achieved a
significant uplift to the Series A, reflecting the impressive
technical progress made by the company. This resulted
in a fair value gain of £46.5m. It is encouraging to see
large up-rounds in our cleantech companies against
a backdrop of falling valuations in the wider venture
ecosystem.
Earlier-stage assets were also successful in fund raising
with Oxford spin-outs OxCCU and Mixergy both raising
up-rounds. In May, OxCCU, which has breakthrough
technology for the synthesis of sustainable aviation
fuels (“SAFs”), raised an oversubscribed £18m Series A.
The round was led by well-established US cleantech VC
Clean Energy Ventures and was their first investment in a
UK company. In January, smart home heating company
Mixergy completed a £9m Series B raise, led by OSE, with
new investors Nesta and EDP Ventures joining the share
register. Mixergy has continued to make good progress
and has doubled revenue each year for the past three
years. In addition to the four new investments made
in 2022, the team completed one new investment in
2023 into smart home energy pioneer Tado°. Tado° is
the European leader in smart home energy technology
and its smart thermostats, protected by a strong patent
portfolio, lead to reductions in home energy costs of 22%
From left to right:
Robert Trezona,
Arne Morteani,
Jamie Vollbracht
Founding Partners,
Kiko Ventures.
The Cleantech (Kiko
Ventures) portfolio
comprises holdings in
16 companies valued at
£275.3m at 31 December
2023.
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
27
IP GROUP PLC ANNUAL REPORT 2023
PORTFOLIO REVIEW
.
REGENERATIVE FUTURE: CLEANTECH (KIKO VENTURES)
on average. The company’s offerings are particularly welcome and impactful
at the current time of high energy prices and it has now sold a total of 3
million thermostats. Kiko jointly led a €43m funding round in January 2023
to help the company expand its offering into home energy management,
combining its thermostats with time-of-use energy tariffs.
In less welcome news, First Light Fusion has not yet completed its Series
C funding round, which was planned to conclude in 2023, leveraging
momentum following its fusion result in 2022. While there is still activity in
the fusion funding market, there has been a decline in multi-hundred-
million funding rounds like those seen in 2021 and targeted by First Light.
Given this delay to funding and the change to fusion market sentiment, we
have carried out a re-evaluation of our holding in First Light using expert
third-party input. This has led to a reduction in our holding value of £49.6m.
Following the announcement this year of further improvement to net
positive gain achieved at the National Ignition Facility lab in the US, there is
growing interest in inertial confinement fusion (“ICF”) technology, as pursued
for commercialisation by First Light. The company recently entered into a
technology collaboration on ICF with the Sandia federal lab in the US giving
access to the Z-machine, the world’s most powerful pulse power driver.
First Light is the first privately funded fusion company to fire a shot on the
Z-machine and its amplifier technology enabled a new pressure record to be
set for the facility.
We have also continued to build the ecosystem around the Kiko brand
with a wide range of speaking and clean energy innovation engagement
policy activities. As one of the founders of Cleantech for UK, a new cleantech
policy initiative, backed by Bill Gates’ Breakthrough Energy Ventures, Kiko
helped convene a total of £6bn of funds to support the initiative. Cleantech
for UK aims to promote UK cleantech champions, drawing on the country’s
world-class research facilities and investor base, and was launched at
Imperial College in February at an event attended by Bill Gates and the Prime
Minister. We continue to be a member of the leading energy think tank, the
Energy Transitions Commission (“ETC”), which published an assessment
of the role of fossil fuels in the transition ahead of the UN climate change
conference COP28 in Dubai. Our view of the COP28 outcome was that the
acknowledgement of the need to transition away from fossil fuels represents
an important step in the right direction. ETC analysis shows that coal use can
and must fall by 85% by 2050, gas by 70% and oil by 95% in order to meet the
UN climate goals of limiting global heating to safe levels. The agreements to
triple renewables and double the rate of energy efficiency improvement also
follow longstanding ETC recommendations. Despite wider headwinds in the
venture ecosystem, the need for clean energy technology remains clear and
was reiterated at COP28.
Cleantech portfolio
£17.6m
£(0.1)m
£(8.7)m
£0.1m
£266.4m
£275.3m
Closing
Other
Fair value
movement
Realised
cash
Invested
Opening
28
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
PORTFOLIO REVIEW
.
PLATFORM INVESTMENTS
The Platform Investments portfolio contains holdings in funds and companies that operate
in a similar way to IP Group, most significantly our interest in our US platform, managed by
Longview Innovation, Oxford Science Enterprises Limited, Cambridge Innovation Capital
Limited, and the UCL Technology Fund in all of which IP Group was a founding investor.
Company name
Description
Group Stake at
31 December
2023
%
Net
investment/
(divestment)
£m
Unrealised
+ realised
fair value
movement
£m
Fair value of
Group holding
at 31 December
2023
£m
US platform
(managed by
Longview Innovation)
Commercialising world class research
in the US
58.1
8.1
(42.1)
46.0
Interest in UCL
Technology Fund L.P.
Commercialising world class research
from UCL
46.7
0.8
3.0
20.7
Oxford Science
Enterprises plc
University of Oxford preferred IP partner
under 15-year framework agreement
1.8
–
(2.3)
18.3
Other companies
(2 companies/LPs)
(0.7)
0.3
5.8
Total
8.2
(41.1)
90.8
Having been unable to secure additional significant funding from third parties other than $10m which the Group
committed in 2022, Longview Innovation has taken proactive steps to focus its resources on a smaller number of its
most promising portfolio companies, resulting in a rationalisation of the portfolio and a corresponding portfolio fair
value reduction of £42.1m.
Number of investments by sector
As at 31 December 2023
As at 31 December 2022
Sector
Number
%
Number
%
Healthier future: Life Sciences (ex-ONT)
32
37%
38
40%
Healthier future: Life Sciences (ONT)
1
1%
1
1%
Tech-enriched future: Deeptech
32
37%
34
36%
Regenerative future: Cleantech (Kiko Ventures)
16
19%
15
16%
Platform investments
5
6%
7
7%
Total number of portfolio investments
1
86
100%
95
100%
1
Excludes de minimis holdings, which have a small value to the Group and are not actively managed to the same extent as core holdings.
IP Group’s Platform
Investments portfolio
comprises holdings
in two companies
and three interests in
Limited Partnerships,
valued at £90.8m at
31 December 2023.
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
29
IP GROUP PLC ANNUAL REPORT 2023
PORTFOLIO REVIEW
.
PLATFORM INVESTMENTS
Number of investments
United
Kingdom
North
America
Australia
& New
Zealand
Total
1 January 2023
81
1
13
95
Additions
1
–
2
3
Exited & acquired
(1)
–
–
(1)
Being closed/liquidated
–
–
(1)
(1)
Reclassified to de minimis
1
(6)
–
(4)
(10)
31 December 2023
75
1
10
86
1
De minimis holdings have a small value to the Group and are not actively managed to the same
extent as core holdings, and are accordingly not included in the stated number of companies.
Co-investment analysis
Including the £73.2m of capital invested by the Group, the Group’s portfolio
raised £667m during 2023 (2022: £1.0bn). Co-investment from parties or
funds with a greater than 1% shareholding in IP Group plc totalled £1.0m
(2022: £24.9m). An analysis of this co-investment by source is as follows:
2023
2022
Portfolio capital raised
£m
%
£m
%
IP Group
1
73.2
11%
89.8
9%
IP Group managed funds
2
12.9
2%
35.6
4%
IP Group plc shareholders
(>1% holdings)
1.0
0%
24.9
2%
Institutional investors
317.7
48%
249.7
25%
Corporate, other EIS,
individuals, universities
and other
262.2
39%
364.0
35%
Capital into multi-sector
platforms
–
0%
250.0
25%
Total
667.0
100%
1,014.0
100%
1
Reflects primary investment only; during 2023 the Group invested £nil via secondary purchase of
shares (2022: £3.7m).
2
Includes Parkwalk Advisors and other funds managed by IP Group.
Portfolio funding position
The following table lists information on the expected cash-out dates for
portfolio companies IP Group’s investment holding value is greater than £4m.
Company name
Fair value of
Group holding
at 31 December 2023
£m
%
Funded to breakeven
345.8
35%
2024 H1
69.8
7%
2024 H2
57.7
6%
2025
410.8
41%
2026
104.2
10%
2027
10.7
1%
Total companies > £4m value
999.0
100%
Companies < £4m value
75.1
Interest in Limited Partnerships and Platforms
90.8
Total portfolio
1,164.9
30
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
David Baynes
Chief Financial and Operating Officer
We continue to navigate carefully through
difficult markets. With £227m gross cash
and only 13% of our portfolio needing to
raise money in 2024, we are well-positioned
for an improvement in investor appetite.”
CFOO REVIEW
.
•
Loss for the period of (£174.4m) (2022: loss of £344.5m)
•
Net assets were £1,190.3m (2022: £1,376.1m)
•
Net assets per share were 114.8p (2022: 132.9p)
•
Final 2022 dividend of 0.76pps and 2023 interim dividend of 0.51pps paid in period, talking total
cumulative dividends and share buybacks since 2021 to over £75m
•
£60m second tranche of long-term private loan notes drawn
Consolidated statement of comprehensive income
A summary analysis of the Group’s performance is provided below:
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
Net portfolio (loss)
1
(160.5)
(309.1)
Net overheads
2
(22.1)
(20.2)
Administrative expenses – consolidated portfolio companies
–
(0.1)
Administrative expenses –share-based payments charge
(2.6)
(2.9)
Carried interest plan provision credit/(charge)
4.7
(12.0)
Net finance income
4.2
0.8
Taxation
1.9
(1.0)
Loss for the year
(174.4)
(344.5)
Other comprehensive (expense)/income
(0.4)
0.5
Total comprehensive loss for the year
(174.8)
(344.0)
Exclude:
Share-based payment charge
2.6
2.9
Return on NAV
1
(172.2)
(341.1)
1
Defined in note 28 Alternative Performance Measures.
2
See net overheads table below and definition in note 28 Alternative Performance Measures.
Net portfolio gains/(losses) consist primarily of realised and unrealised fair value gains and
losses from the Group’s equity and debt holdings in portfolio companies.
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
31
IP GROUP PLC ANNUAL REPORT 2023
31
IP GROUP PLC ANNUAL REPORT 2023
CFOO REVIEW
.
Fair value movements
A summary of the unrealised and realised fair value gains and losses is
as follows:
2023
£m
2022
£m
Quoted equity & debt investments
(31.8)
(428.5)
Private equity & debt investments
(83.8)
101.4
Investments in Limited Partnerships
(36.5)
(6.4)
Foreign exchange movements
(8.4)
24.4
Net portfolio losses
(160.5)
(309.1)
A summary of the largest unrealised and realised fair value gains and losses
by portfolio investment is as follows:
Gains
£m
Hysata Pty Ltd
46.5
Centessa Pharmaceuticals plc
9.7
Featurespace Limited
8.8
Autifony Therapeutics Limited
6.1
Pulmocide Limited
5.0
Apollo Therapeutics Group Limited
3.3
Other quoted
1.2
Other private
22.8
Foreign exchange
0.1
Total
103.5
Losses
£m
First Light Fusion Limited
(49.6)
US Platform (managed by
Longview Innovation)
(39.8)
Oxford Nanopore Technologies plc
(31.9)
Hinge Health, Inc.
(17.8)
Akamis Bio Limited
(15.9)
Oxular Limited
(14.1)
Other quoted
(10.8)
Other private
(75.7)
Foreign exchange
(8.5)
Total
(264.1)
Net overheads
Year ended
31 December
2023
£m
Year ended
31 December
2022
£m
Other income
5.9
7.1
Administrative expenses – all other expenses
(25.8)
(24.3)
Administrative expenses – annual incentive scheme
(2.6)
(3.0)
Net overheads
(22.5)
(20.2)
Other income
Other income comprises fund management fees and licensing and patent
income. In 2023 other income totalled £5.9m (2022: £7.1m), a decrease from
2022, primarily due to a £0.6m decrease in revenues from the Group’s patent
and license portfolio, and a £0.4m reduction in corporate finance fees due to
our decision to largely cease this activity.
Other central administrative expenses
Other central administrative expenses, excluding performance-based staff
incentives and share-based payments charges, have increased by £1.6m
from the prior year to £25.8m (2022: £24.3m) as a result of increases in non-
staff cost across a number of expense categories.
The charge of £2.6m (2022: £3.0m) in respect of the Group’s Annual Incentive
Scheme, reflects a provisional assessment of performance against 2023 AIS
targets which include Group, Team, and Individual performance elements as
described in the Directors Remuneration Report.
Other income statement items
The share-based payments charge of £2.6m (2022: £2.9m) reflects the
accounting charge for the Group’s Restricted Share Plan, Long-Term
Incentive Plan and Deferred Bonus Share Plan. This non-cash charge reflects
the fair value of services received from employees, measured by reference
to the fair value of the share-based payments at the date of award, but has
no net impact on the Group’s total equity or net assets.
Carried interest plan charge
The carried interest plan credit of £4.7m (2022: £12m charge) relates to
the recalculation of liabilities under the Group’s carry schemes, with the
credit in the year reflecting this year’s reduction in value of assets within
the scheme. As at 31 December 2023, 70% by value of the Group’s equity
& debt investments were included within carry scheme arrangements
(2022: 67%). The liabilities are calculated based upon any excess of current
fair value above cost and hurdle rate of return within each scheme or
vintage. Any payments will only be made following the full achievement of
cost and hurdle via cash realisations and are only paid on the event of a
cash realisation.
32
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
CFOO REVIEW
.
Consolidated statement of financial position
A summary analysis of the Group’s assets and liabilities is provided below:
Year ended
31 December
2023
£m
Year ended
31 December
2022
£m
Portfolio
1,164.9
1,258.5
Other non-current assets
10.2
7.7
Other net current assets/(liabilities)
(7.5)
33.2
Cash and deposits
226.9
241.5
Borrowings
(135.2)
(81.4)
Other non-current liabilities
(69.0)
(83.4)
Total Equity or Net Assets (“NAV”)
1,190.3
1,376.1
NAV per share
114.8p
132.9p
The composition of, and movements in, the Group’s portfolio are described in
the portfolio review above.
Portfolio valuations
Given the public market valuation reductions in the year and slowdown in
private company fundraise activity, we have carried our year-end private
portfolio valuations against a backdrop of heightened valuation uncertainty.
As a response, we have carried out an enhanced valuation process in the
period, including obtaining external valuations for eleven (2022: ten) of our
largest private assets (Istesso, Featurespace, Oxa, First Light Fusion, Hinge
Health, Ultraleap, Ieso Digital Health, Artios Pharma, Mission Therapeutics,
Akamis Bio and MOBILion) accounting for 46% (2022: 44%) of the private
portfolio value.
In the case of Featurespace, our third-party valuers recommended an
increase in valuation in the year, because of strong performance against
milestones. In the case of First Light Fusion, Hinge Health, Ultraleap, Ieso Digital
Health and Mission Therapeutics they recommended a reduction in our
carrying values, reflecting the impact of reduced public market valuations the
more challenging fundraise environment and company-specific performance.
Valuations of Istesso, Oxa, MOBILion and Artios Pharma were broadly
unchanged. In all cases, our carrying values reflect the mid-point or below of
the valuation ranges we received from our external valuation consultants.
Although we saw an increase in the proportion of down rounds within our
portfolio (i.e. where a funding round is agreed at a lower valuation than the
previous funding round price), most of our portfolio fundraises were at higher
valuations than the previous funding round. An analysis of funding rounds
within our portfolio is as follows:
Year ended
31 December 2023
Year ended
31 December 2022
Analysis of priced funding rounds
in private portfolio
No.
%
No.
%
Up round
13
62%
18
62%
Flat round
3
14%
8
28%
Down round
5
24%
3
10%
Total
21
100%
29
100%
The above table reflects priced funding rounds in the private portfolio
(excluding organic and de minimis companies) and excludes debt funding
and funding transactions where a subsequent tranche is drawn based on
pre-agreed pricing.
Most of our portfolio remains well funded, with many of our more mature
companies evidencing commercial progress or anticipating technical or
funding milestones in the next 12-24 months, therefore we remain confident
around the resilience of our portfolio.
The table below summarises the valuation basis for the Group’s portfolio.
Further details on the Group’s valuation policy and approach can be found in
notes 13 and 14.
Year ended
31 December 2023
£m
Audited
Year ended
31 December 2022
£m
Quoted
203.8
228.7
Financing transaction (<12 months)
187.9
289.8
Financing transaction (>12 months)
162.7
117.8
Other: Future market/commercial events
25.0
40.7
Other: Adjusted financing price based on
past performance – upwards
99.9
151.8
Other: Adjusted financing price based on
past performance – downwards
203.9
154.5
Other: Discounted cash flow (“DCF”)
126.6
97.7
Other: Revenue multiple
85.4
77.9
Statements from LP
69.7
99.6
Total Portfolio
1,164.9
1,258.5
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
33
IP GROUP PLC ANNUAL REPORT 2023
CFOO REVIEW
.
Further context: Parkwalk Advisors portfolio valuations
Thirteen portfolio companies closed funding rounds at uplifts in valuation, six
unchanged and nine at lower valuations than the previously held value.
Other assets
The majority of other long-term and short-term assets relate to amounts
receivable on sale of equity and debt investments, representing deferred
and contingent consideration amounts to be received in more than one
year. Property, plant and equipment includes the lease asset relating to the
Group’s Kings Cross head office, which increased in the period due to an
extension of the lease.
Other long-term liabilities relate to carried interest and revenue share
payables, and loans from LPs of consolidated funds. The Group consolidates
the assets of a fund in which it has a significant economic interest,
IP Venture Fund II LP. Loans from third parties of consolidated funds represent
third-party loans into this partnership. These loans are repayable only upon
these funds generating sufficient realisations to repay the Limited Partners.
Borrowings
On 2 August 2022, the Group signed a Note Placing Agreement (“NPA”)
to issue a £120m debt private placement to London-based institutional
investors (primarily Phoenix Group). £60m of this was drawn in December
2022 and the balance was drawn in June 2023, with three equal repayment
maturities in December in 2027, 2028 and 2029. The interest rate is fixed at an
average of 5.25%. Approximately £15m of the proceeds were used to repay
early the shorter-dated portion of our EIB debt, leaving £15.6m of EIB debt to
be progressively repaid between now and January 2026 (£6.3m of the EIB
debt will be repaid within twelve months of the period end).
Under the terms of the NPA, the Group is required to maintain a minimum
cash balance of £25m at any time, equity must be at least £500m and
gross debt less restricted cash must not exceed 25% of total equity as at the
Group’s 30 June and 31 December reporting dates. The NPA also includes
‘Cash Trap’ provisions which stipulate that the Group is required to maintain
cash and cash equivalents of not less than £50m at any time and equity
must be at least £750m, gross debt less restricted cash must not exceed 20%
of total equity as at the Group’s 30 June and 31 December reporting dates. In
the event of the Cash Trap being triggered, the Group is not permitted to pay
or declare a dividend or purchase any of its shares. In addition, investments
are restricted to £2.5m per calendar quarter other than those legally
committed to. The Group is also required to place the net proceeds of all
realisations (over a threshold of £1m) into a blocked bank account. Entering a
Cash Trap does not constitute a default under the NPA.
For further details of the Group’s loans including covenant details see note 18.
Cash and deposits
At 31 December 2023, the Group’s cash and deposits totalled £226.9m,
a decrease of £14.6m from a total of £241.5m at 31 December 2022,
predominantly due to outflows from portfolio investment of £73.2m, a £19.3m
net cash outflow from operations, £13.1m of dividend payments and share
buybacks, offset by net drawdown of debt of £53.8m and realisations
of £38.6m.
The principal constituents of the movement in cash and deposits during the
period are as follows:
Year ended
31 December
2023
£m
Year ended
31 December
2022
£m
Net cash (used) in operating activities
(19.3)
(24.3)
Investments
(73.2)
(93.5)
Realisations
38.6
28.1
Other investing
(0.6)
(0.3)
Interest received on deposits
4.1
–
Net cash (outflow) from investing activities
(31.1)
(65.7)
Dividends paid
(13.0)
(12.3)
Purchase of treasury shares
(0.1)
(8.0)
Interest paid
(5.5)
–
Repayment of debt facility
(6.2)
(30.4)
Drawdown of loan notes
60.0
60.0
Other financing activities
(0.5)
(0.5)
Net cash inflow from financing activities
34.7
8.8
Effect of foreign exchange rate changes
(0.2)
–
Movement during period
(14.5)
(80.4)
34
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
CFOO REVIEW
.
Investments and realisations
The Group invested a total of £73.2m across 33 portfolio companies during the
year (2022: £93.5m; 46), and realised cash proceeds of £38.6m (2022: £28.1m).
Largest investments and realisations by portfolio company:
Investments
£m
Istesso Limited
15.0
US platform (managed by
Longview Innovation)
8.1
Hysata Pty Ltd
4.7
Tado GmbH
4.4
Mission Therapeutics Limited
3.9
Other
37.1
Total
73.2
Cash Realisations
£m
Wave Optics Limited
30.8
Zihipp Limited
1
3.4
Reinfer Limited
1.5
UCL Technology Fund L.P.
0.9
Cambridge Innovation Capital
Limited
0.7
Other
1.3
Total
38.6
1
Plus, deferred consideration valued at £1.5m (2022: £nil).
Deferred consideration estimated at £9.1m was outstanding at year end
(2022: £48.2m), relating to the Group’s realisation of Enterprise Therapeutics
(£7.6m, exited in 2020) and Zihipp Limited (£1.5m, exited in 2023).
Treasury policy
It remains the Group’s policy to place cash that is surplus to near-term
working capital requirements on short-term and overnight deposits with
financial institutions that meet the Group’s treasury policy criteria or in
low-risk treasury funds rated prime or above. The Group’s treasury policy
is described in detail in note 2 to the Group financial statements alongside
details of the credit ratings of the Group’s cash and deposit counterparties.
On 31 December 2023, the Group had a total of £0.1m (2022: £0.1m) held in US
Dollars, £nil (2022: £nil) held in Euros, £0.8m (2022: £0.7m) held in Australian
Dollars and £0.9m (2022: £0.7m) held in Hong Kong Dollars.
Dividend and share buyback
As announced in the Group’s half-yearly results, an interim 2023 dividend of
0.51p per ordinary share was paid in September 2023, totalling £5.3m.
On 18 December 2023, the Group announced that, in light of the prevailing
discount between the Company’s share price and its NAV per share, it had
initiated a share buyback of up to £20m. The Board remains committed to
making regular cash returns to shareholders from realisations. In future these
regular cash returns will normally be made in the form of share buybacks
when the share price discount to NAV exceeds 20%. Regular dividend
payments will be suspended under such conditions, including consideration
of any final dividend for 2023.
Taxation
The Group’s business model seeks to deliver long-term value to its
stakeholders through the commercialisation of fundamental research
carried out at its partner universities. To date, this has been largely achieved
through the formation of, and provision of services and development capital
to, spin-out companies formed around the output of such research. The
Group primarily seeks to generate capital gains from its holdings in spin-
out companies over the longer term but has historically made annual net
operating losses from its operations from a UK tax perspective. Capital
gains achieved by the Group would ordinarily be taxed upon realisation
of such holdings; however, since the Group typically holds more than 10%
in its portfolio companies and those companies are themselves trading,
the majority of the portfolio will qualify for the Substantial Shareholdings
Exemption (“SSE”) on disposal.
This exemption provides that gains arising on the disposal of qualifying
holdings are not chargeable to UK corporation tax and, as such, the Group
has continued not to recognise a provision for deferred taxation in respect
of uplifts in value on those equity holdings that meet the qualifying criteria.
Gains arising on sales of holdings which do not qualify for SSE will ordinarily
give rise to taxable profits for the Group, to the extent that these exceed the
Group’s ability to offset gains against current and brought forward tax losses
(subject to the relevant restrictions on the use of brought-forward losses). In
such cases, a deferred tax liability is recognised in respect of estimated tax
amount payable.
The Group complies with relevant global initiatives including the
US Foreign Account Tax Compliance Act (“FATCA”) and the OECD Common
Reporting Standard.
Alternative Performance Measures (“APMs”)
The Group discloses alternative performance measures, such as NAV per
share and Return on NAV, in this Annual Report. The Directors believe that
these APMs assist in providing additional useful information on the underlying
trends, performance, and position of the Group. Further information on APMs
utilised in the Group, including the details of a new APM for Cash proceeds is
set out in note 28.
OUR GOVERNANCE
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STRATEGIC REPORT
35
IP GROUP PLC ANNUAL REPORT 2023
KEY PERFORMANCE INDICATORS
.
Our KPIs measure performance
against our strategy.
KEY
Have an impact on the world that counts
Develop our unique insight, expertise and access
Accelerate value creation
Build a truly differentiated reputation
Be a home for exceptional talent
01
NAV/share p
1
02
Return on NAV £
1
Net Assets divided by the number of
outstanding shares in issue. A useful
measure to compare to the Group’s
share price.
Profit for the year excluding share-based
payment charges. Shows a summary of the
income statement gains and losses that
directly impact NAV.
107.8
125.3
167.0
132.9
114.8
2023
2022
2021
2020
2019
Link to strategy
Link to
remuneration
Yes
(73.7)
189.5
452.2
(341.1)
(172.2)
2023
2022
2021
2020
2019
Link to strategy
Link to
remuneration
Yes
03
Total portfolio £m
04
% return on portfolio
Equity and debt investments plus
investments into limited partnership
interests. Shows assets under the
Group’s control.
Net portfolio gains or (losses) as a percentage
of total portfolio value. A useful measure to
compare annual returns.
1,067
1,184.9
1,507.5
1,258.5
1,164.9
2023
2022
2021
2020
2019
Link to strategy
Link to
remuneration
Yes
(4%)
21%
42%
(20%)
(13%)
2023
2022
2021
2020
2019
Link to strategy
Link to
remuneration
Yes
1
Alternative performance measure. See note 28 for definition and reconciliation to IFRS primary statements.
36
IP GROUP PLC ANNUAL REPORT 2023
36
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
OUR FINANCIALS
STRATEGIC REPORT
BUSINESS OVERVIEW
KEY PERFORMANCE INDICATORS
.
05
Portfolio investment £m
1
06
Proceeds from sale of equity
and debt investments £m
07
Net overheads %
1
The purchase of equity and debt investments
plus investments into limited partnership
interests. A useful measure to compare annual
investment in the portfolio.
The total amount received from the disposal
of interests in portfolio companies. A measure
of realisation success. Realised funds are
invested into new opportunities or returned to
shareholders.
The Group’s core overheads less operating
income as a percentage of net assets. Reflects
the Group’s controllable ‘cash-equivalent’ cost
base in proportion to net assets.
71.5
72.0
106.7
93.5
73.2
2023
2022
2021
2020
2019
Link to strategy
Link to
remuneration
Yes
79.5
191.0
213.4
28.1
38.6
2023
2022
2021
2020
2019
Link to strategy
Link to
remuneration
Yes
2.0%
1.6%
1.1%
1.5%
1.9%
2023
2022
2021
2020
2019
Link to strategy
Link to
remuneration
Yes
08
Number of new portfolio
investments
09
Third-party assets under
management £m (NEW)
10
ESG progress % (NEW)
The number of portfolio investments that
received initial capital from the Group during
the year. A measure of the Group’s ability to
find and invest in new opportunities. Revised in
2023 to include Parkwalk Advisors investments.
Third-party funds and capital managed or
advised by the Group. Shows progress against
the Group’s stated objective to increase
capital managed on behalf of third-party
investors.
A hybrid metric that demonstrates the Group’s
commitment to having an impact on the world
that counts. 50% relates to outperforming sector
ESG benchmarks under Refinitiv, MSCI and ISS
and 50% relates to progressing the collection
and analysis of data and development of
impact metrics for the portfolio.
24
22
28
15
10
2023
2022
2
2021
2
2020
2
2019
2
Link to strategy
Link to
remuneration
Yes
413.7
541.9
586.6
696.8
650.9
2023
2022
2021
2020
2019
Link to strategy
Link to
remuneration
Yes
0
0
0
0
91
2023
Link to strategy
Link to
remuneration
Yes
1
Alternative performance measure. See note 28 for definition and reconciliation to IFRS primary statements.
2
Restated to include Parkwalk Advisors.
OUR GOVERNANCE
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37
IP GROUP PLC ANNUAL REPORT 2023
37
IP GROUP PLC ANNUAL REPORT 2023
MEANINGFUL IMPACT
.
Environment and climate
IP Group’s carbon footprint and exposure to climate risk as an
organisation is low but, through our investments in carbon capture,
nuclear fusion and hydrogen technology, we have a significant
opportunity to support the global transition away from fossil fuels
in support of the Paris Climate Agreement. In addition, IP Group’s
deeptech investments include technologies that are working to
improve product performance whilst reducing energy consumption,
from new computing architectures to next generation wireless
networks. Science, technology and innovation funding have also been
identified by the UN as one of the main means of implementation for
the achievement of the 2030 Sustainable Development Goals (“SDGs”).
The Group is required to comply with UK-CFD requirements for the first
time this year.
We are focused on having an
impact on the world that counts
Driven by our purpose, we are working at the cutting edge of sectors
that are changing the world. Our three investment themes align our
efforts with some of the most pressing challenges facing humanity and
our planet: curing and preventing disease; managing complex data to
solve complex problems; and the decarbonisation of energy systems
to limit climate change. At the same time, we consider how the way we
run our business can maximise impact – through strong governance
and ethical practice; for our exceptionally talented people; for our
communities and the environment; and by supporting our portfolio
companies to do the same.
Read our
impact
in our
2023 Meaningful Impact report
38
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
MEANINGFUL IMPACT
.
Social
We are a responsible organisation that seeks to have a positive
impact on people and society through our investments and the
way we operate. We conduct all of our operating and business
activities in an honest, ethical and socially responsible manner, acting
professionally, fairly and with integrity in all business dealings and
relationships. Our culture and internal frameworks guide our behaviour
and help us focus on the things that really matter, such as meeting
our commitments, developing and supporting our people, furthering
diversity and inclusion, and making a difference in our communities.
We are building companies in our Life Sciences portfolio for a healthier
future and in our deeptech portfolio that will support current and
future societal needs in computing, communication and mobility. Our
investments in the human-machine interface, for example Ultraleap,
are just one way we seek to make a positive social change: for
example, by allowing all human users the ability to interact digitally
through means other than a keyboard – through touch, sound and
immersion.
Governance
IP Group endeavours to conduct business in accordance with
established best practice, to be a responsible employer, and to adopt
appropriate values and standards. The Group’s Board of Directors
oversees the Group’s approach to ESG and ensures that ESG factors
are incorporated into the Board decision-making process. Further
details on the day-to-day responsibility for ESG matters is set out
on page 47. The ESG and Ethics Committees report to the Executive
Committee, which, in turn, reports up to the Board. Both of the
Executive Directors and a Non-executive Director, Anita Kidgell, sit on
the ESG Committee. A written ESG report is included in each Executive
Committee and Board pack, and relevant issues are discussed at the
Executive Committee and/or Board as appropriate. Furthermore, the
Group’s Head of ESG attends the Board on a biannual basis to present
on the Group’s ESG workstreams and progress.
OUR GOVERNANCE
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39
IP GROUP PLC ANNUAL REPORT 2023
Our stakeholders
Meaningful impact
through engagement
with our stakeholders
Our investments
Meaningful
impact through
our investments
Our Group
Meaningful impact
through the way
we run our business
Our community
Meaningful impact
in the communities
in which we operate
ESG
Forward
MEANINGFUL IMPACT
.
OUR ESG FORWARD AGENDA
ESG Forward is our ambitious
agenda to fulfil our first
Group strategic pillar: to
have an impact on the world
that counts. We aim to take
ESG to the next level, focusing
on where we can create the
most meaningful impact for
society and the environment
by fully integrating ESG into
our business processes
and those of our portfolio
companies.
Our approach speaks to our duty
as active, responsible investors and
stewards, and to delivering clear
outcomes that marry both financial
and social returns and generate
long-term sustainable value across
the triple bottom lines of social,
economic and environmental
impact.
In 2023 an updated hybrid ESG
metric was included in the Group’s
Annual Incentive Scheme (“AIS”).
50% relates to outperforming sector
ESG benchmarks and 50% relates
to progressing the collection and
analysis of data and development of
impact metrics for the portfolio. This
will continue in 2024. See page 115.
IDEA methodology
Innovate
Back impactful companies, funding research and developing solutions
to clear societal and environmental issues
Demonstrate
Co-create Group and portfolio company KPIs, working with our investors
and stakeholders, that are meaningful, appropriate and transparent
Elevate
Raise the profile of ESG matters in our organisation and in our
portfolio companies
Accelerate
Provide the tools, funding, support and management expertise to help
portfolio companies achieve impact, incorporating a just and
equitable approach
40
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
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MEANINGFUL IMPACT
.
OUR ESG FORWARD AGENDA
Progress on our ESG Forward agenda
Focus area
Progress in 2023
Accelerating in 2024
Further integrate ESG into
IP Group’s overall strategy
and across all of our
business units
•
Introduced an ESG component to our Annual Incentive Scheme
that has two parts. Each part is designed to engage different
teams within the organisation and embed ESG thinking and
considerations across the organisation. Part A addresses ESG
best practice and involves all operational and investment
teams; part B seeks to embed impact and impact reporting and
involves all investment teams and deepens the engagement with
portfolio companies
•
Provide more customised guidance to teams around ESG
•
Develop clearer guidance around impact tracking and reporting
• Further develop impact scoring framework
Engage internal
stakeholders with ESG
including relevant training
•
Developed an internal reporting format to provide regular updates
on key ESG activities via CEO communications as well as via
internal All Staff presentations on ESG initiatives
•
Conducted internal ESG training for Parkwalk Advisors team
•
Create training course for entire organisation around ESG
and impact
Improve data collection
and reporting, particularly
around material factors
as identified by our
materiality assessment
•
Invested in an ESG data platform to be rolled out in the coming
year to our portfolio companies. This will give our portfolio
companies access to a tool that they can use to help them on
their ESG and impact journey and will support reporting
• Embed data tool within portfolio companies
•
Co-create dashboards for portfolio companies to enable them to
track key metrics for their ESG and impact journeys
Consider formal
environmental targets
aligned to Net Zero at
operational and portfolio
level
•
Joined the Initiative Climat International (“iCI”), a global,
practitioner-led community of private markets investors that
seek to better understand and manage the risks associated with
climate change
•
Agreed to participate in the ‘10 in 10’ collective energy reduction
campaign at our office estate. The goal is to achieve a 10%
reduction in energy consumption during a ten-week period
•
We are in the process of collating our Scope 3 emissions to better
understand our financed emissions and create a meaningful
reduction plan
•
Collect and analyse emission data from portfolio companies
•
Work with portfolio companies to develop meaningful Scope 3
emissions reduction plan
Explore ways in which the
positive impact of our
portfolio can be further
tracked, measured and
disclosed. Engage portfolio
companies on key ESG
factors such as diversity
•
Partnered with the Value Balancing Alliance to co-create an
impact methodology that will allow us to articulate our impact in
a clearer manner. We have also developed a set of impact KPIs
across our Cleantech, Deeptech and Life Sciences portfolios
•
Co-convened a working group, with the Operating Principles of
Impact Management to help advance the thinking around impact
measurement and reporting across the VC ecosystem
•
Attended COP28 and, along with our portfolio companies,
participated in various panels and round tables
•
Publish joint paper on impact with the Value Balancing Alliance
•
Embed impact approach with portfolio companies and collate
impact data from portfolio companies
OUR GOVERNANCE
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41
IP GROUP PLC ANNUAL REPORT 2023
MEANINGFUL IMPACT
.
ESG DISCLOSURES
Engaging our team
Ensuring our people remain engaged, motivated and aligned with our
purpose is as critical as ever. We clearly see the benefits of engaging with
the wider team regularly via a range of channels and on a two-way basis
insofar as possible. Our primary measure of engagement is taken from our
Voice of IP Group (“VIP”) surveys.
Read about our
2023 VIP surveys
on page 19
In addition to our regular employee surveys, we use multiple channels to
ensure we are able to develop a positive two-way dialogue with individual
employees and representative groups.
Our Designated Non-executive Director, Aedhmar Hynes, remains directly
responsible for workforce engagement, acting as a conduit between the
Board and the wider team. Anthony York, Group People Director, fulfils this role
for the Executive Committee. Both Aedhmar and Anthony attend the regular
meetings of our employee forum, IP Connect.
IP Connect is a group of employees elected by the employee group to
represent workforce views. It is consulted regularly for both general and
specific feedback on cultural development as well as other matters. During
2023, the group continued to meet regularly and provided valuable feedback
on a number of key areas, including Executive and wider remuneration
issues, flexible working arrangements, our new Group Values, policy
developments, group strategy, performance and our approach to employee
engagement.
Finally, the small size of our overall team means that we are able to ensure
that all of our people have direct and consistent access to leadership, both
informally on a day-to-day basis and through more formal channels, and at
regular all-employee events.
Employee Executives
In 2021 IP Group announced it would be including two Employee Executives
on the Executive Committee, a pioneering move with the primary purpose of
bringing more diversity of thought into decision-making processes at the top
of the organisation.
These positions were assigned to employees who put themselves forward for
selection, with our two initial Employee Executives being Lisa Patel, a Partner
in the Life Sciences team and CEO of Istesso, and Joyce Xie, Managing
Director, IP Group Greater China.
This initiative has been hugely valuable, with both Joyce and Lisa playing
a key role in the development of our Group strategy and the effective
management of the business over their period of appointment.
During 2023, Joyce was promoted to a new role with a permanent seat on
our Executive Committee. Lisa is on full time secondment to Istesso for the
foreseeable future. As such, both individuals are no longer available for the
Employee Executive roles.
As set out on page 97, we made some practical changes to the way that
our Executive Committee works during 2023. For this reason, we deferred the
recruitment of new Employee Executives to the first part of 2024 to allow the
changes to embed and to ensure we optimised the new role profile before
starting our recruitment process.
Ethical behaviour
We strive to always conduct our business activities in an honest, ethical and
socially responsible manner and to comply with all laws, regulations and
rules applicable to our business. We expect our portfolio companies, co-
investors, employees and suppliers to hold the same high standards when
conducting their respective businesses.
We are committed to acting professionally and with integrity in all of our
business dealings and relationships, and with consideration for the needs of
all of our stakeholders.
We have adopted policies and standards designed to help and guide
employees in their conduct and business relationships. We take a
zero-tolerance approach to breaches of our policies, and implement and
enforce effective systems to mitigate risk. We provide mandatory training
on critical areas such as anti-bribery and corruption, market abuse, anti-tax
evasion and data privacy matters. Copies of our key policies can be found
on our website www.ipgroupplc.com
Human rights and modern slavery
We believe that human rights are universal and non-negotiable. We
seek to promote a working environment where workers are treated with
respect, dignity and consideration, and their fundamental human rights
are protected. We comply fully with applicable human rights legislation in
the countries in which we operate, which includes upholding freedom of
association and the right to collective bargaining, equal remuneration and
protection against discrimination.
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IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
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MEANINGFUL IMPACT
.
ESG DISCLOSURES
We are committed to implementing and enforcing effective systems and
controls to ensure modern slavery is not taking place anywhere in our
business or supply chain. We expect the same high standards from our
contractors, suppliers and other business partners. We have adopted
principles and policies which are relevant to the prevention of modern
slavery in our organisation. These are overseen and monitored by our ESG
and Ethics Committees. The Company has in place a new supplier checklist,
which includes a confirmation from all new suppliers that they comply in all
respects with the Modern Slavery Act. Our Modern Slavery Statement and
our Human Rights Statement (adopted in early 2024) can be found on our
website www.ipgroupplc.com
Supporting our communities
We recognise that we do not operate in a vacuum and that it is important to
look outside of our organisation and consider the bigger picture. To maximise
impact, we typically partner with organisations we believe have a similar
purpose to us and address societal and environmental needs. A key area
of focus is to increase equity for underserved groups, including those from
underrepresented ethnic and socio-economic backgrounds by supporting
relevant community organisations and providing access to pathways into
venture capital and private equity. We involve our employees in choosing
partners, working through our Group charity liaison team. We currently work
with IntoUniversity, an educational charity and support the 10,000 Black
Interns programme.
Read our impact with
community partners
in our
2023 Meaningful Impact report
Inclusion and Diversity Project (“IDP”)
We are committed to driving wider improvements in inclusion, diversity and
equality across the Group. Our ambition is to improve diversity and inclusion
across all characteristics, and create a work environment where every
talented individual can thrive. Our approach is defined and implemented by
an employee-led group, the IDP.
During 2023, the IDP continued to focus on the implementation of our multi-
year IDP Masterplan. Activity has included:
•
Appointment of an IDP Champion in every internal team who takes
responsibility for engaging with and educating their team members on
these complex issues. Our Champions are tasked with building knowledge
using a targeted curriculum covering subjects such as privilege, allyship
and microaggressions
•
A full programme of events led by our Women’s Networking Group to
support our female talent
•
The launch of our Inclusive Communications Guide and accompanying
workshop
•
Development of a reverse mentoring scheme for roll out in 2024
•
Full review of Group Policies to ensure we build in inclusivity and equity to
our ways of working
We were delighted to have been placed sixth out of more than 300 firms
in the Honordex Inclusive PE & VC Index 2023, as well as winning the overall
Innovation Award for our IDP Champions initiative, and even more pleased
to have been ranked the leading VC firm in the 2024 Index, with Honordex
highlighting our ability to drive “significant improvements in social impact
performance with the right data, team and strategy in place”.
Gender diversity
In the recent past we have focused on gender representation as a proxy
of our progress in this area and, with appropriate data, will seek to move
beyond this narrow definition of diversity. That said, it is encouraging to note
that senior female representation within IP Group remains at a high level
across all cohorts.
Gender split as at 31 December 2023
Male
Female
Number
%
Number
%
Board
4
50%
4
50%
Executive Committee
7
70%
3
30%
Other Senior Management/Partners
18
64%
10
36%
Combined Senior Leadership Team
25
66%
13
34%
All employees
47
49%
48
51%
This gender diversity data is the information submitted to FTSE Women
Leaders. Greg Smith (CEO) and David Baynes (CFOO) are included in data for
the Board and for the Executive Committee.
OUR GOVERNANCE
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43
IP GROUP PLC ANNUAL REPORT 2023
MEANINGFUL IMPACT
.
ESG DISCLOSURES
Board and Executive Management diversity
Listing Rules LR 9.8.6(10) and (11) require the Group to publish information on
Board diversity. Data is for the IP Group Board and Executive Management on
31 December 2023.
Numbers in this table are based on how individuals identify themselves,
based on data which is a subset of data collected regularly from all
individuals on a wholly voluntary basis. Further detail on our Parker
Review submission, including our target for senior management team
representation, is set out on page 105.
In the tables below, Executive Management data is for the Executive
Committee. Greg Smith (CEO) and David Baynes (CFOO) are included
in Board data but not the Executive Management data.
Gender
Men
Women
Not specified/
prefer not to say
Number of Board members
4
4
–
Percentage of the Board
50%
50%
–
Number of senior positions on the
Board (CEO, CFO, SID and Chair)
3 (75%)
1 (25%)
–
Number in Executive Management
5
3
–
Percentage of Executive Management
62.5%
37.5%
–
Ethnic background
White British or other
White (including
minority-white
groups)
Mixed/Multiple
Ethnic Groups
Asian/Asian
British
Black/African/
Caribbean/
Black British
Other ethnic
group,
including Arab
Not specified/
prefer not to
say
Number of Board members
7
–
1
–
–
–
Percentage of the Board
87.5%
–
12.5%
–
–
–
Number of senior positions on the Board (CEO, CFO, SID and Chair)
4 (100%)
–
–
–
–
–
Number in Executive Management
7
–
1
–
–
–
Percentage of Executive Management
87.5%
–
12.5%
–
–
–
Environment
IP Group’s carbon footprint and exposure to climate risk is low but, as a
responsible business, we continue to focus on managing and reducing the
entirety of our environmental footprint. We are targeting Net Zero for Scope
1, 2 and 3 emissions by 2030 (by reducing our emissions by 90% or more,
compared to that of our base year) and have broadly aligned our reduction
plan with Science-Based Targets thinking.
Sustainable London HQ
Our headquarters in Kings Cross is one of the most energy efficient and
sustainable developments in the UK. The building has been awarded a
BREEAM ‘outstanding’ rating and uses the most efficient route to create
clean localised heat and power.
Environmental disclosures
IP Group is required to report on its annual greenhouse gas (“GHG”)
emissions as part of the Companies Act 2006 (Strategic Report and
Directors’ Report) Regulations 2018. IP Group is also required to report in
line with Streamlined Energy and Carbon Reporting (“SECR”) requirements.
These requirements include an overview of GHG emissions, intensity ratios,
energy consumption and energy efficiency actions taken by IP Group over
the reporting period for operational office locations. These disclosures can
be found in the table on page 45. See our Task Force on Climate-Related
Financial Disclosures (“TCFD”) disclosure on page 46.
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IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
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STRATEGIC REPORT
MEANINGFUL IMPACT
.
ESG DISCLOSURES
The table below shows IP Group’s annual energy consumption for global
operations, associated relevant greenhouse gas emissions and additional
related information. This encompasses energy and emissions from office
use and has been expanded beyond the minimum requirements to include
emissions associated with all business travel and staff commuting.
The methodology used for the calculation of greenhouse gas emissions
is the “GHG Protocol Corporate Accounting and Reporting Standard”. An
“operational control” boundary has been applied. Carbon conversion
factors have been taken from “UK Government GHG Conversion Factors
for Company Reporting – 2022”. Emissions are reported as tCO
2
e. Scope 2
emissions are reported as “location based”. Of our total reported energy
consumption 86,867 kWh was directly related to our UK operations, producing
GHG emissions of 18.2 tCO
2
e, 96% of our total.
Energy consumption and emissions
2019
2020
2021
2022
2023
Difference
vs 2022
On-site combustion (kWh)
42,592
n/a
n/a
n/a
n/a
–
Electricity (kWh)
385,759
67,165
169,604
122,880
92,245
(24.9%)
Road Transport (kWh)
n/a
n/a
17,463
n/a
n/a
–
Total Energy (kWh)
428,351
67,165
187,067
122,880
92,245
(24.9%)
Scope 1 Emissions (tCO
2
e)
8
–
–
–
–
–
Scope 2 Emissions (tCO
2
e)
114
21
41
24
19
(19.3%)
Scope 3 Emissions (tCO
2
e)
852
118
42
103
331
161%
Total Emissions (tCO
2
e)
974
139
83
127
350
176%
Emissions Intensity
tCO
2
e/FTE
8.7
1.4
0.9
1.46
3.7
153%
Emissions Intensity
tCO
2
e/m
2
0.4
0.07
0.05
0.15
0.4
167%
Emissions intensity
IP Group reports two metrics: emissions/staff number in FTE, and emissions
per unit of office floor area in m
2
. The resulting emission intensity calculations
for 2023 are:
•
3.7 tCO
2
e/FTE
•
0.4 tCO
2
e/m
2
Our intensity metrics have increased by 153% and 167% respectively.
Performance
Our scope 2 emissions reduced by 19.3% but our Scope 3 rose by 161%.
The reasons for the significant increase in our scope 3 emissions are:
Increased business travel:
post covid, there has been an increase in the
business travel related to our business operations. This is especially so given
the global nature of our business.
Greater data capture:
we have started to go beyond employee commuting
when it comes to calculating our scope 3 data and now include emissions
from our purchased goods and services. We have also started to collate our
financed emissions and will publish this next year.
Energy efficiency actions
Our offices incorporate a number of energy efficient technologies: the
majority of light fittings are low energy LED, and motion sensors are installed
to maximise energy efficiency. Other appliances and large office equipment
such as printers and laptops are of energy efficient design. In 2024 our team
is participating in the ‘10 in 10’ collective energy reduction campaign at our
office estate. The goal is to achieve a 10% reduction in energy consumption
during a ten-week period.
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IP Group’s carbon footprint and overall
exposure to climate risk is low. Through
our investments we have a huge
opportunity to lead in the transition
away from fossil fuels and enable
organisations and governments to
meet their Net Zero goals sooner,
and support the Paris Agreement on
climate. Science, technology and
innovation, combined with funding,
have also been identified by the
UN as one of the main ‘means of
implementation’ for achievement of
the 2030 SDG agenda, which includes
climate change.
We are well positioned on each of the
four elements of climate-related financial
disclosures recommended by the TCFD. We
see these disclosures as an important journey
for all organisations and we are committed to
continuing to make progress on them.
Governance
Our Board and various Committees ensure
active and ongoing oversight of the Group’s
management of climate-related risk
and opportunities.
Strategy
Climate-related risks and opportunities are
integrated into our broader Group-level strategy
and operational processes. Our Group’s strategy,
taking into consideration different climate-related
scenarios is resilient. Our Group’s purpose
focuses us on impact and we back and support
businesses that will meaningfully contribute to a
healthier, tech-enriched and regenerative future,
including businesses whose technologies support
action on climate.
Risk Management
We adopt a multifaceted approach to
understanding potential risks to our business
and portfolio companies, and ensuring that
appropriate mitigations and controls are enacted
for material issues. Climate-related risks are an
important part of these efforts. We benchmark our
overall ESG and climate risk management process
with external ESG ratings agencies, to ensure that
we are either in line with or above peers, with
respect our to broader ESG risk management
and disclosures.
Metrics and Targets
We have reduced our overall operational
emissions by various strategies, including the
implementation of hybrid working, moving offices
to more sustainable premises, undertaking
business travel only when necessary, and working
with our suppliers to reduce Scope 3 emissions.
Our overall emissions have reduced from 974
in our 2019 base year to 350 in 2023, which is a
64% decrease. We have had an increase in our
Scope 3 numbers due to the greater granularity
with which we are measuring and reporting our
Scope 3 emissions. We are also planning to
track our financed emissions from 2024 onwards,
and work towards a cohesive formalised emission
reduction plan that incorporates all scopes.
The intensity metrics that we use (office space
and FTE) enable cross-industry comparisons.
A summary of our compliance with the
recommended disclosures can be found on
pages 57 to 59.
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Our approach to ESG and
responsible investment and our
related policies are overseen
by the Board. Accountability for
climate risk and strategy rests with
executive management, with the
CFOO having overall responsibility
for ESG and climate matters. Our
investment process considers ESG
matters using our Ethical Investment
Framework, which is overseen by
our Ethics Committee. We have
quarterly meetings (or on an ad-
hoc basis when required) of the ESG
Committee and Ethics Committee.
We understand that operating
and investing responsibly requires
a strengthened focus on climate
change, particularly with respect
to risks and opportunities that may
have a material impact on the
Group and our wider portfolio.
We have reporting processes in
place to ensure that climate-
related risks and opportunities are
identified and communicated to
management and Board level at the
earliest opportunity. A description of
our ESG organisational structure can
be found in the table (right).
In 2023 our outsourced internal audit
function (PwC) undertook a review
of our high level ESG governance
arrangements and surrounding
internal and external ESG reporting,
in comparison with the wider sector.
The review concluded with no critical or high level risks, and commended us on a number of good practice,
especially in relation to the senior level representation at the ESG Committee. The review also commended us for
being one of the few firms with a standing Ethics Committee chaired by an external party (Professor Gordon Clark).
In 2024, we have strengthened our ESG Committee with the addition of Anita Kidgell, Non-executive Director. We
have incorporated the workstream previously covered by the Responsible Investment working group (whose primary
mandate was to operationalise ESG data collection across portfolio companies) into the ESG Committee to create a
more streamlined approach to our in-house ESG initiatives.
Committee mandates and responsibilities
Committee
name
Mandate and scope of responsibilities
Frequency of
reporting to the Board
Board
The Board of Directors oversees the implementation and execution of the Group’s
ESG strategy.
The ESG Committee includes three members of the Board, who take an active part in
the functioning and duties of the ESG Committee.
The Head of ESG also provides regular updates to both the Board and to the
Executive Committee.
Key matters pertaining to ESG and climate-related risks are discussed at the
Executive Committee and at the Board, and any decisions are recorded in the
minutes. Any key matters or considerations with respect to climate or broader ESG
are included in the CEO update to the Board.
The head of ESG also regularly presents to the Board, during which time, any material
issues relating to climate will be raised. Climate-related considerations are factored
into the broader IP Group risk management process and Risk Register.
Quarterly
ESG
Committee
The ESG Committee defines the Group’s ESG risk policy, reviews climate risks, monitors
adherence to climate risk tolerance, and reviews all key climate-related issues
and exposures.
The ESG Committee also oversees related policies, programmes, targets and
performance metrics. It reviews IP Group’s responsible investing frameworks,
including those that consider climate risks and opportunities. The ESG Committee is
chaired by the CEO, and attended by the CFOO, a Non-executive Director, Director
of Communications, UK General Counsel and representatives from the investment
partnerships and operational teams.
The CFOO has overall responsibility for ESG and climate matters.
Quarterly
Ethics
Committee
Our Ethics Committee reflects the importance placed on ethics and how we conduct
our business. The Ethics Committee is chaired by an independent external chair
and oversees the Group’s ethics framework, which defines and guides conduct with
respect to our portfolio companies, employees, partners and our communities.
Biannually
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STRATEGY
Our approach to assessing and managing climate-related risks and opportunities
IP Group carries out a climate risk and opportunities analysis of its operations and those of our 19 most material companies on an annual basis. The
methodology used within this climate risk and opportunities analysis aligns to the TCFD recommendations and reporting framework. We consider a
short-to-medium-term, and a long-term time horizon, and used Network for Greening the Financial System (“NGFS”) scenarios to assess physical and
transition risks, for different time horizons, and assess potential material financial impact on the organisation.
Time horizons
Due to the long-term nature of our investments and given the size and stage of our companies we do not anticipate material risks within a time horizon less
than five years. Climate-related issues often manifest themselves over the medium and longer terms and for this reason we look at periods over five years
and up to ten years as medium term and over ten years as long term.
Medium term:
5 to 10 years.
Long term:
over 10 years.
When determining which risks could have a material financial impact on the organisation, we consider key risks at our organisational level (IP Group)
in addition to key risks at an investment level (with respect to the portfolio in which we invest). The determination of the severity of the risk assess both
physical risks (using geographical location and forward-looking scenarios that model potential impact across a range of material factors), and transition
risks (looking at the core products or service of the portfolio company, and how climate change could impact demand and revenue). We list any key risks
identified in the table ‘summary of key risks’, and our opportunities in the section ‘categorising our opportunities’.
Global themes
Looking at the macro landscape, we see three global themes relevant to us as a Group:
01
Increasing societal imperative
for a regenerative world
Societal imperative to limit global climate
warming to 1.5°C, accelerating the demand for
changes in industry structure, and social and
economic reforms.
Society will continue to focus on increasing the transition to a
green economy by accelerating the phase-down of fossil fuels,
and increasing efforts to achieve a net zero economy. This
implies faster adoption/a greater imperative for alternative,
innovative clean technologies.
02 Increasing climate regulation
Increasing global regulation around
decarbonisation and caps on carbon and
GHG emissions.
The UK’s Green Finance Strategy 2023; the net zero emission
vehicle mandate is now law.
This new regulation is backed by over £2 billion already invested
by the UK Government to expand charging infrastructure and
incentivise zero emission vehicles. This will further increase the
demand for build out of net zero infrastructure.
03 Increasing capital flow
into climate transition
technologies
Increasing capital flow from private and public
sectors into clean technology and supporting
infrastructure.
We expect the announcement at COP28 to triple the world’s
installed renewable energy generation capacity to at least
11,000GW by 2030 and double the global average annual rate
of energy efficiency improvements from around 2% to over
4% every year until 2030, to greatly increase and accelerate
investments into cleantech.
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How we are positioned with respect to the future climate landscape
•
The transition to a lower-carbon economy offers a sizable opportunity for IP Group to not only contribute to the green transition, but also to realise value
for stakeholders via the Group’s long-term investment strategy, which seeks to address societal needs of the future including climate change via our
Cleantech (Kiko Ventures) portfolio.
•
Our Group and portfolio are highly resilient to the transition to a lower-carbon economy consistent with a 1.5°C or lower scenario, and additional scenarios
consistent with increased physical climate-related risks. Our core strategy remains that of investing in early-stage science and technology, that will have
a positive impact on people and planet. We do not invest in hard to abate sectors, nor do we have exposures to fossil fuel related sectors. Our investments
in early-stage science and technology companies have low inherent exposure to climate risk and, via our Cleantech (Kiko Ventures) portfolio, we support
companies that are innovating new technology, products and services to directly address climate risk mitigation and adaptation.
Our analysis approach
Materiality analysis
Identify likely material sustainability issues for our Group and portfolio.
Scenario analysis
Overlay key material issues identified for physical and transition risks, across various scenarios aligned with the NGFS for different time horizons.
Risk analysis
Gauge level of risks across physical and transition dimensions.
Disclosure
Summarise key findings and highlight any mitigation actions for risks, and any actions with respect to opportunities identified.
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Sectors
that have
high
exposure to
climate risk
Climate risk
exposure
dependent
on product
types and
markets
Location
specific risk
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RISK MANAGEMENT
Our climate-related risks
and opportunities
Updating our risk
assessment approach
We have updated our scoring
approach based on the process
diagram to the right. This allows us
to score our overall risk relative to
the sector, and products/services,
that are more likely to be impacted
by the transition to a regenerative
and low carbon economy.
The impact based on the capacity to adapt is considered in recognition of the two overarching TCFD climate-related
risk categories:
•
Vulnerability
– which is determined as a function of risk exposure, sensitivity and adaptive/transition capacity, is,
therefore, the degree to which organisations, assets, societies, processes or systems will be negatively affected by
risk, or have the propensity to be negatively affected. If the asset is carbon intensive or premised on the carbon
economy, then the degree of vulnerability is higher.
•
Adaptive capacity
– the ability of organisations, assets, societies, processes or systems to alleviate the level of
physical risks through actions and transition capacity, and the ability of organisations, assets, societies, processes
and systems to alleviate the level of transition risks through actions.
Risks and
opportunities
Resource efficiency
Energy source
Products and services
Supply chain and
labour disruption
Fabricate
products
High risk
Carbon
intensive
section
Operational risks; acute and chronic
(location specific)
No
No
Yes
Yes
Opportunities
Risks
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Risks and resilience
To determine our climate risk
exposure, we conducted scenario
analysis over the short-to-medium
term, as well as long term. As a result
of our analysis, we believe that the
impact of climate change on the
Group’s financial position will be
limited. We have updated our score
values to a quantitative scoring,
based on key material factors, with
scores of ‘low’, ‘medium’ and ‘high’,
dependent on defined thresholds.
The magnitude of each risk is
considered across three climate
scenarios proposed by NGFS.
•
Orderly Transition Scenario
This scenario represents early
and decisive global policy
action to limit greenhouse
gas emissions
•
Disorderly Transition Scenario
This scenario represents delayed,
disruptive, sudden and/or
unanticipated global policy
action to limit greenhouse
gas emissions
•
Hot House World Scenario
This scenario represents
insufficient global policy action to
limit greenhouse gas emissions,
leading to a hot house world with
significant global warming and,
as a result, significantly increased
exposure to physical risks
When looking at physical risks, we have used a time
horizon extending to 2050, whereas when looking at
transition risks we have used a time horizon of 2040.
This is intentional. Physical risks are considered over
a wider time horizon given that the scenarios do not
change drastically over a long time frame. The potential
for physical risk scenarios to change over a specific
timeframe is:
•
If there is a key event or new variable, such as
biosphere collapse, in which case the whole scenario
will have to be re-worked
•
If the physical location of a company changes
Physical risks
Reference period:
compared to 1986-
2006 climate conditions.
Scenario:
using the NGFS scenario and
data points from the NGFS climate
impact tool to determine the severity
of climate change impacts over time
for the geographical locations of
the companies being assessed, with
respect to the factors listed below.
Scoring approach:
Absolute based on
reference period used.
Scored out of 50
with: low <20
medium <35
high<50
The climate-related
scenarios and
associated time
horizon(s) considered
2030 and 2050.
Acute risks
Material factors considered:
•
Relative changes in labour productivity due to heat stress
compared to the reference period
•
Changes in mean air temperature over time, compared
to the reference period
Chronic risks
Material factors considered:
•
Exposure to river floods compared to the reference period
•
Exposure heatwaves compared to the reference period
•
Exposure to wildfires compared to reference period
We have taken a shorter time horizon for the transition risk
(to 2040 instead of 2050), as transition risk is influenced
more by policies, and macroeconomic factors, and the
confidence levels to extend the scenario to 2050 is low.
Finally we have used the NGFS models as an overlay for
both physical risks and transition risks, and these are the
timeframes for the data presented in the NGFS models.
Transition
Scenario:
NGFS scenarios for transition
risk using the NGFS tool.
Scoring approach:
relative scoring to
other companies of similar size and
sector. For transition risks, we score
the resilience of the core products or
services to transition risk factors such
as carbon price increases, consumer
behaviour preferences shifting to more
environmentally products, etc. The
resiliency score looks at the product or
service and assess the potential impact
on revenues and business model using
the four dimensions to the right. Each is
scored 1 to 5, with a total overall score
of 20.
The climate-related scenarios and
associated time horizon(s) considered
2030 and 2040.
Policy and Legal
•
Increased pricing of GHG emissions
•
Mandates on, and regulation of, existing
products and services
•
Exposure to litigation
Material factors
considered:
•
Shadow carbon price,
energy prices, projected
energy investments
•
The climate-related
scenarios and associated
time horizon(s) considered
2030 and 2050
Technology
•
Substitution of existing products and services
with lower emissions options
•
Costs to transition to lower emissions technology
Market
•
Changing customer behaviour
•
Uncertainty in market signals
•
Increased cost of raw materials
Reputation
•
Shifts in consumer preferences
•
Stigmatisation of sector
•
Negative stakeholder feedback
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Summary of key risks
Climate scenarios
Risk description
Orderly
Transition
Disorderly
Transition
Hot House
World
Mitigation measures
IP Group plc:
Policy/legal risk from
increasingly stringent reporting
requirements around climate risk,
including TCFD and SECR.
TCFD Risk category:
Policy and Legal
Risks (Transition Risks)
Ensure robust climate governance
structure is in place, which
appropriately manages climate
risks throughout the organisation,
including specifying which climate
considerations should be considered
as part of pre-investment due
diligence.
IP Group plc:
Risk of failing to
incorporate climate change fully
into investment screening and due
diligence process.
TCFD Risk category:
Market Risk and
Reputation Risk (Transition Risks)
Formalise the incorporation of climate
change specific risk screening
questions in the pre-investment due
diligence process.
IP Group plc:
Business interruption
because of extreme weather
events taking electricity or
telecommunications networks offline.
TCFD Risk category:
Acute Risk and
Chronic Risk (Physical Risks)
Develop back up and resiliency plans
which account for potential impacts
of climate change.
Portfolio:
Risk of supply chain
disruption, which limits the availability
of component parts required for
manufacturing for certain companies.
TCFD Risk category:
Acute Risk and
Chronic Risk (Physical Risks)
Support portfolio companies to
review supplier sourcing strategies;
encourage companies to develop
contingency plans for when
one supplier is affected; and
encourage companies to avoid over
concentration of risk with key suppliers.
KEY
LOW
Low impact to overall business
model/operations and revenue
streams. There is minimal, if any
impact to the operations/revenue
streams and/financial position, of
the company.
MEDIUM
Medium impact to business model/
operations and revenue streams.
There could be some disruption,
but the business is able to adapt/
mitigate and continue operations.
The core service/product offering
and/or financial position, is not
impacted.
HIGH
There could be a major impact to
either the operational capability
and/or products and services.
The company suffers severe
disruption to its operations and
revenue streams as well as financial
position due to the impact of
climate change and the transition
to a greener economy, requiring a
major pivot with respect to its core
products or services.
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Climate scenarios
Risk description
Orderly
Transition
Disorderly
Transition
Hot House
World
Mitigation measures
Portfolio:
Risk of increased cost of raw
materials and production costs.
TCFD Risk category:
Acute Risk and
Chronic Risk (Physical Risks)
Support portfolio companies to
explore whether certain inputs can
be substituted for others that may be
more cost effective or have higher
availability; and encourage portfolio
companies to develop diversified
supplier sourcing strategies.
Portfolio:
Risk of product failure due
to extreme weather conditions driven
by climate change for companies
with products operating in harsh
environments exposed to extreme
weather conditions.
TCFD Risk category:
Acute Risk and
Chronic Risk (Physical Risks)
Review product design and testing
with portfolio companies that may be
exposed to this risk.
Portfolio:
Reputational risks associated
with the decommissioning, recycling
and non-recyclable waste associated
with renewable energy products and/
or energy storage systems e.g. fuel
cells and batteries.
TCFD Risk category:
Policy and
Legal Risks, Reputational Risks
(Transition Risks)
Support portfolio companies to
develop business models and
strategies that reduce waste and
encourage re-use and facilitate
recycling.
Portfolio:
Risks to product deployment
where companies are exposed to
harsh weather conditions that may be
exacerbated by climate change.
TCFD Risk category:
Acute Risk and
Chronic Risk (Physical Risks)
Support portfolio companies where
this risk may apply to factor climate
conditions into product design and
testing.
KEY
LOW
Low impact to overall business
model/operations and revenue
streams. There is minimal, if any
impact to the operations/revenue
streams and/financial position, of
the company.
MEDIUM
Medium impact to business model/
operations and revenue streams.
There could be some disruption,
but the business is able to adapt/
mitigate and continue operations.
The core service/product offering
and/or financial position, is not
impacted.
HIGH
There could be a major impact to
either the operational capability
and/or products and services.
The company suffers severe
disruption to its operations and
revenue streams as well as financial
position due to the impact of
climate change and the transition
to a greener economy, requiring a
major pivot with respect to its core
products or services.
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Risk summary table
Using the NGFS data sets, we scored our most material companies.
The scoring approach is further detailed on the table in page 50.
Investment theme
Sum of
total risks
Number of
companies in
investment theme
Average
risk
Cleantech
82
5
16.4
Deeptech
66
4
16.4
Life Sciences
160
10
16.4
Key points to note:
•
No portfolio company scored above 50 in terms of key risks
•
Our Life Sciences investment theme appears at first glance to pose a
high level of risk, but this is because of the large number of Life Sciences
companies in our portfolio. The normalised average risk is the same
across each investment theme
•
Given the early-stage nature of our portfolio companies, any risk would
be minimal
Mitigation
At Group level, we have strengthened our governance and due diligence
process. We have also developed a playbook for business resiliency to
respond to business interruption caused by extreme weather events. At a
portfolio level, we are implementing a programme of increased engagement
and support to our portfolio companies, with their broader approach to
climate risks and opportunities.
No company in our analysis breached the high risk threshold, across both
the physical and transition risk assessments, over the various scenarios that
were used.
In summary, in addition to building on the mitigation strategies identified
from page 52, we have also launched two key initiatives to help with
mitigating climate risks and impact.
•
ESG data platform to collate data on ESG and climate risks: This platform
will also provide our portfolio companies with a dashboard to highlight key
indicators such as Greenhouse gas emissions and other metrics to help
them understand and address broader ESG as well as climate risks
•
Scoring system to assess investments across our three investment
themes: we are developing a scoring system to assess opportunities as
well as risks of portfolio companies that will assist with due diligence for
new as well as follow on investments
Categorising our opportunities
IP Group’s portfolio is well positioned to benefit from the transition to a lower
carbon economy because of the large number of companies in our portfolio
whose core technology and/or product offering responds to likely demand
growth as the world decarbonises. This is particularly true of holdings in the
cleantech sector. Technologies backed by the Group include renewable
energy, hydrogen, electric mobility and energy storage.
The matrix on page 55 categorises the key environmental themes over the
long term, where we feel we have the most opportunity to build and grow,
based on our core competencies and expertise.
Climate-related R&D and innovation, expansion of low emission goods and
services across the portfolio, and successful investment in new technologies
were identified as the most material opportunities for IP Group.
Climate-related opportunities were identified using opportunity scores based
on two dimensions:
•
The size of the opportunity
•
The ability to execute the opportunity
Opportunity scores were given to companies in the portfolio where the core
technologies and products of the company aligned with climate-related
opportunities. When applying this scoring methodology to our top holdings,
37 portfolio companies were rated ‘high’ in both opportunity size and
execution capability.
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Opportunity categories
Opportunity context
TCFD categories
Low carbon energy
generation
We expect to see a continuing increase in demand for low carbon energy generation, such
as fusion energy, as the world transitions to zero carbon. We also expect to see significant
demand for small-scale, localised wind energy generation.
Portfolio companies in this category: First Light Fusion, Hysata
•
Products and services
•
Markets
•
Energy source
Energy use reduction
In addition to a different energy paradigm, there will also be a drive for reduction and
efficiency in energy usage. This will be from both a retail perspective as homeowners seek
to lower their energy costs and reduce emissions, as well as in industrial applications and
the transport sector.
Portfolio companies in this category: Helio Display Materials, Mixergy
•
Products and services
•
Markets
•
Resource efficiency
Energy storage
There will be growing need for storing various forms of renewable energy from solar, wind
and hydrogen. We see a significant opportunity as demand for fuel cell technology grows
and we expect the demand for low cost and long duration fuel cell storage will grow
significantly as the world decarbonises and electric vehicles proliferate.
Portfolio companies in this category: RFC Power, Bramble Energy
•
Products and services
•
Markets
•
Resource efficiency
Carbon capture
There will be increasing demand for emissions reduction technologies including carbon
capture.
Portfolio companies in this category: C-Capture
•
Products and services
•
Markets
•
Resource efficiency
Water availability
Water availability will become increasingly uncertain in the future, particularly under
warmer climate scenarios. Many locations across the globe will experience an increase in
water scarcity resulting in growing demand for technologies that help in the conservation,
cleaning and filtering of water.
Portfolio companies in this category: Xeros Technology Group
(a company that was co-founded by IP Group)
•
Products and services
•
Markets
•
Resource efficiency
Integrating climate risks and opportunities into businesses, strategy and financial planning
Any climate risks and opportunities that are identified are assessed in terms of how they may affect the Group’s business model and performance.
We have established two key strands in integrating climate risks and opportunities into business strategy and financial planning.
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Strand 1: Reduce and mitigate climate risk
We collate key findings and learnings from the assessments that we
undertake with respect to our operations and portfolio. Any key risks are
integrated into our Risk Register Framework, with a view to strengthening our
resilience, mitigation and adaptation responses.
New issues relating to climate and other ESG factors are discussed at the
ESG Committee and escalated to the Executive Committee or the Board
as appropriate. A materiality assessment is carried out, where we engage
with external stakeholders to better understand the issues that are of
most concern to them. For each issue, the assessment rates the degree of
stakeholder concern and potential business impact.
ESG platform:
to better monitor our financed emissions and understand ESG
risks more broadly, we have purchased an ESG platform (apiday). We have
undertaken to provide all our portfolio companies with access to this ESG
tool, whereby we will pay for the tool, allowing them to track their progress
against ESG and climate factors, and access key guidance around ESG
topics.
Strand 2: Capitalise on climate opportunities
Growing interest in climate change and the transition to a low carbon world
is expected to lead to stronger demand from investors for solutions that
genuinely provide long-lasting impact for people and the planet. We are
strongly poised to benefit the transition, as a leader, and an active investor,
in the cleantech space for over 20 years. We are the world’s first evergreen
cleantech venture investor, with one of the earliest cleantech unicorns (Ceres
Power). We are positive with respect to our position as a long-term investor in
sustainability and climate change.
Our strategy to capitalise on climate opportunities is built on the following
core components:
•
A dedicated cleantech platform:
Created a dedicated cleantech
platform called Kiko Ventures, that will allow us to build a brand for the
dynamic cleantech ecosystem
•
Investing at scale:
We are looking to allocate £200m from our balance
sheet, for cleantech investments across Europe, over the next five years,
which signifies a 3x increase in our rate of investment in this space
(making us one of the largest cleantech VC investors across Europe)
•
Leveraging our differentiated insight, expertise and synergies:
Our
team has deep experience within cleantech (with one of the best track
records in our space), and have proprietary assets, including roadmaps
to net zero, and linked into the wider green ecosystem, such as the Energy
Transitions Commission. We collaborate closely with Parkwalk Advisors,
our internal EIS specialists. Our internal Deeptech team is developing new
AI tools, which we are able to leverage in sourcing and screening the right
opportunities
•
Expanded team size:
We have expanded our Cleantech team with three
new hires to support our pipeline and execute our ambitious strategy
•
Supporting industry initiatives and championing cleantech:
We are
part of Cleantech for UK, the initiative that aims to pave the way for a
new generation of global cleantech champions. We are members of the
Institutional Investors Group on Climate Change (“IIGCC”), as well as the
Initiative Climat International (“iCI”)
Metrics and Targets
We have the ambition and goal to become a net zero company in the longer
term and, in order to do this, are working towards a challenging emission
reduction programme. We have reduced our overall operational emissions
by various strategies, including the implementation of hybrid working,
moving offices to more sustainable premises, undertaking business travel
only when necessary, and working with our suppliers to reduce Scope 3
emissions. Overall, our total operational emissions (tCO
2
e) have fallen by 87%
to 127 from our 2019 base year total of 974. We continue to make efforts to
reduce emissions by more than 90%.
Our intent is to achieve net zero by 2030. For 2024 we have initiated a
process to collect information on our financed emissions across our portfolio
companies. We are also collaborating with the IIGCC and the iCI, around a
meaningful framework for emissions reductions for VCs.
Summary
There were no red flags identified and overall climate risk at Group and
portfolio level is low.
Climate-related R&D and innovation, expansion of low emission goods and
services across the portfolio, and successful investment in new technologies
were identified as the most material opportunities for IP Group.
The portfolio is well positioned to benefit from the transition to a low carbon
world due to its low exposure to climate-related risks and because of the
large number of companies whose core technology and/or product offering
address opportunities for energy transition.
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TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES
.
COMPLIANCE WITH TCFD RECOMMENDATIONS
IP Group considers climate-related risk to be financially immaterial in the context of the Company’s overall
financial statements.
IP Group has complied with the requirements of LR 9.8.6R and UK CFD by including climate-related financial disclosures consistent with
the TCFD recommendations and recommended disclosures. We have considered Section C Guidance for All Sectors, and Section E of
the TCFD Annex entitled ‘Supplemental Guidance for Non-Financial Groups’ in developing this disclosure. The table below describes our
compliance with each area of the disclosure and where this information can be found in this Annual Report.
Section
Recommendation
2023
disclosure
level
Reference
Further works planned in 2024
Governance
Disclose the organisation’s
governance around
climate-related risks and
opportunities.
a. Describe the Board’s
oversight of climate-related
risks and opportunities.
Page 47
•
For 2024 we are rolling out our ESG data
platform with the intention of improving
our data sets around ESG and climate, so
that our ESG Committee, ExCo and Board
have better insights and signals on which
to base their decisions around climate
risks and climate change
b. Describe management’s role
in assessing and managing
climate-related risks and
opportunities.
Page 47
Strategy
Disclose the actual and
potential impacts of
climate-related risks
and opportunities on the
organisation’s businesses,
strategy and financial
planning where such
information is material.
a. Describe the climate-related
risks and opportunities the
organisation has identified
over the short, medium and
long term.
Page 52
•
There were no red flags identified and
overall climate risk at Group and portfolio
level is low
•
Climate-related R&D and innovation,
expansion of low emission goods
and services across the portfolio,
and successful investment in new
technologies were identified as the most
material opportunities for IP Group
•
The portfolio is well positioned to benefit
from the transition to a low carbon world
due to its low exposure to climate-related
risks and because of the large number of
companies whose core technology and/
or product offering address opportunities
for energy transition
•
For 2024, we are looking to better
understand the opportunities that the
green transition offers us, and better
develop our response and strategy to
accelerate the green transition
b. Describe the impact of
climate-related risks
and opportunities on the
organisation’s businesses,
strategy and financial
planning.
Page 55
c.
Describe the resilience of
the organisation’s strategy.
Taking into consideration
different climate-related
scenarios, including a 2°C or
lower scenario.
Page 56
DISCLOSURE
LEVEL KEY
Full
Partial
Omitted
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.
COMPLIANCE WITH TCFD RECOMMENDATIONS
Section
Recommendation
2023
disclosure
level
Reference
Further works planned in 2024
Risk Management
Disclose how the
organisation identifies,
assesses and manages
climate-related risks.
a. Describe the organisation’s
processes for identifying
and assessing climate-
related risks.
Page 48
•
The methodology used within this climate
risk and opportunities analysis aligns
to the TCFD recommendations and
reporting framework
•
Any risks that are identified are escalated
as appropriate to the relevant function,
Committee or Board, for a considered risk
mitigation and management strategy
and approach
•
The overall climate-related controls
are embedded into the broader ESG
governance and committee structure
and monitored via an internal risk register
•
For 2024, we are in the process of
developing a proprietary framework for
climate risk assessment, which will also
look to integrate the new ‘too little, too
late’ scenario developed by the NGFS
b. Describe the organisation’s
processes for managing
climate-related risks.
Page 48
c.
Describe how processes for
identifying, assessing and
managing climate-related
risks are integrated into the
organisation’s overall risk
management.
Page 48
DISCLOSURE
LEVEL KEY
Full
Partial
Omitted
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Section
Recommendation
2023
disclosure
level
Reference
Further works planned in 2024
Metrics and Targets
Disclose the metrics and
targets used to assess
and manage relevant
climate-related risks and
opportunities where the
information is material.
a. Disclose the metrics used
by the organisation to
assess climate related risks
and opportunities in line
with its strategy and risk
management processes.
Page 48
•
The metrics we use are:
–
tCO
2
e/FTE (full time equivalent
employee)
–
tCO
2
e/m
2
(of office space)
•
As our overall emissions are very low, an
intensity ratio allows us to better gauge
our energy efficiency and overall strategy
to increase energy efficiency, as well as
compare our energy intensity to that
of peers
•
Scope 1:
We do not have Scope 1
emissions
•
Scope 2:
We disclose Scope 2 for our
operational boundary
•
Scope 3:
We disclose business travel and
commuting as part of Scope 3. For Scope
3, the Group does not currently collate
data on financed emissions, but we
intend to do so in future
•
For 2024, we are looking to work with
our portfolio companies to develop a
meaningful emission reduction plan. We
will develop a plan in line with recognised
formal frameworks. We are currently
working with both the IIGCC and the iCI to
look at the best approaches for net zero
for venture capital firms
b. Disclose Scope 1, Scope 2
and, if appropriate, Scope
3 GHG emissions, and the
related risks.
Page 45
c.
Describe the targets used
by the organisation to
manage climate-related
risks and opportunities, and
performance against targets.
Page 56
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES
.
COMPLIANCE WITH TCFD RECOMMENDATIONS
DISCLOSURE
LEVEL KEY
Full
Partial
Omitted
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RISK MANAGEMENT
.
Managing risk: our framework for
balancing risk and reward
Governance
Overall responsibility for the risk framework and
definition of risk appetite rests with the Board
who, through regular review of risks, ensure
that risk exposure is balanced with an ability to
achieve the Group’s strategic objectives. The IP
Group Risk Council is the executive body that
operates to establish, recommend and maintain
a fit-for-purpose risk management framework
appropriate for the Group and to oversee the
effective application of the framework across the
business. The Risk Council is chaired by the CFOO,
its members include the Company Secretary,
Finance Director and Senior Compliance and
Risk Manager and it has representation from
operational business units as required during
the year. Risk identification is carried out through
a bottom-up process via operational risk
registers maintained by individual teams, which
are updated and reported to the Risk Council
at least biannually, with additional top-down
input from the Executive Committee and with a
non-executive review carried out by the Audit and
Risk Committee at least annually.
Risk management process
Ranking of the Group’s risks is carried out by
combining the financial, strategic, operational,
reputational, regulatory and employee impact
of risks and the likelihood that they may occur.
Operational risks are collated into strategic risks,
which identifies key themes and emerging risks,
and ultimately informs our principal risks, which
are detailed in the Principal Risk and Uncertainties
section of this report. The operations of the Group,
and the implementation of its objectives and
strategy, are subject to a number of principal risks
and uncertainties. Were more than one of the risks
to occur together, the overall impact on the Group
may be compounded.
The design and ongoing effectiveness of the
key controls over the Group’s principal risks are
documented using a ‘risk and control matrix’,
which includes an assessment of the design and
operating effectiveness of the controls in question.
The key controls over the Group’s identified
principal risks are reviewed as part of the Group’s
risk management process, by management, the
Audit and Risk Committee and the Board during
the year. However, the Group’s risk management
programme can only provide reasonable, not
absolute, assurance that principal risks are
managed to an acceptable level.
The risk management activity in 2023 included
updating the Group’s risk appetite statements
and key risk indicators, refreshing the Group’s
existing operational, strategic and principal risk
registers, performing a full refresh of the key
controls and an assessment of the strategic risks
and the appropriateness of our principal risks via
executive team and Board risk workshops.
Risk Council activity
During 2023, the Risk Council continued to build on
the Group’s existing risk management framework,
enhancing risk management and internal control
processes and working with PwC in an outsourced
internal audit capacity and, in doing so,
supported the Board in exercising its responsibility
surrounding risk management.
While awaiting further updates with detail of
the exact requirements and confirmed dates in
relation to the proposed legislation and updates
to the UK Corporate Governance Code outlined
in the BEIS response statement in June 2022, the
Risk Council considered an existing programme of
‘no-regrets’ workstreams identified in a previous
scoping review which would support the Group’s
transition to the expected internal controls
regime once announced in H1 2023. This included
a financial reporting focused ‘record to report’
review, an entity level controls review and a
treasury controls review to identify and remediate
any controls gaps to the expected standard. The
Risk Council reviewed a consultation on proposed
changes to the UK Corporate Governance Code
released in May and facilitated the Group’s
response to the FRC’s consultation with input from
Executive and Non-executive Directors, Company
Secretary and People Director. The Risk Council
reviewed the proposed changes to the Code
and considered an appropriate implementation
timeline and resourcing plan to meet the flagged
effective date and continue to update our plans
in light of emerging guidance. The Risk Council
will review the final changes and associated
guidance once published and reconsider its
existing implementation plan.
The Group adopted a ‘Cyber Response Guide’
and ‘Strategic Ransomware Response Playbook in
2021 which details how the Group would respond
to a cyber crisis addressing the threat that
cyber attacks now pose to businesses in every
sector. In 2023, the Risk Council onboarded senior
external communications support to provide
strategic level support and additional resources
to supplement a crisis scenario in the future, a
‘Crisis Communications Manual’ was developed
as part of this workstream training was provided
to the relevant individuals within the Group. The
Risk Council also updated all existing policies,
procedures and reference materials and provided
refresher training to all staff on plans in place at
the Group to respond to a cyber attack, support
available, examples of what a ransomware attack
might look like and the appropriate steps to
take if they identify signs of a compromise. The
Risk Council held two communications-focused
scenario-based training sessions with the internal
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and external communications teams and Silver
Response Team (“SRT”) Chair in the year and held
an externally facilitated cyber crisis simulation for
all members of the SRT including external legal
and communications supports. The Risk Council
received a formal report from the Baker Mackenzie
team who facilitated the all-parties training
session noting multiple effective procedures
were in place to respond to issues raised in the
training scenario, which the SRT were obviously
familiar with, excellent engagement from the
SRT and other attendees, demonstration of good
awareness of many cybersecurity issues and also
noted a common-sense approach to responding
to complex issues raised and considered
practical ways to minimise effects and severity
of the simulated cyber attack scenario. Areas
for improvement were also identified and the
Risk Council is leading the implementation of
the actions identified which are expected to
supplement current procedures in place.
Other projects in the year included:
•
Monitoring the set-up of an RMB fund
from ICCV
•
The Group’s joint venture with China Everbright,
to be operated by the Group’s Hong Kong
subsidiary and obtaining the requisite licensing
authorities from the local regulator to allow this
activity
•
Reviewing risk management disclosures in the
Annual Report and Accounts
•
Updating the Group’s Business Continuity Plans
•
Monitoring training and testing completion
rates by employees
•
Testing of key controls over the Group’s
principal risks
•
Monitoring key risk indicators
•
Performing a control investment review to
ensure the desired levels of controls agreed by
the Board were in place
•
Continued monitoring of internal audit
remediation points
•
Monitoring progress of the Risk Council against
its agreed objectives
•
Reviewing a cyber compliance monitoring
programme
•
Providing project management support to the
ARC in relation to the audit tender process
•
The launch of a formal compliance-focused
onboarding programme for new joiners
•
Monitoring of the Group’s conflicts procedures
•
Considering the Group’s relevant fraud risk
categories alongside their relevant controls
and potential likelihood and impact
•
Continued communication of key outputs
of the risk management programme to
operational business heads and the wider
employee group
Internal audit reviews were conducted over the
following areas:
i.
Cybersecurity review: an ‘ethical-hacking’
type review which consisted of a time-
bound collaborative assumed compromise
assessment across all IT infrastructures in
operation across the Group
ii.
Investment process review: a review of the
investment approval process in the Group’s
Australian business which considered:
a. Due diligence and risk assessment
b. Review, approval and execution of
investment documentation
c. Regulation and compliance
iii.
ESG review: a review of high-level governance
arrangements surrounding internal and
external ESG reporting and processes related
to data collection and monitoring to inform
internal and external ESG reporting
Priorities for 2024 include further business
reviews by the internal audit function, review
of the finalised UK Governance Code and
associated preparation for updated internal
controls requirements, delivering training
and scenario-based testing programmes
for operational resilience workstreams, and
continued enhancement of Group risk reporting
and communication across the business. We
continue to monitor the impact of the ongoing
wars in Ukraine and the Middle East, heightened
geopolitical tension, supply chain disruption,
inflation and interest rate trends, elevated levels
of cost of living and volatile capital markets and
note the greatest impact to the Group has been
the marked decline in the valuation of technology
and life sciences sector listed companies,
which we consider heighten our principal risks
of macroeconomic environment and access to
capital risks.
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RISK MANAGEMENT
.
IP GROUP RISK MANAGEMENT FRAMEWORK
Committees
The Group has a number of committees
in place to manage specific risks being:
• Valuation Committee
• Capital Allocation Committee
• Group Cyber Forum
• ESG Committee
• Ethics Committee
Oversight and challenge by the
Risk Council, Central Functions and
Management
Independent assurance
Hong Kong
Board
Risk Council
Collated risk
registers
Executive
Management
HR
Finance
IT
Legal & CoSec
Communications &
Investor Relations
IP Capital
Australia
Parkwalk Advisors
Frontline Operations
Audit and Risk Committee
Life Sciences
Technology
Internal audit
Consolidation, analysis, reporting, oversight
Challenge, feedback, learning
KEY
Direct reporting
Review and challenge
First line of defence
Third line of defence
Second line of defence
Cleantech
ESG
Central Functions
01
02
03
IP Exec
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Emerging risk
The Group’s management
and Board regularly
consider emerging risks and
opportunities, both internal
and external, which may
affect the Group in the near,
medium, and long term.
The Board considered this
subject in detail at its annual
risk workshop at the Board
Strategy Day in October
and continue to consider
emerging risks throughout
the year. Set out here are
examples of some of the
potential emerging risks
that are currently being
monitored by management
and the Board:
Near term
Medium term
Longer term
Economic and
geopolitical uncertainty
War in Europe and the Middle East
is impacting cost of raw materials
and potentially global inflation and
there is considerable uncertainty
over policymaking given that eight
of the ten most populous countries
in the world are expected to hold
elections in 2024. Despite interest
rate increases across the world in
2023 the global economy has shown
considerable resilience and the IMF
currently forecast global growth for
2023 to be 3% and predict a similar
level of expansion in 2024. However,
capital market volatility has persisted
and continues to impact growth and
technology stocks such as IP Group
and its portfolio.
Global government
spending on healthcare
and drug development
Government spending on new
healthcare technology, drug
development and related regulators
and investment policy decisions would
impact the speed of progress for
the industry as a whole which could
encourage more financial and human
capital to the sector and ultimately
there would be a greater opportunity
for meaningful impact for all
participants including investors such
as the Group and its stakeholders.
Climate change transition
and technology risks
Transition risks can occur when moving
towards a less polluting, greener
economy. Such transitions could mean
that the Group could face higher costs
of doing business; for example new
climate-related legislation, regulations
and reporting requirements, such as
TCFD and SECR reporting, will pose
additional costs as the Group seeks
to manage these risks by investing
additional resources to ensure
compliance.
Climate change continues to be a
key concern of the Group and its
stakeholders. IP Group invests in
technology that has the potential
to have positive impacts on the
environment and the Group is well
positioned to take advantage of the
changing preferences of governments,
businesses and individuals.
In addition, IP Group reported against
the TCFD recommendations in
monitoring risks and opportunities to
the business as presented by climate
change.
New cyber, IT security and
AI threats
Cyber and IT security continue to
be areas of risk for the Group and
its portfolio which could be targets
for hackers or competitors and the
regulatory landscape, which is evolving
rapidly around data security and the
increasing powers of regulators to
impose significant fines on companies
who inadvertently breach legislation
such as GDPR. The industry saw the
exponential rise in AI-based threats
in 2023 with increasing levels of
sophistication available to bad actors
to launch more sophisticated cyber
attacks. The Group continued to invest
in mitigating controls, regular staff
training and cyber incident exercising
to support our response to this
risk area.
Competition and the use of
AI tools
AI tools could be used more effectively
by competitors increasing competition
for deals and driving up valuations or
be used incorrectly leading to bias in
decision making.
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RISK MANAGEMENT
.
Summary of principal risks
and mitigants
A summary of the principal risks affecting the
Group and the steps taken to manage these
is set out in this section. Further discussion
of the Group’s approach to principal risks
and uncertainties is given on page 100 of the
Corporate Governance Statement and pages 132
to 133 of the Audit and Risk Committee Report,
while further disclosure of the Group’s financial
risk management is set out in note 3 to the
consolidated financial statements on pages 161 to
163. Following the 2023 annual review process, the
heatmap below describes the relative potential
risks posed by each of the Group’s identified
principal risks i.e. how the principal risks are
ranked against each other.
Consideration of risk appetite
The Group accepts that certain risks are inherent
in achieving its strategic aims, which are set out in
the strategy section of the report on page 17. The
Group accepts risk only as it is consistent with the
Group’s purpose and strategy and where they can
be appropriately managed and offer a sufficient
risk/reward balance. The Board has determined its
risk appetite in relation to each of its principal risks
and considered appropriate metrics to monitor
performance relative to defined thresholds.
The Board’s assessment of risk appetite is
provided in the summary of each principal
risk below.
Risk appetite ratings defined:
Very low
Following a marginal-risk, marginal-reward
approach that represents the safest
strategic route available
Low
Seeking to integrate sufficient control
and mitigation methods in order to
accommodate a low level of risk, though this
will also limit reward potential
Balanced
An approach which brings a moderate
chance of success, considering the risks,
along with reasonable rewards, economic
and otherwise
High
Willing to consider bolder opportunities with
higher levels of risk in exchange for increased
business payoffs
Very high
Pursuing high-risk, inherently uncertain
options that carry with them the potential for
high-level rewards
Principal risks:
1
Insufficient capital: plc
2
Insufficient capital: portfolio
3
Insufficient returns
4
People
5
Macroeconomic environment
6
Legislation/regulation
7
Cyber and IT security
8
Operations including international operations
2023 principal risk scoring
Board risk workshop – principal risks
Risk heatmap
Impact
Likelihood
2
1
5
3
6
4
8
7
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PRINCIPAL RISKS AND UNCERTAINTIES
01
It may be difficult for the Group
to maintain the required level of
capital to continue to operate
at planned levels of investment
activity and overheads
The Group’s funding model has historically been reliant on capital markets, particularly those in the UK;
however, the Group is moving towards self-sustainability with realisations from the portfolio contributing
significantly to the Group’s ongoing capital needs. The ability of the Group to raise further capital
through realisations, or potentially through equity issues or debt, is influenced by the general economic
climate and capital market conditions, particularly in the UK.
Link to strategy
Access to sufficient levels of capital allows
the Group to invest in its investment
assets, develop early-stage investment
opportunities and invest in its most exciting
companies to ensure attractive future
financial returns.
Actions taken by management
•
The Group has significant balance sheet capital and managed funds capital to deploy
in portfolio opportunities
•
The Group regularly forecasts cash requirements of the portfolio and ensures capital
allocations are compliant with budgetary limits, treasury and capital allocation policies
and guidelines and transaction authorisation controls
•
The Group ensures that minimum cash is available to maintain sufficient headroom
over debt covenants and regulatory capital requirements
Risk
appetite
Examples of risk
•
The Group may not be able to provide the
necessary capital to key priority assets,
which may affect the portfolio companies’
performance or dilute future returns of the
Group
•
The Group may not be able to realise
capital from its portfolio to fund the
desired level of investment activity in the
portfolio
Development during the year
•
The Group appointed a Managing Director of Global Capital in January 2023 to develop
greater levels of access to strategic third-party capital
•
The Group’s share price continued to trade below NAV during the year
•
A sub-group of the Executive Committee met regularly throughout the year to oversee
workstreams focused on narrowing the gap between NAV and the share price
•
Cash proceeds totalled £38.6m in 2023
•
Capital allocation group met monthly in 2023 in response to the volatile capital market
environment and we continue to develop the capital allocation process to support
optimal decision making
•
The quoted portfolio value reduced by £32.4m in the year
Change
from 2022
KEY
STRATEGIC PILLARS
Have an impact
on the world
that counts
Develop our
unique insight,
expertise
and access
Accelerate value
creation
Build a truly
differentiated
reputation
Be a home for
exceptional talent
CHANGE
FROM 2022
Increase
Decrease
No change
RISK APPETITE
Very low
Low
Balanced
High
Very high
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RISK MANAGEMENT
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PRINCIPAL RISKS AND UNCERTAINTIES
02
It may be difficult for the Group’s
portfolio companies to attract
sufficient capital
The Group’s portfolio companies are typically in their development or growth phases and, therefore,
require additional capital to continue operations. While a proportion of this capital will generally be
forthcoming from the Group, subject to capital allocation and company progress, additional third-party
capital will usually also be necessary. The ability of portfolio companies to attract further capital is
influenced by their financial and operational performance and the general economic climate and
trading conditions, particularly (for many companies) in the UK.
Link to strategy
Access to sufficient levels of capital allows
the Group’s portfolio companies to invest in
technology and commercial opportunities
to ensure future financial returns.
Actions taken by management
•
The Group operates a corporate finance function, which is experienced in carrying out
fundraising mandates for portfolio companies
•
The Group maintains close relationships with a wide variety of co-investors that focus
on companies at differing stages of development
•
The Group regularly forecasts cash requirements of the portfolio and monitors those
with a heightened funding risk
•
Parkwalk Advisors continue to have independent investment decision making and is
anticipated to continue to be an important co-investor with the Group, supporting
shared portfolio companies
Risk
appetite
Examples of risk
•
The success of those portfolio companies
that require significant funding in the
future may be influenced by the market’s
appetite for investment in early-stage
companies, which may not be sufficient
•
Failure of companies within the Group’s
portfolio may make it more difficult for the
Group or its spin-out companies to raise
additional capital
Development during the year
•
IP Group hosted a flagship “scale it up” investor event at London’s Science Museum and
included a panel discussion on how best the UK can support more innovation which
showcased seven of the Group’s most exciting companies and was attended by over
180 guests
•
IP Group hosted two portfolio company events in 2023 to showcase the Group’s
portfolio companies. These included an in-person Deeptech event to showcase recent
portfolio company performance and key focus areas for investment and an-person Life
Sciences investor update outlining key value inflection points for the portfolio over the
next 12–18 months and included presentations from Genomics plc and Oxford Nanopore
Technologies plc CEOs
•
Increased number of targeted international investor roadshows in the year in the US, UK,
EU and Middle East
•
Continued management of an A$310m trust and a separate mandate for an
Australian Super Fund which has a mandate to co-invest with IP Group plc portfolio
companies. In the year, six Group portfolio companies received funding from these
investment vehicles. Total assets at the year end for the managed trust plus undrawn
commitments totalled A$307m
•
Obtained regulatory permissions in Hong Kong for a licence to raise capital from Hong
Kong in the year
•
Parkwalk Advisors raised £32m in 2023 and had total AUM of £469m at the end of 2023
and obtained full-scope AIFM permissions from the FCA allowing the firm to manage
greater levels of third-party capital
Change
from 2022
KEY
STRATEGIC PILLARS
Have an impact
on the world
that counts
Develop our
unique insight,
expertise
and access
Accelerate value
creation
Build a truly
differentiated
reputation
Be a home for
exceptional talent
CHANGE
FROM 2022
Increase
Decrease
No change
RISK APPETITE
Very low
Low
Balanced
High
Very high
66
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
RISK MANAGEMENT
.
PRINCIPAL RISKS AND UNCERTAINTIES
03
The returns and cash proceeds
from the Group’s early-stage
companies may be insufficient
Early-stage companies typically face a number of risks, including being unable to secure later rounds
of funding at crucial development inflection points, being unable to source or retain appropriately
skilled staff, competing technologies entering the market, technology can be materially unproven and
may ultimately fail, IP may be infringed, copied or stolen, may be more susceptible to cybercrime and
other administrative, taxation or compliance issues. These factors may lead to the Group not realising a
sufficient return on its invested capital at an individual company or overall portfolio level. At the portfolio
level, a reduction in NAV and realisation potential could impact shareholder returns or negatively impact
specific strategic initiatives.
Link to strategy
Uncertain or insufficient cash returns
could impact the Group’s ability to deliver
attractive returns to shareholders when our
ability to react to portfolio company funding
requirements is negatively impacted
or where budgeted cash proceeds are
delayed.
Actions taken by management
•
The Group’s employees have significant experience in sourcing, developing and
growing early-stage technology companies to significant value, including use of the
Group’s systematic opportunity evaluation and business building methodologies within
delegated board authorities
•
Members of the Group’s investment partnership teams typically serve as non-executive
directors or advisors to portfolio companies to help identify and remedy critical issues
•
The Group has portfolio company holdings across different sectors managed by
experienced sector-specialist teams to reduce the impact of a single company failure
or sector decline
•
The Group maintains significant cash balances and seeks to employ a capital efficient
process deploying low levels of initial capital to enable identification and mitigation of
potential failures at the earliest possible stage
Risk
appetite
Examples of risk
•
Portfolio company failure directly impacts
the Group’s value and profitability
•
At any time, a large proportion of the
Group’s portfolio may be accounted
for by very few companies, which could
exacerbate the impact of any impairment
or failure of one or more of these
companies
•
The value of the Group’s drug discovery
and development portfolio companies
may be significantly impacted by a
negative clinical trial result
•
Cash realisations from the Group’s
portfolio through trade sales and IPOs
could vary significantly from year to year
Development during the year
•
The Group’s portfolio companies raised approximately £655m of capital in 2023
•
Excluding the Oxford Nanopore holding, the Group held board seats on 89.5% of portfolio
companies valued at greater than £5m by value
•
The Group hired four investment professionals across the UK Deeptech and Cleantech
teams, one investment profession at Parkwalk Advisors and one investment professional
in the Australian Physical Sciences team in 2023. Two investment professionals left the
business, of which one took up a senior role at an IP Group portfolio company
Change
from 2022
KEY
STRATEGIC PILLARS
Have an impact
on the world
that counts
Develop our
unique insight,
expertise
and access
Accelerate value
creation
Build a truly
differentiated
reputation
Be a home for
exceptional talent
CHANGE
FROM 2022
Increase
Decrease
No change
RISK APPETITE
Very low
Low
Balanced
High
Very high
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
67
IP GROUP PLC ANNUAL REPORT 2023
RISK MANAGEMENT
.
PRINCIPAL RISKS AND UNCERTAINTIES
04
The Group may lose key personnel
or fail to attract and integrate new
personnel
The industry in which the Group operates is a specialised area and the Group requires highly qualified
and experienced employees. There is a risk that the Group’s employees could be approached and
solicited by competitors or other technology-based companies and organisations or could otherwise
choose to leave the Group. Scaling the team, particularly in foreign jurisdictions such as Australia and
New Zealand and Hong Kong, presents an additional potential risk.
Link to strategy
The Group’s strategic objectives of
developing and supporting a portfolio of
compelling intellectual property-based
opportunities into robust businesses
capable of delivering attractive financial
returns on our assets is dependent on
the Group’s employees who work with
the portfolio companies and those who
support them.
Actions taken by management
•
Senior team succession plans in place
•
Formal learning and development programme for all employees in place
•
The Group carries out regular market comparisons for staff and executive remuneration
and seeks to offer a balanced incentive package comprising a mix of salary, benefits,
performance-based long-term incentives, and benefits such as flexible working and
salary sacrifice arrangements
•
The Group encourages employee development and inclusion through coaching and
mentoring and carries out annual objective setting and appraisals
•
The Group promotes an open culture of communication and provides an inspiring and
challenging workplace where people are given autonomy to do their jobs. The Group is
fully supportive of flexible working and has enabled employees to work flexibly
•
An employee forum, “IP Connect” with an appointed designated Non-executive Director
to facilitate dialogue with the Board in both directions. Part of IP Connect’s remit is also
to support the evolution of the culture and continuous improvement of working life at
the Group
•
An inclusion and diversity committee the “ID Project”, sponsored by the CEO is in place
to support an inclusive environment to work
Risk
appetite
Examples of risk
•
Loss of key executives and employees of
the Group or an inability to attract, retain
and integrate appropriately skilled and
experienced employees could have an
adverse effect on the Group’s competitive
advantage, business, financial condition,
operational results and future prospects
Development during the year
•
Continued excellent employee engagement (net promoter) scores obtained in the year
from employee engagement surveys
•
Continued to dedicate senior team time and resources to the development of the
Group’s inclusion and diversity programme, the ID Project. Progress against key IDP
Masterplan objectives and a firmwide inclusive communications training was provided
to all employees in 2023
•
More than 74% of employees attended a L&D programme sponsored training course
•
Continued high frequency of employee communications from Executive Directors and
the Head of HR via regular virtual and in-person all-staff meetings
•
The labour market was resilient in 2023; however, quit rates, a key feature of tight
pandemic labour markets are now thought to be below 2019 levels. This, alongside
moderated labour market demand in response to the weakened economic activity
globally means that while talent acquisition and retention is still competitive the impact
of the wider market has reduced this risk somewhat for the Group
•
Unplanned staff attrition was 2%
•
Approximately 59% of employees have been with the Company for at least five years
Change
from 2022
KEY
STRATEGIC PILLARS
Have an impact
on the world
that counts
Develop our
unique insight,
expertise
and access
Accelerate value
creation
Build a truly
differentiated
reputation
Be a home for
exceptional talent
CHANGE
FROM 2022
Increase
Decrease
No change
RISK APPETITE
Very low
Low
Balanced
High
Very high
68
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
RISK MANAGEMENT
.
PRINCIPAL RISKS AND UNCERTAINTIES
05
Macroeconomic conditions may
negatively impact the Group’s
ability to achieve its strategic
objectives
Adverse macroeconomic conditions could reduce the opportunity to deploy capital into opportunities
or may limit the ability of such portfolio companies to receive third-party funding, develop profitable
businesses or achieve increases in value or exits. Political uncertainty, including impacts from Brexit, the
COVID-19 pandemic or similar scenarios, could have a number of potential impacts, including global
conflicts impacting the cost of raw materials required by portfolio companies, changes to the labour
market available to the Group for recruitment or regulatory environment in which the Group and its
portfolio companies operate.
Link to strategy
The Group’s strategic objectives of
developing a portfolio of commercially
successful portfolio companies and
delivering attractive financial returns on
our assets and third-party funds can
be materially impacted by the current
macroeconomic environment.
Actions taken by management
•
Senior management receive regular capital market and economic updates from the
Group’s capital markets team and its brokers
•
Monthly capital allocation process and on-going monitoring against agreed budget
•
Regular oversight of upcoming capital requirements of portfolio from both the Group
and third parties
•
The Group’s Risk Council monitors key macroeconomic trends that may impact
the Group
Risk
appetite
Examples of risk
•
The success of those portfolio companies
that require significant external funding
may be influenced by the market’s
appetite for investment in early-stage
companies, which may not be sufficient
•
Of the Group’s portfolio value, 17.5% is held
in companies quoted on public markets
and decreases in values to these markets
could result in a material fair value impact
to the portfolio as a whole
Development during the year
•
Macroeconomic and geopolitical conditions remain uncertain in the UK. Inflation in the
UK fell in 2023 to 4.0% and interest rate rises were seen across the UK, Eurozone, US and
elsewhere, ending an era of low interest rates. In early 2024 the market is anticipating
moderate decreases to interest rates in the short term; however, the expectation is that
interest rates will not revert to the lower interest rates experienced in the recent past
•
Russia’s invasion of Ukraine continued in the year and conflict in the Middle East began
in Q4
•
The Group has maintained significant cash reserves available for investment and as
such is well placed to respond to macroeconomic uncertainty
Change
from 2022
KEY
STRATEGIC PILLARS
Have an impact
on the world
that counts
Develop our
unique insight,
expertise
and access
Accelerate value
creation
Build a truly
differentiated
reputation
Be a home for
exceptional talent
CHANGE
FROM 2022
Increase
Decrease
No change
RISK APPETITE
Very low
Low
Balanced
High
Very high
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
69
IP GROUP PLC ANNUAL REPORT 2023
RISK MANAGEMENT
.
PRINCIPAL RISKS AND UNCERTAINTIES
06
There may be changes to, impacts
from, or failure to comply with,
legislation, government policy and
regulation
There may be unforeseen changes in, or impacts from, government policy, regulation or legislation
(including taxation legislation). This could include changes to funding levels or to the terms upon which
public monies are made available to universities and research institutions and the ownership of any
resulting intellectual property.
Link to strategy
The Group’s strategic objectives of creating
and maintaining a portfolio of compelling
opportunities to deliver attractive returns for
shareholders could be materially impacted
by failure to comply with, or adequately
plan for, a change in legislation, government
policy or regulation.
Actions taken by management
•
University partners are incentivised to protect their IP for exploitation as the partnership
agreements share returns between universities, academic founders and the Group
•
The Group utilises professional advisors as appropriate to support its monitoring of, and
response to changes in, tax, insurance or other legislation
•
The Group has internal policies and procedures to ensure its compliance with
applicable regulations
•
The Group maintains directors and officers (“D&O”) and professional indemnity
insurance policies
Risk
appetite
Examples of risk
•
Changes could result in universities and
researchers no longer being able to own,
exploit or protect intellectual property on
attractive terms
•
Changes to tax legislation or the nature
of the Group’s activities, in particular in
relation to the Substantial Shareholder
Exemption, may adversely affect the
Group’s tax position and accordingly its
value and operations
•
Regulatory changes or breaches could
ultimately lead to withdrawal of regulatory
permissions for the Group’s authorised
subsidiaries, resulting in loss of fund
management contracts, reputational
damage or fines
Development during the year
•
Ongoing focus on regulatory compliance, including third-party reviews and utilisation of
specialist advisors
•
Parkwalk Advisors Ltd received regulatory permissions from the FCA in the year to allow
them to increase the level of assets under management in response to their success as
an EIS investment manager
•
An application for Type 1 and Type 9 regulatory licences from the Securities and Futures
Commission (“SFC”) in Hong Kong was obtained in the year. The licences allow the
Group’s Hong Kong subsidiary to raise capital for the Group’s portfolio companies and
other similar companies and manage a PRC-based fund
Change
from 2022
KEY
STRATEGIC PILLARS
Have an impact
on the world
that counts
Develop our
unique insight,
expertise
and access
Accelerate value
creation
Build a truly
differentiated
reputation
Be a home for
exceptional talent
CHANGE
FROM 2022
Increase
Decrease
No change
RISK APPETITE
Very low
Low
Balanced
High
Very high
70
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OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
RISK MANAGEMENT
.
PRINCIPAL RISKS AND UNCERTAINTIES
07
The Group and its portfolio
companies may be subjected to
phishing and ransomware attacks,
data leakage and hacking
This could include taking over email accounts to request or authorise payments, GDPR breaches and
access to sensitive corporate and portfolio company data.
Link to strategy
The Group’s strategic objectives of creating
and maintaining a portfolio of compelling
opportunities to deliver attractive returns for
shareholders could be materially impacted
by a serious cybersecurity breach at a
corporate or portfolio company level.
Actions taken by management
•
The Group reviews its data and cybersecurity processes with its external outsourced
IT providers and applies the UK Government’s “ten steps” framework or other national
equivalents where relevant
•
Regular IT management reporting framework in place
•
Internal and third-party reviews of policies and procedures in place to ensure
appropriate framework in place to safeguard data
•
Assessment of third-party suppliers of cloud-based and on-premises systems in use
•
Annual Cyber and IT training is supplemented by regular bite-sized and interactive
cybersecurity training
•
Network and infrastructure security systems to respond to emerging threats
Risk
appetite
Examples of risk
•
The Group, or one, or a combination of, its
portfolio companies could face significant
fines from a data security breach
•
The Group or one of its portfolio
companies could be subjected to a
phishing attack, which could lead to
invalid payments being authorised or a
sensitive information leak
•
A malware or ransomware attack
could lead to systems becoming non-
functioning and impair the ability of the
business to operate in the short term
Development during the year
•
Ongoing focus on IT security and staff training
•
Continued programme of phishing and penetration testing
•
Implementation of additional cybersecurity systems to provide enhanced
threat detection
•
Internal Audit completed an “ethical hacking” style review
•
Onboarded strategic level external communications resource to supplement response
resources to a serious cyber incident
•
Three cyber attack simulations were undertaken in the year to allow executive
management to practice their planned response to a serious cyber incident,
including two externally facilitated sessions
•
Extensive training and testing of the Group’s cyber response plans in the year
Change
from 2022
KEY
STRATEGIC PILLARS
Have an impact
on the world
that counts
Develop our
unique insight,
expertise
and access
Accelerate value
creation
Build a truly
differentiated
reputation
Be a home for
exceptional talent
CHANGE
FROM 2022
Increase
Decrease
No change
RISK APPETITE
Very low
Low
Balanced
High
Very high
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
71
IP GROUP PLC ANNUAL REPORT 2023
KEY
STRATEGIC PILLARS
Have an impact
on the world
that counts
Develop our
unique insight,
expertise
and access
Accelerate value
creation
Build a truly
differentiated
reputation
Be a home for
exceptional talent
CHANGE
FROM 2022
Increase
Decrease
No change
RISK APPETITE
Very low
Low
Balanced
High
Very high
RISK MANAGEMENT
.
PRINCIPAL RISKS AND UNCERTAINTIES
08
The Group may be negatively
impacted by operational
issues both from a UK central
and international operations
perspective
The potential for a negative impact to the Group arising from operational issues such as business
continuity and the overseas operations through non-compliance with local laws and regulations,
failure to integrate overseas operations with the Group, an inability to foresee territory-specific risks
and macro-events. The Group may also fail to establish effective control mechanisms, considering
different working culture and environment, leading to significant senior management time requirement,
distracting from core day-to-day business.
Link to strategy
The Group’s strategy includes building
a portfolio of compelling intellectual
property-based companies across the
UK and Australia and New Zealand. The
scale of the Group’s operations, including
internationally represents increased
importance of successful execution of its
operations.
Actions taken by management
•
Local legal and regulatory advisors have been engaged in the establishment phase of
overseas operations. International teams typically have their own in-house legal teams
and regularly report to the UK-based General Counsel
•
Business continuity plans are in place for the Group and tested regularly
•
Our executive recruitment function and HR are involved in senior hires for new territories.
Senior international personnel include current and former UK employees, encouraging a
shared culture across territories
•
Video conferencing supplements regular travel between the UK and other territories to
ensure the Group is aligned in its strategy and culture
•
The risk management framework in place across each business unit has been
established in each international territory and is integrated into the Group’s regular risk
management processes and reporting
•
Third-party suppliers are used for international accounting and payroll services to
reduce the risk of fraud within smaller teams
•
The Group’s Executive Committee includes senior representatives from Australia and
Hong Kong. Other key committees and working groups also include team members
from international offices
Risk
appetite
Examples of risk
•
A legal or regulatory breach could
ultimately lead to the withdrawal of
regulatory permissions overseas, resulting
in loss of trust management contracts,
reputational damage and fines
•
Divergent Group cultures may lead
to difficulties in achieving the Group’s
strategic aims
•
A major control failure could lead to a
successful fraudulent attack on the Group’s
IT infrastructure or access to bank accounts
•
Senior management may spend a
significant amount of time in setting up
and establishing new territories, which
could detract from central Group strategy
and operations
Development during the year
•
Continued coordination of risk reporting across Australia, New Zealand and Hong Kong
•
Hong Kong regulatory permissions obtained from local regulator and Group risk and
compliance reporting programme commenced
•
Reviewed disaster recovery plans in the year
Change
from 2022
72
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OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
RISK MANAGEMENT
.
Viability statement
The Directors have carried out a robust
assessment of the viability of the Group over a
three-year period to December 2026, considering
its strategy, its current financial position and its
principal risks. The three-year period reflects
the time horizon reviewed by the Board, and
over which the Group places a higher degree of
reliance over the forecasting assumptions used.
The strategy and associated principal risks
underpin the Group’s three-year financial plan
and scenario testing, which the Directors review
and approve at least annually. As a business
which seeks to accelerate the impact of
science for a better future through our portfolio
companies, our business model seeks to balance
cash investments, the generation of portfolio
returns and portfolio realisations. The three-year
plan is built using a bottom-up model using
assumptions over:
•
the level of portfolio investment
•
the level of realisations from the portfolio
(net of carried interest payments)
•
the financial performance (and valuation) of
the underlying portfolio companies
•
the Group’s drawdown and repayment of
its debt
•
the Group’s ability to raise further capital
•
the level of the Group’s net overheads and
•
the level of dividends and share buybacks
Of the Group’s principal risks, those relating to
insufficient capital (both Group and portfolio
companies), insufficient investment returns and
macroeconomic conditions are deemed to be the
most relevant to the Group’s viability assessment
due to their potential to impact the Group’s
liquidity position and net asset position, both of
which directly impact the level of headroom over
the Group’s debt covenants. Other principal risks
including; personnel risk; legislation, governance
and regulation; cyber and IT and international
operations could have an impact on the Group’s
performance but are less likely to have a direct
impact on viability within the assessment period.
To assess the impact of the principal risks
highlighted above on the prospects of the Group,
the financial plan is stress-tested by modelling
severe but plausible and intermediate downside
scenarios where adverse impacts across the
Group’s principal risks relating to insufficient
capital, insufficient investment returns and
macroeconomic conditions were considered as
part of the review. Under the severe downside
scenario, a 70% reduction in planned realisations
and a 35% decline in portfolio fair values which
were considered together with a series of
mitigating actions, including reducing planned
levels of investment.
Under these stress-testing scenarios, significant
reductions to portfolio investments are made to
preserve the Group’s remaining cash balances.
In all scenarios modelled, the Group remains
solvent throughout the three-year period with no
breach of debt covenants of a “cash trap period”
occurring. See note 19 for further details on cash
trap arrangements.
Based on this assessment, the Directors have
a reasonable expectation that the Group will
continue to operate and meets its liabilities,
as they fall due, up to December 2026.
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
73
IP GROUP PLC ANNUAL REPORT 2023
WORKING WITH THE GROUP’S STAKEHOLDERS
.
Shareholders
Employees
Portfolio
companies
Universities,
academics
and research
institutions
Environment
and wider
community
Debt
holders
Inventors,
founders and
entrepreneurs
Regulators
Brokers and
advisors
Governance
bodies including
proxy advisors
Third-party
fund investors
and portfolio
co-investors
Statement by the Directors in
performance of their duties in
accordance with s172(1) Companies
Act 2006
The Directors of IP Group plc consider that they
have acted both individually and together as
a Board in the way that would be most likely to
promote the success of the Company for the
benefit of its members as a whole. This statement
describes how the Board has had regard to the
matters set out in s172(1) (a) to (f) Companies
Act 2006 when performing its duties under s172
Companies Act 2006 (“s172”) for the year ended 31
December 2023.
Engaging with stakeholders
Engaging and maintaining open channels of
communication with the Group’s stakeholders
is an integral part of our business and critical to
ensuring the future success of the business. The
Group engages with its stakeholders in various
forms and using multiple different media. This
flexibility in methods of engagement enables
the Company to obtain wider access to, and to
facilitate constructive two-way engagement with
its multiple stakeholders.
The following table sets out how the Group
actively engages with its key stakeholders in a
way that enables the Group’s senior executives
and Board members to understand the potential
impact of decisions and actions on a wide range
of stakeholders who would be affected by such
events. As a consequence of such engagement,
the Group is able to be responsive to matters
raised during discussions with key stakeholders
and to feed back to such stakeholders on how the
Group has taken their views into account.
74
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OUR GOVERNANCE
OUR FINANCIALS
STRATEGIC REPORT
BUSINESS OVERVIEW
OUR GOVERNANCE
WORKING WITH THE GROUP’S STAKEHOLDERS
.
Name of
stakeholder
and relevant
application of s172
Why we engage
Engagement methods – who and how
Impact of engagement
Shareholders
s172(1)
a
e
f
To ensure that:
•
shareholders have a good
understanding of and
confidence in the Group’s
strategy, performance,
purpose and culture
•
the Group fosters and
maintains open and
constructive relationships
with its shareholders
•
the Board understands the
issues that are important
to its shareholders
•
the Board acts fairly
between shareholders of
the Company
•
Direct meetings/calls with individual shareholders,
primarily with the Executive Directors and senior
management, enabling consultation on various key issues
for the Group
•
Direct shareholder access to the Chair, Senior
Independent Director and Board Committee Chairs
relating to matters within the relevant Committee’s
mandate
•
Results announcements, investor roadshows and
presentations in person and broadcast via the
‘Investormeetcompany’ platform to enable broader
audience engagement and real-time Q&A
•
Group capital market, sector showcase events, and
themed seminars which in 2023 included (i) the Group’s
approach to valuations and (ii) an ESG deep-dive
•
Broker facilitated investor forums/conferences
•
The Group’s website, with investors being able to sign up
to regulatory and portfolio company alerts
•
Meetings with analysts and feedback from the Group’s
brokers
•
Annual General Meeting (“AGM”), with the 2023 AGM
having been preceded by a shareholder update, with
both events enabling live remote access, and recordings
also being available after, via the ‘Investormeetcompany’
platform. Shareholders were also able to submit questions
in advance of the 2023 AGM
•
Annual Report and Accounts
•
RNS and RNS Reach announcements
•
Shareholder circulars
•
Dedicated IR and company secretarial mailboxes
(IR@ipgroupplc.com and CoSec@ipgroupplc.com)
•
Closer and more direct links
between shareholders and
the Board, which has enabled
the Board to gain a better
understanding of shareholder
expectations on the matters
which have been most important
to the Group’s shareholder
base in 2023, including strategy,
financial performance, group
structure, capital allocation and
share price/discount to NAV
•
Enabled broader audience
engagement and the ability to
engage in a real-time Q&A with
shareholders on a number of
occasions through the year
•
Contributed to the Board’s
decision to launch the Share
Buyback programme (as further
detailed on page 84)
•
Resulted in informative two-way
discussions with shareholders
to explain the Group’s approach
to ESG and to better understand
their requirements around ESG
reporting
KEY
S.172(1) FACTORS
a
the likely
consequences of
any decision in the
long term
b
the interests of
the Company’s
employees
c
the need to foster
the Company’s
business
relationships
with suppliers,
customers
and others
d
the impact of
the Company’s
operations on the
community and
the environment
e
the desirability
of the Company
maintaining a
reputation for
high standards of
business conduct
f
the need to act
fairly between
members of the
Company
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
75
IP GROUP PLC ANNUAL REPORT 2023
WORKING WITH THE GROUP’S STAKEHOLDERS
.
Name of
stakeholder
and relevant
application of s172
Why we engage
Engagement methods – who and how
Impact of engagement
Employees
s172(1)
a
b
e
To be an attractive home
for exceptional talent, which
is critical to achieving the
Group’s strategy and vision.
Meaningful engagement
with employees also helps
to foster a strong and
supportive culture.
•
IP Connect employee workforce forum
•
Designated Non-executive Director for employees
•
Regular all-staff meetings in person and via
video conference
•
Annual all-staff off-site events
•
Weekly all-staff emails from the CEO
•
Staff intranet
•
Third-party hosted anonymous speaking up hotline and
web reporting tool
•
Culture and engagement survey and other more regular
pulse surveys
•
Regular all-staff social events and TED talk style
discussions
•
Internal training sessions
•
Women’s Networking Group and associated events and
initiatives/development sessions
•
Inclusion and Diversity Project and the implementation of
the Group’s Inclusion and Diversity Masterplan
•
eNPS scores across the Group
were maintained at a ‘High’ or
‘Very High’ level throughout the
year
•
Employee turnover at a historic
low of 3%
•
82% of employees believe our
culture is one in which diversity
and diverse perspectives are
valued, up from 66% before the
Group started our Inclusion and
Diversity Project
•
Updated succession plan
presented to the Board
•
Formulation and articulation of
the Group’s new values
Read about our
culture
on pages 19 to 20
KEY
S.172(1) FACTORS
a
the likely
consequences of
any decision in the
long term
b
the interests of
the Company’s
employees
c
the need to foster
the Company’s
business
relationships
with suppliers,
customers
and others
d
the impact of
the Company’s
operations on the
community and
the environment
e
the desirability
of the Company
maintaining a
reputation for
high standards of
business conduct
f
the need to act
fairly between
members of the
Company
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.
Name of
stakeholder
and relevant
application of s172
Why we engage
Engagement methods – who and how
Impact of engagement
Portfolio
companies
s172(1)
a
c
e
To identify, back and grow
science-based opportunities
into a diversified portfolio of
transformative businesses,
which address some of
the world’s most pressing
challenges.
Part of the Group’s purpose
is to build businesses that
have a positive social and
environmental impact, and
this forms an element of
the Board’s consideration of
the long-term impact of its
decisions.
•
Hands-on approach via portfolio company boards as
investor directors/observers
•
Offering fundraising and capital markets expertise via IP
Capital (the Group’s fund management and corporate
advisory business), executive search services to help build
strong boards via IP Exec (in-house executive search
function) and commercial advice and support on IP
strategy and due diligence via the Group’s in-house IP
Team
•
Group capital markets events, including presentations at
sector showcase events
•
Portfolio company management team presentations to
the Board, either at the Group’s head office in London or
onsite at the portfolio company, which enables open and
transparent two-way engagement between the Board and
the relevant portfolio company management teams
•
Introductions/facilitating access to co-investors
•
Attending sector conferences and events alongside
portfolio companies and their management teams
•
Marketing including through the use of social media to
amplify messaging around the portfolio
•
Parkwalk Advisors annual portfolio showcase attended by
investors/co-investors, advisors and government bodies
•
Flagship investor event held at the London Science
Museum
•
Development of strong and
mutually supportive relationships
between the Group and its
portfolio companies
•
Portfolio companies better
understand the Group’s approach
to strategy, decision making
processes and capital allocation
•
The Group is able to use its
investor director/observer
positions to assist with
governance, strategic planning
and many other practical
elements of growing a company
•
Support in achieving completion
of a number of portfolio company
financing rounds
•
Reduction of expenditure by
portfolio companies on third-
party advisory services
Read the
portfolio review
on pages 21 to 30
KEY
S.172(1) FACTORS
a
the likely
consequences of
any decision in the
long term
b
the interests of
the Company’s
employees
c
the need to foster
the Company’s
business
relationships
with suppliers,
customers
and others
d
the impact of
the Company’s
operations on the
community and
the environment
e
the desirability
of the Company
maintaining a
reputation for
high standards of
business conduct
f
the need to act
fairly between
members of the
Company
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Name of
stakeholder
and relevant
application of s172
Why we engage
Engagement methods – who and how
Impact of engagement
Third-party
fund investors
and portfolio
co-investors
s172(1)
a
c
e
To attract new strategic
co-investors, including third-
party fund managers, to
invest alongside the Group
either directly or via a vehicle
or arrangement managed
by the Group.
To build an investment
network to support co-
investment into the Group’s
portfolio companies to
ensure that they are
adequately supported, both
financially and in other areas
such as board support,
corporate governance and
strategy.
To maintain strong
relationships with existing
investors who invest in the
Group’s portfolio via funds
or other arrangements
managed by the Group.
•
Direct meetings/calls between co-investors/third-party
fund investors and members of the Group’s Senior
Management Team
•
Via portfolio company boards where several co-investors
have a board seat
•
Attending conferences and sector events including
Cleantech Forum, Ecosummit, Hello Tomorrow and
Web Summit
•
Group capital markets events
•
Broker facilitated investor forums/conferences
•
Parkwalk Advisors annual portfolio showcase and other
investor events
•
Flagship investor event held at the London
Science Museum
•
Built/maintained strong
relationships with co-investors/
fund investors and facilitated
access for them into portfolio
company financings
•
Ensured such stakeholders were
kept abreast of the Group’s
strategy and approach to
key matters through the year,
including ESG
•
Promoted the Group’s brand and
reputation in sector ecosystems
•
Developed sources of new
investment into the Group and/or
its portfolio
•
Launched a new internal
Customer Relationship
Management (“CRM”) system
to facilitate a smarter, more
coordinated approach to
interaction with such stakeholders
across the Group
Universities,
academics
and research
institutions
and Inventors,
founders and
entrepreneurs
s172(1)
a
c
e
To build, develop and
maintain relationships with
universities, academics and
research institutions in order
to identify promising science
into which the Group can
invest to grow transformative
businesses that have a
positive impact on the future
around such science.
To create and maintain
a pipeline of compelling
intellectual property-based
opportunities.
•
Regular interaction with universities within the UK, Europe,
Australia and New Zealand and the US
•
Annual relationship review in Australia and New Zealand
•
Parkwalk Advisors representatives on relevant university
fund investment committees
•
Attending and presenting at sector events and
conferences
•
Meetings throughout the year with entrepreneurs
and innovators
•
Maintained relationships between
the Group and universities,
academics and research
institutions, which has ensured
these stakeholders are aware of
the Group’s strategy and funding
model
•
Generated a pipeline of potential
new investment opportunities
•
Relationships built/enhanced
with founders and entrepreneurs
across various ecosystems to
ensure the Group is their partner
of choice
KEY
S.172(1) FACTORS
a
the likely
consequences of
any decision in the
long term
b
the interests of
the Company’s
employees
c
the need to foster
the Company’s
business
relationships
with suppliers,
customers
and others
d
the impact of
the Company’s
operations on the
community and
the environment
e
the desirability
of the Company
maintaining a
reputation for
high standards of
business conduct
f
the need to act
fairly between
members of the
Company
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Name of
stakeholder
and relevant
application of s172
Why we engage
Engagement methods – who and how
Impact of engagement
The
environment
and wider
community
s172(1)
a
d
To generate social and
environmental impact, which
is part of the Group’s core
purpose.
•
Via the Group’s portfolio companies
•
Engagement with ESG Ratings agencies
•
Charity partnership with IntoUniversity charity
•
Supporting the 10,000 Black Interns programme
•
Signatory to Investing in Women Code
•
Member of UN Global Impact
•
Member of UN Principles for Responsible Investment
•
Participation in the ESG_VC Survey
•
Identified and backed
companies whose products and
services contribute towards a
regenerative, healthier, tech-
enriched future for the world
•
Supported local and wider
communities through charitable
and fundraising initiatives
•
Continued commitment to
driving improvements in inclusion,
diversity and equality across the
Group through implementation of
the Group’s Inclusion and Diversity
Project plan
Read about
our culture
on pages 19 to 20
Debt holders
s172(1)
c
e
To build and maintain
strong partnerships with the
Group’s largest debt capital
providers.
•
Regular reporting requirements
•
Direct conversations and consultation on matters relevant
to existing debt holders
•
Outreach to potential lenders on an ad hoc basis
•
Group capital market events
•
Continued strong relationships with
the largest holders of the Group’s
debt
Regulators
s172(1)
c
e
To maintain strong
relationships with our
regulators and to foster
confidence in our strong
compliance culture.
•
Direct correspondence on transactions and other matters
as necessary
•
Correspondence with the Takeover Panel on concert party
and other code-related matters
•
Regular reporting to the Financial Conduct Authority, and
incorporation of any feedback received
•
Regular reporting to the Securities and Futures Commission,
the Australian Securities and Investment Commission,
Australian Prudential Regulation Authority and the Australian
Transaction Reports Analysis Centre
•
Maintained strong relationships
and communication lines with the
Group’s regulators
•
Confirmation of compliance with
regulatory requirements
WORKING WITH THE GROUP’S STAKEHOLDERS
.
KEY
S.172(1) FACTORS
a
the likely
consequences of
any decision in the
long term
b
the interests of
the Company’s
employees
c
the need to foster
the Company’s
business
relationships
with suppliers,
customers
and others
d
the impact of
the Company’s
operations on the
community and
the environment
e
the desirability
of the Company
maintaining a
reputation for
high standards of
business conduct
f
the need to act
fairly between
members of the
Company
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Name of
stakeholder
and relevant
application of s172
Why we engage
Engagement methods – who and how
Impact of engagement
Brokers and
advisors
s172(1)
c
e
To ensure those who
represent us have a
complete understanding
of the Group’s strategy,
performance, purpose and
culture and to maintain
strong relationships through
our brokers and advisors
with UK capital markets
authorities.
•
Regular dialogue and correspondence with brokers and
advisors including industry analysts
•
Group capital markets events and sales team
presentations in connection with the annual and
interim results
•
Broker/advisers attendance at Company board meetings
to advise on specific strategic matters, shareholder
feedback and sentiment and general
market environment
•
Reinforced the strong
relationships and communication
lines between the Group and the
Group’s Brokers and advisors
•
Enhanced the brokers and
advisors’ knowledge and
understanding of the Group and
its portfolio companies
Governance
bodies
s172(1)
c
e
To maintain strong
relationships with proxy
advisers, the Investment
Association, ESG ratings
agencies and other
governance bodies.
•
Engagement with ESG ratings agencies to help demonstrate
the Group’s performance, as well as enabling identification
of areas of improvement
•
Engaged with the UK Government and parliamentarians on
key issues
•
Responded to Government consultations on matters
impacting the Group and its portfolio including the
revisions to the UK Corporate Governance Code, Long-term
investment for Technology and Science initiative and R&D
Tax Credits
•
Met with leads on the Edinburgh Reforms Review and the
Spin Out Review
•
Two-way engagement with proxy bodies in relation to their
reports on the Group’s Annual General Meeting and any
other General Meetings
•
Regular interaction with EIS Association and HMRC in relation
to EIS investments
•
Regular liaison with government-backed initiatives in relation
to investment within the sector
•
Made sure the Group’s voice was
heard on key issues relevant to
the Group including on changes
to the UK Corporate Governance
Code
•
Ensured the accuracy of the proxy
voting reports and endeavoured
to influence fair voting
recommendations
•
Ensured the ESG ratings agencies
were reporting accurately on
the Group’s performance and
proactively sought to address
gaps
KEY
S.172(1) FACTORS
a
the likely
consequences of
any decision in the
long term
b
the interests of
the Company’s
employees
c
the need to foster
the Company’s
business
relationships
with suppliers,
customers
and others
d
the impact of
the Company’s
operations on the
community and
the environment
e
the desirability
of the Company
maintaining a
reputation for
high standards of
business conduct
f
the need to act
fairly between
members of the
Company
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Key shareholder activities in 2023
Q1
•
Rothschild roadshow
•
Annual results presentation*
•
Results roadshow
•
Valuations deep-dive webinar*
•
Berenberg UK Corporate conference
Q2
•
AGM statement
•
Flagship investor event – ‘Scale it up’
•
AGM and investor presentation*
•
Rothschild roadshow
•
Berenberg roadshow
•
Switzerland roadshow
Q3
•
H1 results presentation*
•
Results roadshow
•
Deeptech webinar: AI and the Internet*
•
Middle East roadshow
•
Rothschild roadshow
Q4
•
ESG webinar on the Group’s approach to
impact*
•
Rothschild roadshow
•
US roadshow
•
Berenberg European Conference
*
available via the Investor Meet Company platform which is
open to all stakeholders.
Shareholders by sector
Sector / Owner
% at
31/12/2023
Mutual Funds
29.33%
Pensions
26.09%
Retail
19.81%
SWF
4.32%
Hedge
4.24%
Insurance
4.05%
Charities
4.00%
Inv Trusts
2.92%
Other
5.24%
Details of substantial shareholders as at both 31 December 2023 and 29 February 2024 can be found on page 138.
Consideration of long-term consequences in decision making
and strategy
The Group’s purpose is to accelerate the impact of science for a better future. Our vision is a
future enhanced by the impact of the transformative businesses we have identified, backed and
grown as long-term partners.
The Group’s strategy to achieve its purpose and to be recognised as a bold, visionary investor is
built up of five strategic pillars, further details of which are shown in diagrammatic form on page
04. These five pillars are underpinned by an objective to deliver class-leading internal processes,
services and controls to enable the strategy to be achieved. The Group is increasingly focusing
capital, resources and expertise on clear thematic areas, focusing on accelerating a dynamic
number of priority companies whose products and services will meaningfully contribute to a
regenerative, healthier and tech-enriched future and which the Board believes can be material
in the context of the overall Group performance. A detailed explanation of the strategy is set out
on pages 17 to 18, and the Group’s business model is set out on pages 10 to 11.
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ESG matters
The Group actively engages with, and obtains input from, its key stakeholders
in relation to environmental, social and governance (“ESG”) matters, to assist
with developing a comprehensive materiality mapping of the Group’s ESG
priorities. This allows the Group to have a meaningful ESG strategy that aligns
the Group’s ESG goals with those of its shareholders and allows the Group to
maximise its impact to the benefit of its broader set of stakeholders. A regular
report is produced for the Group’s principal debt provider which shows
how capital has been deployed against a set of pre-agreed ESG criteria.
Furthermore, the Group actively engages with ESG ratings agencies, feeding
into their ratings approach and methodologies and providing guidance on
ESG matters with respect to sector and company specific data points.
The Group actively takes into account ESG factors in performing its role as a
responsible investor and in relation to evaluating the impact of its portfolio
companies against such factors. For example, a portion of the Group’s
portfolio and its ongoing investment allocation are focused on businesses
pursuing activities aimed at facilitating transition towards Net Zero. The
ESG Committee, a sub-committee of the Executive Committee, oversees
formulation and adoption of the Group’s ESG and impact strategies, and
ensures that all ESG risks, including climate-related risks, are appropriately
managed and that the Group provides required disclosures and reporting
in a full and timely manner. The ESG Committee also ensures that ESG and
impact considerations are embedded into strategy and risk management
and are integrated into investment practices. The ESG Committee is also
responsible for the Group’s active engagement with portfolio companies
on ESG issues. The Group’s ESG Committee is led by the CEO, with the
support of the Head of ESG, and in addition its members comprise Anita
Kidgell (Non-executive Director), the CFOO, Head of Communications, UK
General Counsel and representatives from the investment partnerships.
The composition of the ESG Committee helps to ensure the integration and
alignment of the Group’s ESG strategy with the investment processes and
overall strategy of the Group.
Corporate governance and business conduct
In fulfilling its role as a responsible investor, the Group makes clear its
expectation of high levels of corporate governance within its portfolio
companies. In the majority of the Group’s priority companies, the Group takes
up a Board position to support this requirement. This helps to ensure that
robust governance processes are in place within such companies, which the
Group also supports through facilitating introductions to external advisors,
sharing best practice and offering helpful guidance on new legislation. As
part of its responsible stewardship responsibilities, the Group incorporates a
requirement for portfolio companies to adopt and maintain various legal and
governance policies to ensure such companies are operating in accordance
with the high standards expected by the Group as an active investor. To
facilitate compliance with these requirements, the Group has developed
a policy toolkit, which is available to its portfolio companies. This provides
template policies for the key governance and compliance policies that the
Group expects its portfolio companies to have in place, including with regard
to anti-corruption and bribery, data protection and “speaking up”. Further
information on the Group’s stewardship activities is detailed on page 40.
The Group also operates a separate Ethics Committee which guides the
Group’s approach to ethical investment, ensuring investments align with the
Group’s values. Further details of the Group’s Ethics Committee and its Ethical
Investment Framework can be found on page 47. In accordance with the
Group’s Ethical Investment Framework, the Group’s Investment Committee
processes incorporate ethical considerations into each portfolio company
investment proposal, ensuring that the Group’s investments are carried
out in accordance with the Group’s stance on such matters. The Group
includes undertakings in its investment agreements with portfolio companies
which contain a list of excluded sectors that companies must avoid doing
business with.
The Group is committed to preventing modern slavery in its business and
supply chains and has adopted principles and policies that are relevant to
the prevention of modern slavery across its organisation and supply chains.
This includes the payment of the London Living Wage. The ESG and Ethics
Committees monitor observance of such conduct.
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Wider community
The Group considers its key stakeholders to include the wider community
given its purpose is to accelerate the impact of science for a better future
for all; one example of how the Group engages in this respect can be
seen through the Group’s charitable work. In 2021, the Group entered into
a three-year charity partnership with IntoUniversity. IntoUniversity aims
to provide local learning centres where young people are inspired to
achieve, and donations made by IP Group will support its facility in Brixton,
London. In 2023, the Group hosted both an “Insight Day” and a “Challenge
Day”, which encouraged young people from the charity to meet members
of our investment and wider support teams, ask questions around their
STEM careers and explore problems around tackling the climate crisis. In
particular, we hosted an interactive session on Intellectual Property, which
encouraged students to think critically about how they would patent a
product. In partnership with IntoUniversity and the Big City Bright Futures
programme, the Group also ran a three-week internship for six students who
were beginning their degrees in various STEM subjects. These students were
given the opportunity to meet a member of every IP Group team, including
our Australia and Hong Kong teams, to understand how the organisation
runs, and were challenged to critically assess investment opportunities
for a portfolio company of their choice. Through this scheme, a number
of IP Group team members have become official mentors to students
participating in the programme.
Employees
(including inclusion, equity and diversity matters)
As described on page 76, the Board considers engagement with its
colleagues at all levels in the Group to be a key part of the Group’s culture,
and a wide range of events and experiences are facilitated for employees to
participate in, from both a work and wellbeing perspective.
As further described on page 20 IP Connect, the Group’s employee
forum, works to ensure that employees’ voices are heard by the Group’s
management team and Board. The forum facilitates meaningful and
effective two-way communication between the Board (via Aedhmar
Hynes, the Group’s Designated NED) and employees, enabling the Board
to understand and actively consider the interests of employees in its
discussions and the decisions it makes. This also helps to enable employees
to understand (where practicable to do so) why certain decisions are
made. A major topic of consideration for IP Connect in 2023 was the update
and articulation of the Group’s values, following the launch of the Group’s
updated strategy and new branding over the last two years. IP Connect
members were given the opportunity to input on the sentiment and wording
of the values, ensuring that the final articulated set of values had the support
and buy-in of employees. For further information on the Group’s new values
please refer to page 20. The Group also reviewed the purpose and efficacy
of IP Connect, as well as its terms of reference, during 2023, and the Board
continues to consider that its combination of a Designated NED and an
employee forum continues to be welcomed by colleagues as an effective
and appropriate approach to employee engagement within the Group.
How stakeholders’ views are reported to the Board
and influence the Board agenda
Through understanding the views of its stakeholders, the Board takes into
account their opinions, preferences and concerns when debating and
making decisions. Regular contact is maintained by the Chair and the
Executive Directors with the Group’s key shareholders and, where considered
appropriate, major institutional shareholders are consulted on significant
decisions and transactions in contemplation. Where appropriate, Committee
Chairs will also engage with key shareholders impacted by matters under
the remit of their particular Committee. Key specific areas of discussion
over the last year have related to progress against the Group’s strategy, the
Group’s approach to capital allocation, the disparity between the Group’s
share price and NAV per share and shareholder returns. This ongoing
engagement, together with the various shareholder events highlighted
above, enables the Group to provide feedback to shareholders on how their
views have been taken into account with respect to the various matters
on which they have been consulted, as well as to respond to any specific
questions that shareholders may have.
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Outcome of engagement with shareholders – principal
decision relating to capital allocation
and shareholder returns
Decisions around capital allocation lie at the heart of the Group’s business
model and the Directors regularly review and discuss the Group’s
approach in this area. In recent years, this also included consideration of
the most appropriate way to deliver cash returns to shareholders. In light
of the prevailing discount between the Company’s share price and its
NAV per share, and following consultation with a number of the Group’s
largest shareholders, the Directors approved the launch of a £20m share
buyback programme, as announced by the Company on 18 December
2023 (the “Buyback”). In making this decision, the Directors reconfirmed
their commitment to making regular cash returns to shareholders from
realisations, stating these regular cash returns will normally be made in
the form of share buybacks for as long as the share price discount to NAV
exceeds 20%. As a result, the Directors agreed to suspend regular dividend
payments under such conditions, including consideration of any final
dividend for 2023.
When discussing and subsequently making this decision, the Board, having
regard to its obligations under s172, considered in detail the interests of
shareholders and the following other key stakeholders, and how they may be
impacted, as follows:
Shareholders
The Board considered the impact of the Buyback and suspension of the
dividend on its shareholders, as the group of stakeholders most impacted
by the decision. The authority to make market purchases of up to 10% of
the Group’s shares, provided those shares are trading at a discount to
NAV per share, was granted by shareholders at the Group’s 2023 AGM. The
Board acknowledged that the Buyback would return value to the Group’s
shareholders by reducing the number of outstanding shares in issue thereby,
in principle, increasing the value of the remaining shares. Additionally, the
Board believed that the launch of the Buyback represented a proactive
step in demonstrating its alignment with shareholders, whilst also signalling
to the market that it believes the Group’s share price and discount to NAV
significantly undervalues the Group’s portfolio and its potential to generate
value for shareholders. Taking all this into account the Board therefore
resolved that the Buyback was in the best interests of the Company’s
members as a whole.
Portfolio companies
In making such decision, the Directors also considered carefully the planned
short-term funding requirements of the Group’s investment portfolio.
Considering the Group’s overall strong cash balance and the planned size
of the Buyback, the Board agreed that the Group would maintain sufficient
capital and liquidity to meet ongoing portfolio investment requirements.
The Board therefore concluded that the Buyback would have no significant
impact on its ability to deliver long-term value through planned investment
in its portfolio.
Debt providers
The Board considered the terms of the loan facilities that the Group has in
place with the EIB and Phoenix Group and the impact the Buyback may have
on these outstanding loans. Given the Group’s cash balances remain strong
and the planned size of the Buyback, the Board concluded that these debt
providers and the Group’s other creditors would not be adversely affected by
the Buyback.
Employees
Many of the Group’s employees are shareholders in IP Group and, as a result,
will share the same benefits as other external shareholders noted above.
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Training and Board processes
The Board receives regular training on its s172 obligations to keep current
with evolving market expectations. Information relating to stakeholder issues
is included in relevant Board papers to enable the Board to understand and
consider relevant stakeholder interests when making principal decisions.
This information incorporates feedback received from relevant stakeholders
through ongoing stakeholder engagement.
Where appropriate, being mindful of its obligations as a listed company
and confidentiality requirements, the Board will, in limited circumstances,
seek input from key stakeholders prior to a decision being taken. In each
case, the Directors consider how a short-term decision (for example, to sell
an asset and achieve an immediate financial return) links into the Group’s
overall strategy to create long-term value for its shareholders. The same
considerations are taken into account by the Executive Committee in relation
to decisions made, or proposals recommended to the Board, under its own
authorities. Following any principal Board decision, the Board will reach
out to relevant stakeholders to explain its decision as part of its continued
meaningful two-way communication with stakeholders.
Board approval
The Strategic Report as set out on pages 06 to 85 has been approved by
the Board.
On behalf of the Board
Sir Douglas Flint
Chair
12 March 2024
OUR GOVERNANCE
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
85
IP GROUP PLC ANNUAL REPORT 2023
GOVERNANCE AT A GLANCE
.
Executive/Non-executive split
2
1
5
KEY
Executive Director
Non-executive Director
Non-executive Chair
Board tenure
5
2
1
KEY
0–2 years
3–5 years
Over 5 years
Gender balance
4
4
KEY
Male
Female
Board and Committee attendance
The following table shows the attendance of Directors at scheduled Board and Committee
meetings during the year:
Board
Meetings
Audit and Risk
Committee
1
Nomination
Committee
Remuneration
Committee
Sir Douglas Flint
7/7
5/5
2/2
4/4
Greg Smith
7/7
–
–
–
David Baynes
7/7
–
–
–
Dr Elaine Sullivan
7/7
5/5
2/2
4/4
Heejae Chae
7/7
4/5
2/2
4/4
Dr Caroline Brown
7/7
5/5
2/2
4/4
Aedhmar Hynes
7/7
5/5
2/2
4/4
1
Sir Douglas Flint attends the Audit and Risk Committee meetings as an observer.
Share
Buyback
In December 2023, the Board approved the launch of a
share buyback programme.
Read more on
pages 35 and 84
Audit
Tender
Following a formal audit tender process, the Board agreed
to recommend the re-appointment of KPMG as the Group’s
auditors, subject to shareholder approval at the 2024 AGM.
Read more on
page 134
Inclusion and
Diversity
Continued progress on the Group’s Inclusion and Diversity
Programme (“IDP”) with the majority of priority actions
(from the IDP Masterplan) for the first twelve months being
completed on time or ahead of schedule.
Read more on
page 43
Appointment
of Anita Kidgell
In January 2023, the Board approved the appointment of a
new Non-executive Director, Anita Kidgell.
Read more on
page 104
Governance highlights 2023
86
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
STRATEGIC REPORT
BUSINESS OVERVIEW
OUR FINANCIALS
GOVERNANCE AT A GLANCE
.
Board skills matrix
Skills focus
Individual
Strategic
leadership
Shareholder
engagement
Large uk plc
experience
Shareholder value
delivery
Experience of
innovation
Audit & portfolio
valuation
Physical science
expertise
Life science
expertise
Chair experience/
capability
Strategy definition
Comms, branding,
IR
Access to global
networks
International
experience
VC
experience
Sir Douglas Flint CBE
Chair/Nomination chair
Aedhmar Hynes
Senior Independent
Director and
Designated Non-
executive Director
Dr Caroline Brown
Non-executive
Director/Audit and
Risk chair
Heejae Chae
Non-executive
Director/
Remuneration chair
Dr Elaine Sullivan
Non-executive Director
Anita Kidgell
Non-executive Director
Compliance with the UK Corporate
Governance Code 2018
The table below shows the principles set out in the Code
and where key content can be found.
C
BOARD OF DIRECTORS
.
Sir Douglas Flint CBE
Non-executive Chair
Effective date of current letter of appointment
: Appointed
as a Non-executive Director from 17 September 2018 and as
Non-executive Chair from 1 November 2018
Independent
: n/a
1
Tenure
: 5 years (renewed in September 2021)
Term of office
: 3 years
2
, 3 months’ notice
Re-election to Board
: Annually at AGM
Skills and experience
Sir Douglas has extensive experience of public company board
leadership, which helps to focus Board discussion and challenge
on the design and delivery of our strategy. His collaborative
approach helps to facilitate open and constructive boardroom
discussion. Previously, Sir Douglas served as Group Chairman of
HSBC Holdings plc from 2010 to 2017. For 15 years prior to this he
was HSBC’s group finance director, joining from KPMG where he
was a partner. Between 2005 and 2011, Sir Douglas served as a
non-executive director on the board of bp plc, latterly chairing
its audit committee.
Key external appointments
In other current roles, Sir Douglas is Chairman of abrdn plc,
Chairman of the Royal Marsden hospital and charity and a
member of a number of advisory boards and trade associations,
through which he keeps abreast of industry, regulatory and
international affairs of relevance to his public company
responsibilities. In 2022, Sir Douglas was appointed as chair of the
UK Government’s Digitalisation Taskforce.
Greg Smith
Chief Executive Officer
Effective date of current service agreement
: 6 October 2021
Independent
: No
Tenure
: 12 years as an Executive Director,
2 years as Chief Executive Officer
Term of office
: Permanent, 6 months’ notice
Re-election to Board
: Annually at AGM
Skills and experience
Greg gained significant knowledge of the Group and the sector in
which it operates through his decade’s tenure as Chief Financial
Officer of the Group, during which he contributed broadly and
successfully to the Group’s expansion geographically and in
scale. He has deep experience of capital and resource allocation
and investment appraisal and this experience, together with his
financial expertise, plays a fundamental role in driving the Group’s
strategy, purpose and vision.
His strong communication skills have been critical to maintaining
and optimising the Group’s relationship with its key stakeholders.
Prior to joining the Group, Greg held positions at both Tarchon
Capital Management and KPMG. Greg is a Fellow of the ICAEW and
holds a degree in Mathematics.
Key external appointments
Greg is on a number of advisory bodies seeking to make the
UK’s capital markets more accessible to smaller companies, in
terms of both public listing and scale-up capital, particularly for
those companies whose business is based on innovative science
and technology.
KEY
Audit and Risk
Committee
Nomination
Committee
Remuneration
Committeeterms of bothon
BOARD OF DIRECTORS
.
Aedhmar Hynes
Senior Independent Director and Designated
Non-executive Director for employee engagement
Effective date of current letter of appointment
: 1 August 2019
Independent
: Yes
Tenure
: 4 years (renewed in August 2022)
Term of office
: 3 years
1
, 3 months’ notice
Re-election to Board
: Annually at AGM
Skills and experience
Aedhmar brings valuable experience to the Board in relation to
technology disruption, digital transformation and marketing and
strategic communications. Aedhmar has many years’ experience
in communications and is the former CEO of Text100, a digital
communications agency with 22 offices and over 600 consulting
staff across Europe, Asia and North America.
Aedhmar is also the Senior Independent Director and the Group’s
Designated Non-executive Director for employee engagement on
the Board.
Key external appointments
Aedhmar is trustee of Connecticut Public Broadcasting, The
Page Society, Advisory Council member of the MIT Media Lab,
Board Director of Technoserve and Fluidra S.A, member of the US
Foundation Board of the National University of Ireland, Galway and
a Henry Crown Fellow at The Aspen Institute.
David Baynes
Chief Financial and Operating Officer
Effective date of current service agreement
: 6 October 2021
Independent
: No
Tenure
: 10 years as an Executive Director,
2 years as Chief Financial and Operating Officer
Term of office
: Permanent, 6 months’ notice
Re-election to Board
: Annually at AGM
Skills and experience
David’s financial background and expertise, together with his
experience gained during his tenure as the Chief Operating Officer
of the Group, provide the experience required to drive the Group’s
achievement of its financial goals and operating targets. Dat
E(Chief Financial , 1 TfT1 1 Tf(: 6 Octob(2.
Designated Non-executive Director for employee engagement on
the Board.
C
C
BOARD OF DIRECTORS
.
Dr Caroline Brown
Non-executive Director
Effective date of current letter of appointment
: 1 July 2019
Independent
: Yes
Tenure
: 4 years (renewed in June 2022)
Term of office
: 3 years
1
, 3 months’ notice
Re-election to Board
: Annually at AGM
Skills and experience
Caroline has a wealth of experience covering accounting and
audit, banking and investments, as well as science and technology,
all of which are highly relevant for the Board. She has over 20 years’
plc board experience and held previous positions in corporate
finance at BAML (New York), UBS and HSBC. Caroline is a Fellow of
the Chartered Institute of Management Accountants.
Key external appointments
Caroline is a Non-executive Director of CAB Payment Holdings
plc, Luceco plc and Ceres Power Holdings plc. She is also a
Non-executive external member of the global partnership council
of Clifford Chance LLP.
Heejae Chae
Non-executive Director
Effective date of current letter of appointment
: 3 May 2018
Independent
: Yes
Tenure
: 5 years (renewed in May 2021)
Term of office
: 3 years
1
, 3 months’ notice
Re-election to Board
: Annually at AGM
Skills and experience
Heejae is an experienced public company director, bringing both
knowledge of finance and industry, having spent the early part of
his career in finance at The Blackstone Group and Credit Suisse
First Boston before moving into industry. Heejae’s former positions
include CEO of Scapa Group plc, Group Chief Executive of Volex
Group plc and Group General Manager for Amphenol Corporation.
Key external appointments
Heejae is Executive Chairman of Sysgroup plc.
KEY
Audit and Risk
Committee
Nomination
Committee
Remuneration
Committee
C
Chair
1
Subject to renewal
for subsequent
three-year terms
as set out on
page 100.
90
IP GROUP PLC ANNUAL REPORT 2023
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR GOVERNANCE
BOARD OF DIRECTORS
.
Dr Elaine Sullivan
Non-executive Director
Effective date of current letter of appointment
: 30 July 2015
Independent
: Yes
Tenure
: 8 years (renewed in July 2021)
Term of office
: 3 years
1
, 3 months’ notice
Re-election to Board
: Annually at AGM
Skills and experience
Elaine is a senior pharmaceutical and biotech industry executive
with a successful track record in science, investment, business
development and start-ups. She has extensive global leadership
experience including membership of the top senior global R&D
management teams at Eli Lilly (US) and AstraZeneca (UK) and
is experienced in partnerships with venture, equity and strategic
collaborations.
A former winner of the Ernst and Young Entrepreneur of the
Year (Ireland), Elaine has delivered over 250 collaborations
and transactions including spinouts, joint ventures, strategic
partnerships and acquisitions and brings experience in executing
deals worldwide including US, Europe and China. Former positions
include Co-Founder and CEO of Carrick Therapeutics.
Key external appointments
Elaine is on the supervisory Board of Evotec AG and is a
Non-executive Director of Hvivo plc and Nykode Therapeutics ASA.
Anita Kidgell
Non-executive Director
Effective date of current letter of appointment
: 18 January 2023
Independent
: Yes
Tenure
: 1 year
Term of office
: 3 years
1
, 3 months’ notice
Re-election to Board
: Annually at AGM
Skills and experience
Anita has over 25 years of pharmaceutical experience spanning
multiple disciplines. She is currently Head of Corporate Strategy at
GSK with over ten years of experience of leading strategic initiatives
in numerous areas including China, ESG, geopolitics as well as
integrations and demergers. Between 2004 and 2007 she was
the Global Head of Investor Relations at GSK and prior to this held
senior positions in Corporate Communications, at GlaxoWellcome
and at the Brunswick Group.
Anita has a First Class Honours degree in Applied Biology and has
more than ten years’ experience in pharmaceutical Discovery
Research and Clinical Development.
Key external appointments
Anita is Head of Corporate Strategy at GSK.
KEY
: 1
Independent
: Yes
The Board
Audit and Risk
Committee
Pages 129 to 136
Investment Committees
Page 97
Chair
Investment Group
Page 97
Nomination
Committee
Pages 102 to 110
ESG Committee
Page 47
Chief Executive Officer
Chief Financial and
Operating Officer
Remuneration
Committee
Pages 111 to 128
Ethics Committee
Page 47
Senior Independent Director
Operations Group
Page 97
Disclosure
Committee
Page 97
Company Secretary
Non-executive Directors
Executive Committee
Page 97
CORPORATE GOVERNANCE FRAMEWORK
.
Compliance with
the UK Corporate
Governance Code 2018
(the “Code”)
The Board is committed to
meeting the high standard
of corporate governance set
out within the Code (available
at www.frc.org.uk/directors/
corporate-governance-and-
stewardship/uk-corporate-
governance-code) and to
demonstrating compliance
with best practice as it
develops.
Further explanation as to how
the main principles set out in
the Code have been applied
by the Group is set out in
this section, as well as in the
s172 statement, the Directors’
Remuneration Report, the Audit
and Risk Committee Report, the
Nomination Committee Report
and the Strategic Report. The
Group confirms it applied the
main principles and complied
with all the provisions of the
Code throughout the year.
Read
Board biographies
on pages 88 to 91
Read
Board activities
on page 96
Read
roles and responsibilities
of the Board
on pages 94 to 95
92
IP GROUP PLC ANNUAL REPORT 2023
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR GOVERNANCE
Sir Douglas Flint
Chair
CHAIR’S INTRODUCTION
.
During 2023, the Group
maintained its focus
on meeting the highest
standards of corporate
governance, ensuring
that the interests of
stakeholders were fully
integrated into the
Board’s decision-making
processes.”
Corporate Governance
Effective corporate governance is integral to the Board’s
oversight of the design and execution of the Group’s
strategy. The Board confirms that it has continued to meet
the requirements of the UK Corporate Governance Code
2018 (the “Code”). The Board recognises its accountability
to the Company’s shareholders for good governance, and
this report, together with the reports of the Remuneration,
Nomination, and Audit and Risk Committees of the Board,
describe the Group’s approach to meeting the highest
standards of corporate governance and highlight the key
developments that have taken place in this area during
the year.
Board changes
As noted in our 2022 Annual Report and Accounts, Anita
Kidgell was appointed as Non-executive Director in January
2023, bringing to the Board over 25 years of pharmaceutical
experience spanning multiple disciplines. Anita’s
appointment makes IP Group one of only a minority of FTSE
250 companies with an even gender split on its Board.
Audit tender process
As detailed in the report of the Audit and Risk Committee
(“ARC”) set out on pages 129 to 136, the ARC undertook a
formal audit tender process in 2023 during which it invited
firms to tender for the Group’s 2024 audit. The Board was
involved in setting the firm evaluation criteria and the
invitation to tender and each Board member attended
the firm presentation day. Full details of the audit tender
process including preparation, execution and decision
making can be found on page 134. Based on their ability to
satisfy the audit tender selection criteria, the Board agreed
to re-appoint KPMG LLP as the Group’s external auditor,
and recommend the re-appointment to shareholders for
approval at the 2024 AGM. Planning for the transition to a
new audit partner at KPMG has commenced and we look
forward to working with KPMG and benefiting from their
extensive experience in the investment space.
ESG
The Group upholds strong business values that continue
to guide the Group in implementing its strategy and
employees are encouraged to demonstrate these
values throughout their work. Two committees oversee
implementation of and monitor compliance with the
Group’s obligations to conduct business responsibly,
reporting periodically to the Board; the ESG Committee
has responsibility for the oversight and implementation
of the Group’s ESG and Sustainability policy, and the
Ethics Committee provides guidance to the Group on
ethical issues and monitors compliance with the Group’s
Ethical Investment Framework. Both committees work
together to ensure that the Group’s values and culture
are also embedded in the Group’s capital allocation
framework. Further details on the ESG Committee and
Ethics Committee, and detail on how the Group mitigates
climate-related risk, are included on pages 46 to 59.
Consideration of stakeholders
Effective corporate governance is critical to building
and maintaining strong relationships with all the Group’s
stakeholders in order to earn their continuing support
for the Group’s purpose, vision and strategy. The Group
continues to foster a culture of innovation, mutual
support, diversity and inclusion. The Group encourages its
employees to engage in healthy debate and challenge
so that it can consider a wide range of opinions when
making decisions. For more information on the culture that
the Group seeks to foster and the policy framework and
guidelines developed to deliver that culture, see page 76.
The Group recognises that maintaining and developing
two-way stakeholder engagement plays an important
role in building the stakeholder confidence necessary for
the Group to deliver its strategy and promote the long-
term success of the Company. For further details on how
the Directors have complied with their duties under s172 of
the Companies Act 2006 (the “CA 2006”), including in their
decision making, please refer to pages 74 to 85.
I look forward to welcoming shareholders to our 2024
AGM on 12 June 2024, which will be held at the Company’s
registered office at 3 Pancras Square, King’s Cross, London,
N1C 4AG. In addition, and to facilitate engagement with
shareholders throughout the year, the Group maintains
a dedicated company secretary email address
(cosec@ipgroupplc.com) through which shareholders can
submit questions at any time.
Sir Douglas Flint
Chair
12 March 2024
STRATEGIC REPORT
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IP GROUP PLC ANNUAL REPORT 2023
The Board recognises that its role in setting,
monitoring and enforcing the standards of
behaviour it expects from its people (its culture)
is of key importance. The Group’s culture is
one of the key strengths of its business and
plays a strong role in attracting, retaining and
incentivising the most talented people. Further
information on the Group’s culture and its values
is on pages 19 to 20.
In supporting the Group’s business and its
portfolio companies, the Board acknowledges the
key roles the Group’s operational functions play in
the fields of capital raising, executive search, legal
advice and support, intellectual property strategy
and due diligence support. These sit alongside
and support the hands-on approach and high
level of engagement provided by the experienced,
sector-specific investment partnership team
members. The Directors believe that the Group’s
approach to supporting its portfolio companies
in this way is unique and serves not only to build
sustainable businesses with longevity, but also
provides attractive returns for stakeholders by
creating value over the longer term.
The Directors are responsible for promoting
the long-term success of the Company and
thereby the Group, taking into account the
interests of shareholders and all other relevant
stakeholders in carrying out this responsibility.
The responsibility of the Directors is collective
and recognises their respective roles as Executive
Directors and Non-executive Directors. The
Non-executive Directors are responsible for
constructively challenging and contributing
to proposals on strategy as part of the Board
approval process, scrutinising the performance of
executive management against targets set and
determining appropriate levels of remuneration.
The Non-executive Directors must also satisfy
themselves of the integrity of financial information,
and that financial controls and systems of risk
management are robust and comprehensive.
The Executive Directors are responsible for making
and implementing day-to-day decisions (other
than matters reserved for the Board) within the
risk appetite and tolerance and operating and
financial constraints set by the Board.
The Board reviews the purpose, vision and
strategy of the Group and any issues arising
from it on a regular basis, and exercises control
over the performance of the Group by agreeing
budgetary and other targets and monitoring
performance against those targets.
CORPORATE GOVERNANCE STATEMENT
.
•
ensuring that the necessary financial and
human resources are in place to meet
those aims and to ensure the Group is a
home for exceptional talent
•
monitoring performance against key
financial and non-financial performance
indicators
•
embedding a robust performance
management framework and aligning
reward with the long-term interests of
stakeholders
•
planning for Board and senior
management succession
•
overseeing the system of risk
management
•
setting and monitoring adherence to
mandated values and standards in
governance matters
•
monitoring environmental, social and
governance policies and performance
•
helping to shape and embed the Group’s
purpose, vision, strategy, values and culture
The Board
Role and responsibilities of the Board
The Board is responsible to the Company’s
shareholders for the overall management of
the Group in a way that promotes the Group’s
long-term sustainable success. The Board defines,
challenges and interrogates the Group’s strategic
aims and direction, and provides entrepreneurial
leadership within a framework of controls
for assessing and managing risk. The Board
recognises that, in discharging its responsibilities,
it is necessary to support the maintenance
and evolution of a policy and decision-making
framework in which the Group’s strategic aims are
implemented through the following:
94
IP GROUP PLC ANNUAL REPORT 2023
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR GOVERNANCE
CORPORATE GOVERNANCE STATEMENT
.
Division of responsibilities
Chair
•
Leadership and conduct of the Board, encouraging open and constructive discussion and challenge
•
Promotes high standards of governance and Board effectiveness, including incorporation of ESG factors and the views and interests of
stakeholders into Board decision making
•
Ensures active engagement and effective communication with shareholders
•
Sets the Board’s agenda and is responsible for ensuring the committees carry out their duties
•
Ensures that Board members receive timely, accurate and clear information about the Group’s activities
•
Ensures that Board members receive appropriate induction and ongoing training on the Group’s activities and their own responsibilities
•
Leads performance assessment of Board members
Chief Executive Officer
(“CEO”)
•
Leads on development and delivery of strategy
•
Leads the management of the Group alongside the Executive Committee and establishes financial and operational targets
•
Leads the management of the Group in incorporating ESG factors and is Chair of the ESG Committee
•
Member and “Champion” of the Group’s Inclusion and Diversity Project, ensuring diversity and inclusion factors are incorporated into
decision-making analyses and employee engagement development
•
Responsible for building a team that is able to effectively identify, back and grow impactful early-stage innovation-led companies into a
diversified portfolio of robust, transformative businesses, and for embedding a culture that ensures the team is highly engaged and motivated
to deliver
•
Leads delivery of the Group’s operating plans and budgets and the recommendations in respect of, and the subsequent execution of,
Board decisions
•
Leads succession planning for the senior executive positions alongside the Group People Director and reports to the Nomination Committee
thereon
•
Represents the Group to external stakeholders and engages with them on the Group’s purpose and strategy
Chief Financial and
Operating Officer
(“CFOO”)
•
Oversight and executive responsibility for the Group’s financial and operational systems, processes and matters
•
Maintains an efficient and effective controls environment, including protecting the Group against cyber risks
•
Responsible for executing day-to-day decisions (other than matters reserved for the Board) within the risk appetite and tolerance and
operating and financial constraints set by the Board
•
Monitors operating and financial performance against agreed budgets and targets and reports to the Board on the same
•
Ensures the Group’s financial structure and capacity supports the Group’s objectives
Senior Independent
Director
•
Available to shareholders to discuss their views and concerns when required
•
Intermediary between the Board and the Chair
•
Leads the Board in deliberations where the Chair is conflicted
•
Leads assessment of the Chair’s performance and on any Chair succession matters
Non-executive
Directors (as part of
the Board)
•
Approve Group strategy and operating plans
•
Approve business and financing models
•
Discuss and constructively challenge executive recommendations on matters brought to the Board
•
Monitor and performance manage delivery of strategy and operating plans
•
Provide independent views, support and specialist knowledge
•
Serve on committees of the Board
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IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR GOVERNANCE
CORPORATE GOVERNANCE STATEMENT
.
Board activities during 2023
Principal decisions
•
Recommended the Group’s final dividend for FY 2022 and approved an
interim dividend for 2023
•
Approved the launch of a share buyback programme
•
Approved amendments to the Group’s delegated investment and
realisation authorities (the “Delegated Authorities”)
•
Approved significant portfolio company investments and divestments
required in line with the Delegated Authorities
•
Approved revisions to the Group’s Capital Allocation Policy
Board and Committee composition and conduct
•
Reviewed succession planning for the Executive Directors, Executive
Committee members and Non-executive Board positions
•
Approved the appointment of Anita Kidgell (January 2023)
Strategy and risk
•
Continued to support and engage with the Executive Directors on the
implementation of the Group’s strategic aims
•
Reviewed the Group’s performance within its competitive landscape
•
Regularly discussed and debated the form and implementation of the
Group’s Capital Allocation Policy
•
Debated in detail the Group’s principal risks and the Board’s approach to
the setting of its risk appetite
•
Considered the longer-term emerging risks that may impact the Group
and its business
Corporate Governance
•
Reviewed policies, processes and procedures to ensure continued
compliance with the Code
•
Reviewed, and updated where necessary, the terms of reference for
its committees
•
Received regular updates from the Group’s core business units and
operational functions
•
Implemented the recommendations from the 2022 external
Board evaluation
Stakeholders
•
Considered the Company’s ability to return cash to shareholders,
recommending the final dividend for FY 2022 and approved the interim
dividend for 2023
•
Launched a share buyback programme
•
Received presentations from the Company’s financial advisors on the
current market climate and shareholder activism
•
Discussed the Company’s share price performance, in particular the
discount to NAV and actions to be taken to narrow the gap
•
Received quarterly people updates from the Group People Director
including on progress to embed the Group’s culture and values, improve
inclusion and diversity, expand learning and development resources and
the results and actions from the regular staff surveys
•
Received updates at each Board meeting from the Managing Partners
of the Life Sciences and Technology Partnerships, which included
detail on the short to medium-term strategy for each partnership and
performance of their focus portfolio companies
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IP GROUP PLC ANNUAL REPORT 2023
OUR FINANCIALS
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STRATEGIC REPORT
OUR GOVERNANCE
CORPORATE GOVERNANCE STATEMENT
.
Schedule of matters
Except for a formal schedule of matters, which are reserved for decision
and approval by the Board, the Board has delegated the day-to-day
management of the Group’s operations to the Executive Directors, supported
closely by the Executive Committee. The schedule of matters reserved
for Board decision and approval are those significant to the Group as a
whole due to their strategic, financial and/or reputational implications.
The schedule can be found within the Corporate Governance section of the
Group’s website at www.ipgroupplc.com. This schedule was reviewed in 2023
and all recommended changes were accepted by the Board. The schedule
will be reviewed again in 2024.
Committees and oversight
In addition to the Executive Directors, the Board delegates specific
responsibilities to certain committees that assist the Board in carrying out
its functions and ensure independent oversight of internal control and
risk management.
The three principal committees of the Board (Audit and Risk, Nomination
and Remuneration) play an essential role in supporting the Board in fulfilling
its responsibilities and ensuring that the highest standards of corporate
governance are maintained throughout the Group. Each Committee has
its own terms of reference, which set out the specific matters for which
delegated authority has been given by the Board and which can be
found within the Corporate Governance section of the Group’s website at
www.ipgroupplc.com.
Separate reports on the role, composition, responsibilities and operation of
each of the Nomination, Remuneration and Audit and Risk Committees are
set out on pages 102 to 110, pages 111 to 128 and pages 129 to 136, respectively.
The Group’s Corporate Governance Framework set out on page 92 illustrates
the structure of the Board and its principial committees. The Group’s
Executive Committee comprises the Group’s two Executive Directors,
the Managing Partners of Technology and Life Sciences, the Managing
Partner of Parkwalk Advisors, the Group General Counsel, the Director of
Communications, the Group People Director and the Finance Director.
In addition, both the Managing Director, Australia and a Founding Partner
of Kiko Ventures attend the Executive Committee as observers. Within
the agreed financial limits set by the Board, the Executive Committee
has primary authority for the day-to-day management of the Group’s
operations, save for those matters that are expressly reserved for the Board
or its committees. In 2023, the Executive Committee introduced two standing
sub-groups: the Investment Group and Operations Group.
The Investment Group is primarily responsible for all matters relating to
the investment business conducted by the Group. The Operations Group is
primarily responsible for all matters relating to the operation, sustainability
and longevity of the Group, alongside the day-to-day running of the
business. Both groups report regularly up to the Executive Committee.
The Disclosure Committee assists the Group in making timely and accurate
disclosure of all information that is required to be disclosed in order for
the Group to meet its legal and regulatory obligations, including under the
Market Abuse Regulation, and ensures that relevant training is provided
to the Board and to the wider employee base. This Committee takes
responsibility for the assessment and control of inside information, both in
respect of the Group and its quoted portfolio companies. The composition of
the Disclosure Committee comprises the CEO, the CFOO, the Group General
Counsel, the UK General Counsel, the Director of Communications and a
minimum of one Non-executive Director.
The Group has Investment Committees for its Technology and Life Sciences
Partnerships and in respect its Australian investment decisions. Decisions
relating to investments and divestments in portfolio companies (other
than those reserved for the Board) are delegated to these Investment
Committees within defined parameters and with specific quorum
requirements. Parkwalk Advisors operates a separate Investment Committee
and under separate investment authorities. Additional executive oversight
of key operating subsidiaries is provided by the CEO sitting on the Parkwalk
Advisors board and both the CEO and CFOO sitting on the board of the
Group’s principal Australian subsidiary.
Board size and composition
As at 31 December 2023, there were eight Directors on the Board: the Chair,
two Executive Directors and five Non-executive Directors; four men and four
women. The biographies of all Directors are provided on pages 88 to 91.
Elaine Sullivan, who has served on the Board for nearly nine years, will, as
a consequence not seek re-election as a director at the Annual General
Meeting (“AGM”) on 12 June 2024. She has made a significant contribution to
Board discussions and decisions and will be sorely missed.
In accordance with the provisions of the Code, all the Directors (other than
Elaine Sullivan) will be offering themselves for re-election at the 2024 AGM.
The Board unanimously recommends to shareholders the re-appointment
of the Directors offering themselves for re-election. The annual Board
evaluation and the annual one-to-one performance appraisal process
confirmed that all Directors of the Company are effective, commit the
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required time demanded of them, and continue to display the appropriate
level of commitment in their respective roles.
Diversity
The disclosure required by DTR 7.2.8A relating to the Group’s diversity policy
is presented in the Nomination Committee Report on page 105 and in the
Meaningful Impact section on page 44.
Company Secretary
All Directors have access to the impartial advice and services of the
Company Secretary. The Company Secretary acts as a key point of contact
for the Chair and has an important role in ensuring both the quality of
information that flows between the Executive and Non-executive Directors
and that any agreed actions are completed. The Company Secretary
supports the Chair and the Nomination Committee on performance
evaluation, the induction of new directors and the continuing development
of current directors to enable them to comply with their duties and effectively
carry out their roles.
Non-executive Directors
The Non-executive Directors provide a wide and diverse range of skills
and experience to the Group as detailed on page 87. By virtue of this,
the Non-executive Directors collectively are well placed to constructively
challenge and scrutinise the performance of executive management at both
Board and Committee meetings.
In order to protect their independence, the Group does not permit
Non-executive Directors to invest personally in any of the Group’s portfolio
companies. All of the Non-executive Directors presenting themselves for
re-election at the AGM in 2024 comply with this policy.
Non-executive Directors are required to obtain the formal written approval
of the Chair before taking on any further directorial appointments or any
engagement with an organisation that competes with the Group (whether
directly or indirectly). The Chair requires the approval of the Board before
adding to his own commitments. In all cases, Non-executive Directors must
ensure that the aggregate time committed to external appointments does
not impinge upon the time they have committed to the Group. The Executive
Directors are restricted to only one external (outside the Group) board
appointment for which the Chair’s approval is required. Details of key external
appointments of the Directors can be found on pages 88 to 91.
Board meetings, provision of information and decisions
The Board and its Committees meet on a scheduled basis throughout the
year as well as on an ad hoc basis, as required in response to the needs of
the Group’s business.
The Board had seven scheduled Board meetings and a two-day strategy
session in 2023; six Board meetings and a two-day strategy session are
scheduled for 2024. The requirement for additional scheduled meetings is
kept under review by the Chair and the Company Secretary.
Meetings between the Chair and the Non-executive Directors, including
informal dinners both with and without the presence of the CEO and other
executive team members, are also held throughout the year.
The Chair, CEO and members of the Executive Committee work together
to ensure that the Directors receive relevant information to enable them
to discharge their duties and that such information is accurate, timely and
clear. This information includes monthly management accounts containing
an analysis of performance against budgets and other forecasts, as well as
written reports from each of the Life Sciences and Technology Partnerships,
the Australasian and US businesses, the capital markets division, the Group’s
IR, Communications and ESG teams and Parkwalk Advisors. Additional
information is provided as appropriate or if requested. At each Board
meeting, the Board receives information, verbal reports and presentations
from the CEO and the CFOO, the Managing Partners of the Life Sciences and
Technology Partnerships and, by invitation, other members of the Executive
Committee and senior management. This includes bi-annual presentations
from the US and Australasian business units and presentations from Parkwalk
Advisors, the Group People Director, the Group Finance Director, Director of
Communications and the Head of ESG. These presentations ensure that
all Directors are aware of, and are in a position to monitor effectively, the
overall performance of the Group, the development and implementation of
its strategy and its management of risk. In addition, the Board receives in-
depth presentations throughout the year from selected portfolio companies,
including through engaging in site visits.
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Directors’ conflicts of interest
Each Director has a statutory duty under the CA 2006 to avoid a situation
in which they have, or could have, a direct or indirect interest that conflicts
or may potentially conflict with the interests of the Company. This duty is
in addition to the continuing duty that a director owes to the Company to
disclose to the Board any transaction or arrangement under consideration
by the Company in which they or a connected party are interested. The
Company’s Articles of Association permit the Board to authorise conflicts or
potential conflicts of interest.
The Company operates a Conflicts of Interest Policy which contains
procedures for disclosing and managing conflicts of interest within the
Group, at the Board, Executive Committee and Investment Committee levels,
with the Company Secretary responsible for the maintenance of a register
of Directors’ conflicts of interest. The Board has established procedures
for managing and, where appropriate, authorising any such conflicts or
potential conflicts of interest. Directors’ conflicts are a recurring agenda item
at all Board meetings, and this gives Directors the opportunity to raise at the
beginning of every Board meeting any actual or potential conflict of interests
that they may have on the matters to be discussed. The Board may revoke
or vary any conflicts authorisation at any time. The Board believes that
the procedures established to deal with conflicts of interest are operating
effectively.
Board support
Directors are able, if required, to take independent professional advice
at the Company’s expense. In accordance with the Company’s Articles
of Association, Directors have been granted an indemnity issued by the
Company to the extent permitted by law in respect of liabilities incurred
as a result of their office. The indemnity would not provide coverage where
a Director is proved to have acted fraudulently or dishonestly. A copy of
the indemnity is available for inspection as required by the CA 2006. The
Company has also arranged appropriate insurance cover in respect of legal
action against its Directors and Officers.
Induction, awareness and ongoing development
As detailed on page 105 of the Nomination Committee Report, a
comprehensive induction process is in place for new Directors. The
programme is tailored to the needs of the individual Director and agreed
with them in advance and monitored throughout the process to ensure that
they can gain a full understanding of the Group and its businesses.
The content of the induction process is regularly re-evaluated by the Board,
supported by the Group People Director, when it is considering a new Director
appointment to ensure it remains tailored to the needs of the business
of the Group and the specific profile of any incoming Director. Following
the completion of the induction process, the Company Secretary will seek
feedback from the relevant incoming Director to assist with this refreshing of
induction processes.
On an annual basis, the Company Secretary arranges for an external
governance specialist to attend one Board meeting to present on the key
Corporate Governance changes over the previous twelve months and to
signpost expected prospective developments. In addition, the Board is kept
updated by the in-house legal team on key legislative and governance
changes and sentiment affecting the Group and how the Group is ensuring
its compliance and obligations under all relevant legislation. The Board also
receives presentations on capital market developments in general and
specific to the Company on an ad hoc basis; during 2023 presentations were
received from Numis, Bank of America Merrill Lynch and Rothschild & Co.
In order to increase their knowledge of the Group’s portfolio companies,
the Chair and Non-executive Directors are encouraged to attend portfolio
company presentations and events, both online and at the Group’s head
office to complement meetings arranged at the portfolio companies’
premises. In July 2023, the Board held its meeting in Bristol, at the offices of
Ultraleap where, in addition to its Board and Committee meetings, it enjoyed
a site visit and first-hand demonstration of the Ultraleap technology, and
met with members of Ultraleap’s senior management. The CEO of Intelligent
Ultrasound then presented at the Board dinner after the meeting.
As a part of their ongoing development, each Director receives feedback
on their performance following the Board’s performance evaluation each
year, following which, the Chair will review and agree with each Director their
training and development needs for the year ahead. Access to training and
development opportunities, including those relevant to the Non-executive
Directors’ membership on the Board’s committees, is facilitated through the
Company Secretary. Further details relating to the assessment of the Board’s
performance are set out on pages 107 to 109.
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Director rotation and independence
The Nomination Committee supported by the Company Secretary has
responsibility for succession planning for each of the Non-executive Directors
(including the Chair). Each Non-executive Director is appointed for an initial
three-year term pursuant to their respective letters of appointment. This
initial term is then subject to renewal for subsequent three-year term(s) and,
other than the Chair, to a maximum of three consecutive three-year terms
in order to maintain their independence from a governance perspective,
in accordance with the Code. Provision 19 of the Code applies to the
maximum term for the Chair’s appointment, and the Nomination Committee
is responsible for ensuring compliance with this provision. The Chair was
considered by the Board to be independent on appointment.
Statement of Non-executive Directors’ independence
The Code sets out the circumstances that should be relevant to the Board
in determining whether each Non-executive Director is independent. The
Board considers Non-executive Director independence on an annual basis
as part of each Non-executive Director’s performance evaluation. Having
undertaken this review, and with due regard to Provision 10 of the Code, the
Board concluded that all the Non-executive Directors are considered to be
independent of management and free of any relationship or circumstance
that could materially influence or interfere with, or affect, or appear to affect,
the exercise of their independent judgement.
Internal controls and risk management
The Board recognises the importance of the Financial Reporting Council’s
Guidance on Risk Management, Internal Control and Related Financial and
Business Reporting. The Group’s internal controls (including all material
financial operational and compliance controls), which are Group-wide
and were in place throughout 2023, were reviewed by the Board, with no
significant failings or weaknesses being identified in respect of the year
ended 31 December 2023 and up to the date of approval of the Annual
Report and Accounts. Where the Board has identified areas requiring
improvement, processes have been put in place to ensure that the
necessary action is taken and that progress in such areas is monitored.
Details of the Group’s internal controls and risk management systems are
provided on pages 60 to 73.
The Board is responsible for establishing and monitoring internal control
systems and for reviewing the effectiveness of these systems. The Board
views the effective operation of a rigorous system of internal control as
critical to the success of the Group. However, it recognises that such systems
can provide only reasonable and not absolute assurance against material
misstatement or loss. Details of the effectiveness reviews of the systems of
risk management and internal control are provided on pages 132 to 133.
The key elements of the Group’s internal control system, all of which have
been in place during the financial year and up to the date of approval of the
Annual Report and Accounts, are as follows:
Control environment and procedures
The Group has a clear organisational structure with defined responsibilities
and accountabilities. Its values surrounding expectation of quality, integrity
and ethics are well documented and communicated clearly throughout the
whole organisation. An overview of the Group’s risk management framework
is set out on page 62.
The Group outsources its internal audit function to PwC. Details of the internal
audit activity during 2023, including internal audit reviews, are on pages 133
to 134.
Detailed written policies and procedures have been established covering key
operating and compliance risk areas. These are reviewed and updated at
least annually by the Audit and Risk Committee.
Identification and evaluation of principal risks and
uncertainties
The operations of the Group and the implementation of its objectives
and strategy are subject to a number of key risks and uncertainties. The
Board actively identifies and evaluates the risks inherent in the business,
formally reviews these on at least an annual basis (or as market or
business developments require) and ensures that appropriate controls
and procedures are in place to monitor and, where possible, mitigate these
risks. Specifically, all decisions relating to strategic partnerships and other
collaborations, strategic acquisitions and disposals and significant long-
term debt facilities entered into by the Group are reserved for the Board’s
review and approval.
The Board regularly reviews significant fair value movements in individual
portfolio companies, concentrating on the Group’s investments in its priority
companies and the top 20 most valuable portfolio company holdings. For
details on the activities of the Group’s Valuation Committee see page 131.
As described on page 60, the Group maintains risk registers setting out
mitigations in place in each case. The key risks and uncertainties faced by
the Group, as well as the relevant mitigations, are set out on pages 64 to 72.
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Information and financial reporting systems
The Group evaluates and manages significant risks associated with the
process of preparing consolidated accounts by having in place systems
and controls that ensure adequate accounting records are maintained and
transactions are recorded accurately and fairly to permit the preparation of
financial statements in accordance with IFRS. The Board approves the annual
operating budgets and receives details of actual performance measured
against the budget at each meeting.
Further details in relation to the Group’s approach to the management of its
business risks, and the function and ongoing roles and responsibilities of its
internal risk council are set out on pages 60 to 73 and on pages 132 to 133.
Engaging with key stakeholders
Engaging with stakeholders is an integral part of the Group’s governance
and decision-making procedures and is critical to ensuring the future
success of the business. During 2023, the Board and the Executive Committee
completed its annual review of the mapping of its key stakeholders, ensuring
all its key stakeholders were captured. This process will be repeated again
in 2024.
Further details of the Group’s engagement with its key stakeholders and
issues that matter to such stakeholders are set out on pages 74 to 85.
Share capital and related matters
Details of the structure of the Company’s share capital (including shares
held in treasury) and the rights attaching to the Company’s shares are set
out in note 1 to the consolidated financial statements. Details of the Directors’
authorities in relation to the issuing or buying back by the Company of its
shares are set out on pages 137 to 138 of the Directors’ Report.
Articles of Association
The Company’s Articles of Association may be amended by a special
resolution of the shareholders and were last amended in 2021.
Substantial shareholders
Details of persons who hold a significant direct or indirect holding of
securities in the Company are set out on page 138 of the Directors’ Report.
Annual General Meeting
Notice of the Annual General Meeting, which will be held on 12 June 2024 at
IP Group plc, 3 Pancras Square, Kings Cross, London, N1C 4AG, is included with
this Annual Report, containing details of the resolutions to be proposed at the
meeting and explanatory notes on those resolutions. To ensure compliance
with the Code, the Board proposes separate resolutions for each issue
and proxy forms allow shareholders to vote for or against, or to withhold
their vote on each resolution. The results of all proxy voting are published
on the Group’s website after the meeting and declared at the meeting
itself. Shareholders who attend the Annual General Meeting will have the
opportunity to ask questions and all Directors are expected to be available to
take questions.
The Group’s website (www.ipgroupplc.com) is the primary source of
information on the Group. The website includes an overview of the activities
of the Group; details of its portfolio companies, and its key university
relationships and other strategic collaborations; and details of all recent
Group and portfolio company announcements.
On behalf of the Board
Sir Douglas Flint
Chair
12 March 2024
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Sir Douglas Flint
Chair
NOMINATION COMMITTEE REPORT
.
Principal responsibilities
The key objective of the Nomination
Committee is to ensure that the Board
comprises individuals with the necessary
skills, knowledge, independence and diversity
of thought and experience, including lived
experience, to ensure that the Board is
effective in discharging its duties and is
independent for the purposes of the Code. The
principal responsibilities of the Committee are
as follows:
•
Regularly reviews the size, composition
and skills of the Board and leads the
process and makes recommendations
on any changes considered necessary in
the identification and nomination of new
Directors, the re-appointment of existing
Directors and the appointment of members
to the Board’s committees
•
Ensures that there is a formal, rigorous and
transparent procedure for the appointment
of new Directors to the Board
•
Assesses the roles of the existing Directors
in office to ensure there continues to
be a balanced Board in terms of skills,
knowledge, experience, independence and
diversity
•
Keeps under review the leadership needs of
the Group to enable the Group to compete
effectively in its chosen fields and deliver on
its strategy
•
Advises the Board on succession planning
for Directors and other senior management
appointments, given that the Board as a
whole is responsible for succession
•
Oversees a diverse pipeline for succession
•
Considers the setting of diversity and
inclusion policies, objectives, targets and
strategies, alongside the Group’s HR team
and the Group’s Inclusion and Diversity
Project and monitors the impact and
outcome of any agreed initiatives
•
Oversees the induction of new Directors
and the training requirements of the Board
as a whole
•
Oversees the Group’s controls over
potential and actual conflicts of interests
of the Directors and senior management,
including disclosure, authorisation and
management of such conflicts as may be
appropriate or otherwise required by both
the Group’s Conflict of Interests Policy and
applicable law or regulation
•
Assists the Chair in the annual evaluation of
the Board, ensures an externally facilitated
evaluation at least once every three
years and oversees the implementation
of any actions or feedback arising from
each evaluation
Committee membership
The Nomination Committee currently comprises the
following independent Non-executive Directors whose
backgrounds and experience are summarised on
pages 88 to 91.
•
Sir Douglas Flint (Chair)
•
Aedhmar Hynes
•
Dr Elaine Sullivan
•
Heejae Chae
•
Dr Caroline Brown
•
Anita Kidgell
Report contents
•
Principal responsibilities
•
Key activities in the year
•
Meetings and Terms of Reference
•
Appointments
•
Q&A with Anita Kidgell
•
Diversity and inclusion
•
Succession planning
•
Board effectiveness and performance evaluation
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The appointment for future appointments
to the Board is as follows:
Identify
Search
Mapping exercise
of the Board's
existing skills,
experience,
knowledge and
balance to identify
any gaps.
Nomination
Committee
considers whether
the services of an
external search
consultancy or
public advertising
are required in
addition to the
Group's in-house
capabilities and
a detailed job
specification is
prepared.
Identify
A diverse list of candidates is created
and, following review by the Nomination
Committee, is distilled into a shortlist. All
shortlists will be gender balanced, and
we will always seek to include at least
one candidate from another under-
represented group in the final shortlist.
Interview
Appointment
Interviews with
shortlisted
candidates are
carried out by the
Chair and certain
other directs.
The Nomination
Committee
makes a
recommendation
to the Board and,
if in agreement
with the
recommendation,
the Board
approved the
chosen candidate.
Key activities in the year
The key areas of focus for the Committee
in 2023 included:
Board composition
•
Approved the appointment of Anita
Kidgell as an additional Non-executive
Director. See pages 104 to 105 for
more detail
•
Reviewed the size and diversity of the
Board, including a detailed review of
an updated skills matrix of the current
Board members following Anita Kidgell’s
appointment and its interplay with
the medium-term Non-executive
succession plan
Succession planning
•
Reviewed the medium-term succession
plan for the Non-executive Directors,
including initial plans to mitigate the
co-incidence of the end of the nine
years of tenure of the Chair and three
other Non-executives in 2027/28
•
Undertook a detailed review of succession
planning for all key Executive and
leadership positions across the Group
Governance and I&D
•
Received an update from the Group’s
Inclusion and Diversity Project (“IDP”)
on their progress against the IDP
Masterplan and target setting
•
Reviewed the terms of reference for the
Nomination Committee
Evaluation
•
Oversaw the implementation of the
actions identified during the 2022
externally facilitated evaluation of the
Board and its committees
•
Oversaw the internally facilitated
evaluation of the Board and its
committees in 2023
NOMINATION COMMITTEE
REPORT
.
Meetings and terms of reference
The Nomination Committee meets as and
when required, or as requested by the Board,
and had three scheduled meetings during
2023. The attendance by each member of
the Nomination Committee at the scheduled
meetings during 2023 is set out on page 86.
The terms of reference for the Nomination
Committee were reviewed in March 2024 and it
was concluded that no substantive updates were
required at this time. The Nomination Committee
reviews its terms of reference at least annually
and will propose updates where necessary to
reflect current market practice.
Appointment process
In making future appointments to the Board, the
Nomination Committee will continue to adopt
a formal, rigorous and transparent procedure.
It gives full consideration to the balance,
skills, knowledge, independence and diversity
(including diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths)
of the Board. Where relevant, and particularly in
considering matters of succession, the Committee
also considers the future challenges facing the
business, any emerging trends that may affect
the Group’s long-term success and any specific
technical skills and knowledge that may be
required on the various committees.
In addition, for appointments to the Board,
the Nomination Committee will always assess
any potential conflicts of interest and whether
identified candidates have sufficient time
available to devote to the role and meet what is
expected of them effectively.
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.
NOMINATION COMMITTEE REPORT
.
Anita Kidgell
Non-executive Director
IP Group is at the very forefront of
innovation, investing in ideas today
that are likely to have a significant
impact on the environment, health
and business of the future. I can’t think
of a more rewarding and fascinating
area to be in.”
What made you decide to join
IP Group?
The key factors in making my decision
were the business and the people.
IP Group is at the very forefront of
innovation, investing in ideas today that
are likely to have a significant impact on
the environment, health and business
of the future. I can’t think of a more
rewarding and fascinating area to be
in. Maybe I am biased having spent my
whole career in or around innovation,
but who wouldn’t want to work in such
an environment? I wanted to work with
people who are idea creators and
passionate about growing such ideas. I
also wanted to be part of a Board that
is cohesive, respectful and works as
a team.
What skills and experience do
you bring to the role?
I have worked in the life sciences sector
my whole life and continue to do so
with my current role at GSK, which is a
key sector for IP Group. During this time
I have worked in R&D (both Discovery
Medicine and Clinical Research),
Communications, Investor Relations and
Strategy, so I believe I can bring some
outside-in perspective to the Group in
a variety of very relevant disciplines.
Innovative sectors like life sciences are
fast moving and constantly evolving.
I live and breathe this environment
everyday with my current role, which I
hope will be of significant benefit to the
Board and the Group.
Q
A
Q
A
How has your first year at
IP Group been?
It’s been great! I have really enjoyed
meeting the teams, getting to know
the portfolio companies and working
with the Board who have been very
welcoming. I am continuing to learn;
I am a great believer in continuous
learning and trying to look at things in
a different way or approaching things
from a different angle. In a business like
this you have to constantly innovate and
challenge, because the environment is
constantly moving and often at a fast
speed. So I hope I will continue to learn,
question and challenge well into my
second year and beyond.
How did you find the
induction process?
Of course there was a significant amount
of information given the nature of the
Group but it was delivered in a thoughtful
manner as part of a very well structured
process. Everyone I spoke to was so
passionate about their specific area and
eager to share that passion with me. As I
get to know the Group more and more, I
am always encouraged by the depth of
this passion and the desire of individuals
to really want to make a difference. It is
never easy to invest in the unknown, but
those that do are the real shapers of
the future.
Q
A
Q
A
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.
Induction process
Following the appointment of Anita Kidgell to
the Board in January 2023, Anita completed
a comprehensive induction process during
the first quarter of 2023. The Group’s induction
programme is tailored to the needs of each
Director, agreed with them in advance and
monitored throughout the process to ensure each
new Director gains a good understanding of the
Group, its strategy, its people and its business. The
process for Anita’s induction included:
•
An overview of the Group and its businesses,
structure, functions, strategic aims, risk
management framework and remuneration
policies
•
Meetings with both Executive Directors, the
Company Secretary, members of the Executive
Committee (including the Managing Partners
of Life Sciences and Technology, a Kiko
founding partner and the Managing Director
of IP Group Australia) and the heads of the
Group’s key functions
•
Meetings with both the Group’s auditor and
internal audit function
•
Training on key legal matters relevant to the
Group and its policies
•
Meetings with some of the Group’s priority
portfolio companies and presentations from
their management teams on their businesses
•
Observing a meeting of the Valuation
Committee
•
Sessions as appropriate with the Group’s
advisors, as well as with appropriate
external governance specialists, to ensure
understanding of the responsibilities and
obligations she accepts as a Director of a FTSE
250 company, and of the governance and
legislative framework within which the Board
must operate
Diversity and inclusion
The Board is committed to a culture that attracts
and retains talented people to deliver outstanding
performance and enhance the success of the
Group. Within that culture, the Board’s policy is
to make appointments to the Board based upon
merit measured against objective criteria, whilst
recognising that diversity, in all its many forms,
is key to introducing different perspectives into
Board debate and decision making and creating
optimal balance and composition of the Board.
The Nomination Committee applies the Board’s
diversity strategy and policy in accordance
with its terms of reference, considering diversity
in the widest possible sense in evaluating the
composition of the Board, identifying suitable
candidates for the Board and overseeing
a diverse pipeline for succession. The
Board also ensures that the same rigorous
approach is applied to roles across the senior
management team.
The Group supports the diversity targets and
recommendations of the FTSE Women Leaders
Review (having at least one woman in the Chair
or Senior Independent Director role and of 40%
female representation on each FTSE 350 board
and in senior management teams); and the
Parker Review updates issued in 2020 and 2023.
As of 31 December 2023, the Board meets the
Financial Conduct Authority’s Listing Rule 9.8.6R(9)
target of at least 40% of individuals on its Board
being women, at least one individual on the Board
being from a minority ethnic background and at
least one senior Board position being held by a
woman. Diversity information for the Board, senior
management and the gender split for the Group
as a whole, as at 31 December 2023, can be found
on pages 43 to 44.
With the Group’s small team, low turnover and
focus on ensuring that every appointment
throughout the Group is based on an objective,
merit-based process, we generally prefer not
to set hard targets for gender, ethnicity or
other characteristics as part of our recruitment
processes. However, noting the updated Parker
Review guidance from 2023 and the move
beyond a “one and done” approach to ethnic
diversity, we have set a target of 15% of our senior
management team being from an ethnically
diverse background by the end of 2027. We will
focus on this target as part of our recruitment
activity and are committed to regularly reviewing
both the target and our progress against it as part
of our regular cycle.
At this stage, we are not intending to set similar
targets for gender or other characteristics, not
because we are less committed to these forms of
diversity but because we intend to maintain our
input-focused approach to driving wider forms of
diversity across the organisation. This approach
remains under constant review. The Committee
continues to aspire to the organisation being
representative of the communities in which
we operate, and monitors progress in this area
accordingly. Should the Committee feel that
setting similar such targets for other diverse
characteristics would be additive to progress in
this area, it would seek to do so.
The Group’s broad commitment to inclusion
and diversity is not limited to the areas directly
overseen by the Committee. The Committee is
also active in overseeing the continuation and
evolution of the inclusion and diversity strategy for
the whole Group, which is overseen by the Group’s
Inclusion and Diversity Project (“IDP”).
During 2023, the IDP further developed and
refined the Group’s Inclusion and Diversity (“I&D”)
Masterplan, which includes a forward-looking
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plan and actions over the next three years. Both
the Committee and the Board have received
regular updates on the work of the IDP, monitoring
progress against deliverables in the Masterplan,
as well as taking the opportunity to contribute
to the overall development and refining of the
Masterplan itself.
This oversight is part of our commitment to
continue to consider all aspects of diversity
throughout the Group. This commitment applies
both to the assessment of overall Board and
senior management composition, and also
extends to the composition and culture of the
whole Group. This in turn ensures we are able
to ensure the best possible pipeline of diverse
internal talent as part of our succession planning
process, and of course also ensures that we make
IP Group a welcoming, inclusive and positive place
to work for employees from all backgrounds and
of all characteristics.
For further detail on the work of the IDP and of
the Masterplan see page 43. The Nomination
Committee looks forward to significant continued
progress in increasing both inclusion and diversity
during 2024.
Succession planning
The Nomination Committee recognises that
the Group’s performance is highly dependent
upon its ability to attract, recruit and retain the
highest-quality people and that maintaining a
robust succession planning framework is a key
factor in ensuring the Group’s long-term success.
Succession planning also mitigates the risk of any
unforeseen circumstances, ensuring that changes
in Board or senior management positions
are effectively managed, avoiding significant
disruption to the Group and thereby ensuring that
the Group can successfully execute its corporate
strategy.
Executive Directors and
Executive Committee
In partnership with the internal HR team, the
Committee reviewed and agreed an updated
comprehensive succession plan for both
Executive Directors and all Executive Committee
members. Our comprehensive plan considers
each role in detail, and includes emergency
as well as medium and long-term internal
succession options. In each case, development
needs for potential successors have been
identified, and (in discussion with management)
these needs have been or are being incorporated
into the development plans for each relevant
individual.
The Committee noted that, consistent with its
conclusions in 2022, one of the disadvantages
of a small internal team is the lack of “bench”
coverage for some of the roles. In these cases,
the Committee noted that emergency plans for
either internal coverage via a redesign of roles
and responsibilities and/or a plan to cover the
roles with external resource for an emergency
period remained in place, should this be required.
The Committee therefore remains satisfied that
management focus on succession is sufficient
to mitigate any short-term or emergency
challenges, and that the management
team is balancing succession and continuity
requirements with appropriate control over
operational expenditure.
Overall, the Nomination Committee remains
confident that the Board and Executive
Committee are well positioned to deliver the
Group’s evolving strategy into 2024 and beyond.
Non-executive Directors
The Group’s Head of People and Company
Secretary team worked with myself and the other
Committee members through the year to agree
an updated skills matrix across the members
of the Board. The updated matrix reflects the
changes to the Board following Anita Kidgell’s
appointment in January 2023 which was made
in recognition of the retirement from the Board of
Elaine Sullivan in 2024, following her ninth year of
tenure.
Once agreed, the updated matrix was then used
by the Committee as the basis for some initial
discussions on Non-executive succession. In
particular, the matrix provided the Committee
and Board with the confidence that the retirement
of Dr Sullivan will not need to be followed by
the immediate recruitment of an additional
Non-executive Director. This decision was taken
following Committee consideration on whether
there would be any skills gaps immediately
following Dr Sullivan’s retirement; whether
there were any additional skills which would
further add to the short-term effectiveness
of the Board; and whether there would be an
advantage in maintaining the current 6:2 ratio
of Non-executives to Executives. In particular,
the Committee noted that the recruitment of Ms
Kidgell had mitigated the immediate skills gap
which would have emerged upon Dr Sullivan’s
retirement and, therefore, gave them confidence
in the ability of the Board to continue to operate
effectively without an immediate replacement.
The Committee is also aware that the maximum
nine-year appointment term of each of the
remaining Non-executive Directors, myself,
Caroline Brown, Heejae Chae and Aedhmar
Hynes, are all coming to an end in a relatively
short timeframe during 2027/28. This potential,
longer-term issue is one which will inform the
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Committee’s Board succession work over the
course of 2024 and beyond. Given this, the
Committee’s focus over this period will be to
identify the most effective succession plan and
timings for the Chair, Senior Independent Director
and Committee Chair positions which will all
become vacant in 2027/2028.
This longer-term succession issue was also
considered by the Committee as part of its
decision not to immediately replace Dr Sullivan.
The Committee’s view is that reversion to a 5:2
ratio for a period allows additional flexibility
to identify, recruit and onboard longer-term
succession candidates for the key Board positions
in a timely manner. This in turn will provide the
combination of continuity and effective and
meaningful handover periods to underpin the
ongoing effectiveness of the Board. We may also
be able to bolster the existing skills on the Board
as the first stage of the strategy (“putting IP Group
on the map”) continues to play out through to the
end of 2025 (see more on page 17), and the next
phase of development for both the Group and the
Board are determined.
Below Executive Committee
In addition to succession planning at Board and
Executive Committee level, developing internal
talent at all levels within the Group remains a
continuous process. The Nomination Committee is
responsible for ensuring that suitable assessment
and development plans are in place to maximise
the potential of the Group’s employees and that
the Group has effective recruitment policies to
continue to attract and retain a diverse mix of
talented employees. The Committee remains
confident that this is the case.
As part of this wider review of talent plans, the
Committee also considered areas of the business
where the existing structures and/or resource
plans create key-person dependency risks, and
the plans in place to mitigate this. In particular,
the Committee was pleased to note the work
being undertaken to develop external talent maps
for each of the investment teams. These talent
maps, developed in tandem with an external
partner using proprietary systems and expertise,
provide the Group with detailed information on
the total candidate base for each of the mapped
teams. This in turn allows the Group to make
both immediate and longer-term talent and
structure decisions with greater confidence based
on our understanding of the total addressable
market for talent at each level. By the end of 2023,
projects for both the UK Life Sciences team and
the UK Deeptech Investment teams had been
completed.
Board effectiveness and
performance evaluation
In line with best practice under the Code, the
Board carries out a review of the effectiveness
of its performance and that of its Committees
and Directors every year. This evaluation is
externally facilitated every three years with the
next external evaluation due in 2025, following a
full external Board evaluation in respect of the
year to 31 December 2022, which was undertaken
by Bvalco Ltd. The 2023 review was therefore an
internal review, and was led by the Chair, with the
support of the Company Secretary, in line with the
process set out right.
Board evaluation process
Review of the recommendations of the
2022 Board effectiveness evaluation
and summary of progress against
recommendations prepared
Board members invited to one-to-one
meetings with the Company
Secretary and requested to complete
questionnaires
The Company Secretary summarised the
outputs of meetings/questionnaires in
reports for the Board and its committees
Results were presented and discussed at
Board and Committee meetings
Actions and priorities for 2024 were
agreed, as set out on page 109
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Progress against 2023 actions
Set out below is the progress made in 2023 against actions identified through the 2022 externally facilitated Board effectiveness review.
Action
Progress
Re-instigate regular Non-executive only meetings/dinners
around Board meetings, with topics to include how the Non-
executives can individually and collectively support the CEO’s
development and strategy delivery.
The Non-executives met by themselves on a number of separate occasions during the year, including a pre-
strategy-day dinner. All of the Non-executives agreed that these meetings were useful and added value to
the subsequent Board and Committee meetings.
Encourage active attendance and contribution at Board
meetings by the Managing Partners of Life Sciences &
Technology; continue to facilitate Board exposure to portfolio
companies through presentations by management/the
Group’s investment teams and/or site visits.
The Managing Partners of Life Sciences & Technology now attend all Board meetings and present to the Board
on their divisions and on the priority companies within each of their divisions. The Board attended the July
meeting at the offices of Ultraleap in Bristol, where they received a presentation from Ultraleap’s management
team and had the opportunity to trial the Ultraleap software in a number of devices. The Board has also
received presentations from members of the Group’s investment teams on a number of the Group’s portfolio
companies and also from the Istesso CEO. Further, Board members have access to the internal Spotlight
series on the portfolio, which involves bitesize update presentations from investment team members on
portfolio companies across various divisions and stages of development.
Oversee an externally facilitated Executive Committee
360-degree review and support the CEO in any actions
arising from the same.
An independent review of the working of the Executive Committee was carried out through 2023 and involved
1:1 conversations with each of the Executive Committee members and wider members of staff. The outcome of
the review led to a change in the way sub-committees of the Executive Committee operate.
Board to debate and evolve, as required, the Group’s
international connectivity strategy and focus.
The Board critically analysed and challenged the Group’s international strategy on a number of occasions
through the year, which contributed to the decisions to deprioritise future investment in the US platform and
cease plans for a China growth fund.
Continue to develop the Board skills matrix in view of Non-
executive and Chair succession requirements by 2027/28;
continue to complement Board experience with external
expert networks, including to present at Board meetings.
The Nomination Committee debated at length at two of its meetings through the year the updated Board
skills matrix and to what extent there were any gaps, alongside its plans for NED succession over the next
three years.
Interrogate effectiveness of the Board more regularly
throughout the year; regular self-evaluation of Board
performance post-meeting, including prioritising its time on
the right topics and delivering against its 2023 objectives;
include periodic discussions in Board rolling agenda on
Board culture and dynamics, challenging whether there are
ways to improve how the dynamics work; consider Board
development day to challenge itself in a differentiated way.
Bvalco, the entity that facilitated the 2022 external Board effectiveness exercise, ran a further Board
development session in July on Board dynamics, focusing on bias, beliefs and expectations, and shifting Board
behaviour, as well as supercharging insights. In addition, an additional agenda item was added to the Board
meeting agenda to encourage regular post-meeting reflections.
Continue to increase connectivity with the wider organisation,
including through the use of Board/Executive dinners, Non-
executive Q&A and Panel discussions, interactive staff social
sessions (breakfasts/lunches/drinks) around Board meetings;
and Non-executive visits to non-UK operations.
The Group’s employee forum, IP Connect, hosted a “fireside chat” with the Group’s Non-executive Directors
at the Company’s offices in December 2023. Aedhmar Hynes accompanied David Baynes on a trip to meet
the management team of the Group’s US platform holding, as well as the management team of some
of US platform’s portfolio companies. Various Board dinners were held after Board meetings throughout
2023, to which staff members who had presented at the Board were invited. Various Board and staff drinks
were also held during 2024 to encourage interaction between the Board and the employee base in a more
informal way.
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Conclusion of the 2023 review
The 2023 internal review concluded that the Board, each of its Committees and each of its Directors continue to operate effectively, with all Board members
agreeing that the Board had developed its own strong and collegiate culture, enabled by a strong Chair. In particular, it was agreed that the Board was
strengthened through its diversity, which included the knowledge, experience, skillsets, backgrounds and perspectives of the various board members; its
openness and transparency; the collaborative nature of its members and the high level of trust and mutual respect around the table; and the different,
yet complementary, personalities enabling full and open conversations around the matters tabled for discussion and decision. The experience of the Chair
was highly appreciated, in particular with regard to his management of the meetings to ensure everyone’s voices are heard, his listening skills, his ability to
analyse the various contributions and relay them back to achieve consensus and his ability to manage contentious issues. As part of the internal review,
Board members also agreed that good progress had been made against the actions identified from the 2022 external review undertaken by Bvalco and that
the Chair had an agreed set of clear priorities for himself and the Board for the year ahead.
The Board also identified the following actions and priorities for 2024 from its internal review:
Actions
Portfolio oversight
Continue to challenge and hold the Executive Directors and the wider investment teams to account for delivery of priority portfolio company 2024
milestones; undertake scenario planning for various outcomes in key portfolio companies through 2024.
Non-executive
sessions
Schedule additional NED-only focused sessions around Board meetings, in addition to NED-only dinners, so as to fully capitalise on time all together
around the Board table.
Succession
planning
Agree the staging and timetable for Non-executive Director and Chair succession planning through to 2027/28 and begin implementing the same
towards the end of the year.
Board materials
Continue to evolve the structure and succinctness of Board and Committee papers so as to focus board discussion and challenge on the
material questions.
Executive
Committee/Group
connectivity
Seek greater participation from the wider Executive Committee members on ways in which the Board could add further value during its interactions
with them and their respective teams through 2024; seek and respond to additional feedback and ideas through IP Connect to continue effective Board
connectivity with the wider organisation.
Shareholder
engagement and
Board profile
Consider additional opportunities to utilise the Chair and NEDS for increased engagement with investors and shareholders; consider ways, including
through investor events, the Group’s website etc. to highlight the individual experience of the NEDs and their strengths/the collective strength of
the Board.
ESG
Continue to actively oversee the Group’s commitment to and communication of its approach to ESG matters, including challenging how what we are
doing compares to others in our peer group and aligns with external investor priorities.
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Director performance assessment and review
The performance of each of the Non-executive Directors is reviewed by the
Chair with support from the Company Secretary, the performance of the
Chief Executive Officer is reviewed by the Chair and the performance of
the Chief Financial and Operating Officer is reviewed by the Chief Executive
Officer as part of the annual appraisal process. In addition to those reviews,
the performance of the Executive Directors is reviewed by the Board on
an ongoing basis. One-to-one meetings have been held amongst the
individuals concerned using, amongst other things, the input collated on the
performance of each of the individuals from the Board evaluation process
and individual development plans arising from these meetings are now in
place for the year ahead and include certain Board awareness sessions
for continued development. These sessions are to include, as appropriate,
continued exposure to and interaction with portfolio companies and
their management teams, an annual update of corporate governance
environment and trends, presentations from the Group’s brokers and
corporate finance advisors on shareholder perception, market performance
(including versus the Group’s peer group), potential strategic opportunities,
defence strategies and shareholder activism and individual tailored
sessions for some members on the Group’s capital allocation and valuation
processes and the Group’s remuneration schemes. The Chair’s performance
is reviewed by the Senior Independent Director based on feedback from
discussions with individual Directors; the resulting assessment is discussed
with the Chair by the Senior Independent Director and actions required by
the assessment are included in the Chair’s objectives for 2024.
Sir Douglas Flint
Chair of the Nomination Committee
12 March 2024
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Heejae Chae
Chair of the Remuneration Committee
Committee membership
The Remuneration Committee currently comprises
the following independent Non-executive Directors
whose backgrounds and experience are summarised
on pages 88 to 91:
•
Heejae Chae (Chair)
•
Sir Douglas Flint
•
Dr Elaine Sullivan
•
Dr Caroline Brown
•
Aedhmar Hynes
•
Anita Kidgell
Report contents
•
Principal responsibilities
•
Committee focus and key activities 2023
•
Remuneration Policy summary
•
Remuneration at a glance
•
Annual report on remuneration
Principal responsibilities
In line with the UK Corporate Governance
Code 2018, the terms of reference for the
Remuneration Committee were reviewed, and
adopted, by the Board in December 2023. The
Committee will continue to review its terms of
reference at least annually and will propose
updates where necessary or appropriate.
The key responsibilities of the Committee are
unchanged, as follows:
•
Determine the policy for Executive Director
remuneration
•
Design and set the remuneration for
the Chair, Executive Directors and senior
management
•
Review workforce remuneration and related
policies to ensure the Group attracts and
retains the best talent
•
Review remuneration practice and overall
costs to the Group
•
Consider retirement benefits and other
employee benefits offered
•
Consider the engagement and
independence of external remuneration
advisors
•
Establish the Group’s policy with respect to
employee incentivisation schemes
The full terms of reference of the Committee
are available on the Group’s website at
www.ipgroupplc.com.
Committee meetings are administered and
minuted by the Company Secretary.
In addition, the Committee receives assistance
from the CEO, CFOO and Group People
Director who attend meetings by invitation,
except when matters relating to their own
remuneration are being discussed.
Committee focus and
key activities in 2023
In 2023, IP Group continued to both face and
respond to significant external challenges,
as set out on pages 06 to 30. In the face of
these challenges, the main focus for the
Committee during 2023 was to ensure that
the implementation and outcomes of the
Remuneration Policy agreed at our 2022 AGM
remain reasonable and aligned with both
performance and shareholder interests.
Once again, the difficult macroeconomic
conditions have weighed upon our 2023
annual results and the performance of our
shares. As in 2022, we consider the relatively
restrained variable pay outcomes (25.1%
maximum bonus and nil vesting on the 2021
LTIP) to be appropriate given shareholder
outcomes over the period.
We continue to remain confident in the
strategic direction of the Company, and believe
that the management team has continued to
focus on the areas required to set the business
up for medium and long-term success. As such,
we are confident that the work undertaken and
milestones delivered during 2023 will generate
significant shareholder value in the medium
and long term.
Strong performance against the objectives
that underpin our strategy (pages 17 to 18), and
continued progress in the unquoted portfolio
with a number of near-term value inflection
points underpin this confidence. It is a key part
of our strategy to align management focus with
long-term shareholder value creation through
the combination of restricted shares and a high
minimum shareholding requirement. We have
continued to focus and align remuneration in
this way throughout 2023, and intend to do so
as we move into 2024.
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DIRECTORS’ REMUNERATION REPORT
.
REMUNERATION STATEMENT
Through the year, the Committee has:
•
Considered the skills and experience of
the Executive Directors and carried out a
benchmarking exercise in order to determine
base salaries and total remuneration
opportunity for the period 1 April 2023 to
31 March 2024
•
Reviewed the application of the Group’s
Remuneration Policy for non-director
employees, including the Group’s approach
to salary reviews as well as individual base
salaries and incentive scheme targets and
pay-outs
•
Engaged with employees in both 2023
and early 2024 via our employee forum “IP
Connect”
•
Considered and approved the appropriate
vesting level for the 2020 LTIP awards which
vested in 2023, and the monitored potential
outturns for the 2021 LTIP awards (the last
award under the previous LTIP scheme)
•
Considered the level of the 2023 Restricted
Share Plan (“RSP”) awards
•
Considered the Annual Incentive Scheme
(“AIS”) awards and Group performance targets
and out-turns as relevant for 2022, 2023
and 2024
Structure of this Report
Following positive feedback received on the 2022
report, we have retained the Remuneration At
A Glance section introduced last year. We have
also included additional information on our
bonus metrics for 2023 and 2024, in response to
proxy agency and shareholder feedback. The
report also contains a summary of our current
Remuneration Policy (or the “Policy”), details of
how we intend to implement the Policy in 2024
and detailed disclosure of outcomes in relation
to 2023.
How has the Committee engaged
with employees since the last
report?
In February 2023, Aedhmar Hynes (our Designated
NED) and I directly engaged with our employee
forum “IP Connect” on the subject of Executive
remuneration. We repeated this exercise in early
2024, as part of our commitment to ensure that
this direct dialogue with employees takes place
at least once each year, enabling our employees
to have the opportunity to both challenge
our direction and inform our decision-making
process.
The input provided by IP Connect informed our
decisions around both salary levels for 2024
and bonus outcomes for 2023. Overall, we were
encouraged by the level of engagement and
quality of discussion. It was also reassuring
to find that our overall strategy for Executive
remuneration (outlined in the Policy) remains well
understood, and is considered by employees to
be fair, equitable and reasonable in the context
of the remuneration we offer elsewhere in the
business.
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REMUNERATION STATEMENT
Set out below is a summary of the Remuneration Policy, which was approved by shareholders at the AGM held on 14 June 2022, and which is effective for a
period of up to three years from approval. The full text of the Remuneration Policy can be found on page 118 to 124 of the 2021 Annual Report and Accounts and
is available on the Group’s website at
www.ipgroupplc.com
.
Element
Purpose and link to strategy
Policy and approach
Salary
To provide an appropriate level of fixed cash income to attract
and retain individuals with the personal attributes, skills and
experience required to deliver the Group’s strategy.
Market median benchmark. Reflects lower upside potential and talent market
perspective.
Annual salary increases to not normally exceed the average increase awarded to
other UK-based employees.
Retirement
Benefits
To provide a competitive post-retirement benefit in a way that
manages the overall cost to the Group.
Maximum contribution of 10% – aligned to workforce. Contribution made either
to Group Pension Plan, personal pension plan of the Executive’s choosing or an
equivalent cash alternative.
Other
Benefits
To provide a competitive and appropriate benefits package
to assist individuals in carrying out their duties effectively and
to retain individuals with the personal attributes, skills and
experience.
Ongoing benefits typically comprise, but are not limited to, health and travel
insurance, income protection and life assurance and may also comprise a car
benefit (or cash equivalent). Executives are also provided with telecoms and
computing equipment needed to perform their duties.
Executive Directors may also participate in any all-employee share plans that may
be operated by the Group from time to time on the same terms as other employees.
Annual
Incentive
Scheme
(“AIS”)
To provide a simple, performance-linked annual incentive
mechanism that will:
•
attract, retain and motivate individuals with the required
personal attributes, skills and experience
•
support our strategic objectives of long-term equity ownership
and value creation
•
align the interests of management and shareholders
Maximum payment of 75% of salary, with payment based upon an appropriate mix
of financial and strategic targets.
Targets are reviewed annually prior to the start of each financial year to ensure the
detailed performance measures and weightings are appropriate and continue to
support business strategy. Performance targets are set at or around the start of
each financial year.
50% of any amount above £25,000 deferred into shares for two years. Malus and
clawback provisions also apply.
Long-term
award:
restricted
shares
To provide market competitive long-term share awards, which
align the interests of management and shareholders.
Restricted Share Plan awards. Maximum annual awards of 200% of salary (CEO) or
133% of salary (CFOO).
Vesting subject to a performance underpin and Committee discretion, with a three-
year vesting period and two-year holding period post-vesting. Malus and Clawback
provisions also apply.
Shareholding
guidelines
Align the interests of management and shareholders.
Minimum shareholding requirement of 350% of salary (CEO) or 250% of salary
(CFOO), with post-cessation holding requirement applying for two years after exit.
Portfolio
company
share awards
and carried
interest
Balance our policy of encouraging direct investment in the
portfolio below Executive Director level with appropriate controls
to ensure that all decisions are made with the best interests of
shareholders and other stakeholders in mind.
Direct investment in portfolio companies by Executive Directors is prohibited after
appointment, with the exception of the take-up of pre-emption rights on existing
investments.
No Executive Director participation in carried interest pools.
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.
REMUNERATION POLICY SUMMARY
2023 Single Figure
Greg Smith
CEO
David Baynes
CFOO
Base
salary
£541k
£371k
Annual
bonus
£103k
24.8% of maximum
£70k
24.8% of maximum
LTIP
1
(Long-term
incentive plan)
£70k
13.7% of original award
£67k
13.7% of original award
1
Refers to vesting of 2020 LTIP which vested on 31 March 2023.
Variable Pay, Awards and Outcomes 2023
% Change in Bonus
RSP Awards
Directors’ Shareholdings
Base Pay and Total Package
Base Salary Increase
2024 Maximum
Implementation
April
2024
April
2023
Greg
Smith
4%
4%
David
Baynes
4%
4%
UK
Employees
(Average)
6.2%
7.4%
David Baynes
Greg Smith
£765k
£550k
Base Salary
Annual Bonus (AIS)
Benefits
Pension
LTIP
David
Baynes
Greg
Smith
£1,135.6k
£425.9k
£567.8k
£519.0k
£292.0k
£374.4k
£2,129,250
£1,200,520
Base Salary
Max. AIS
RSP Grant
-15%
-12%
-9%
-6%
-3%
0%
3%
6%
9%
UK
Employees
David
Baynes
Greg
Smith
-14.2%
-14.6%
6.5%
£0k
£200k
£400k
£600k
£800k
£1000k
£1200k
David Baynes
Greg Smith
£1,092k
£497k
David Baynes
Greg Smith
3,816,657
740,149
1,858,713
1,869,383
674,367
1,004,134
Shares owned including shares
which have vested but not been
released which have been adjusted
for tax at 47%
Outstanding unvested holdings,
adjusted for tax at 47%
Minimum shareholding requirement
(at 50.07p per share, three-month
rolling average at 31/12/2023)
114
IP GROUP PLC ANNUAL REPORT 2023
REMUNERATION AT A GLANCE
.
The Group targets a remuneration package for its
Executive Directors that will enable the attraction,
retention and incentivisation of individuals of the
highest calibre in order to successfully deliver the
Group’s strategic objectives.
In 2024, we will continue to base our approach
on the Remuneration Policy approved by
shareholders in 2022. Our approach combines
market aligned base salary levels with short- and
long-term incentives, which underpin long-term
shareholder value creation through a focus on
building an ownership mindset in the senior team.
During the year, we will begin to engage with
shareholders on their preferred approach for
the next policy period, which runs from 2025 to
2027, and which will be the subject of a binding
shareholder vote in 2025.
For 2024, our Remuneration Policy will be
implemented as set out below.
Salary
As explained in the 2021 report, upon appointment
to their current roles in October 2021, salaries for
both Greg Smith and David Baynes were set at
market competitive levels. As such, the Committee
expected a period of moderate salary increases
for both individuals at or below the level that is
applied to the wider workforce.
This has continued to inform the approach for
2024, where inflationary rises for both Executive
Directors and the wider leadership team were
aligned with the rest of the business at 4.0%.
Overall, the average rise for both Executive
Directors and the wider leadership team is below
the average for the rest of the workforce.
With effect from April 2024, the salaries of the
Executive Directors will be:
2024/25
base
salary
2023/24
base
salary
Increase
%
Greg Smith (CEO)
£567,800
£546,000
4.0%
David Baynes (CFOO)
£389,400
£374,400
4.0%
For reference, in 2024 the average like-for-like
increase for the wider workforce is expected to be
around 6.2%.
Our investment in this area is intended to ensure
that our salary levels remain competitive,
reflecting the importance of attracting and
retaining a high quality team as part of our
business model.
The inflationary rise applied reflects the fact that
inflation (and salary inflation) remained well
above recent historic levels during 2023, and our
desire to treat both employees and shareholders
fairly and proportionally.
Retirement and other benefits
Retirement and other benefits will continue to be
in line with the levels stated in the Remuneration
Policy table set out on page 113. Pension levels for
both Executive Directors are aligned with the wider
workforce, with employer contributions of up to
10% of salary.
Annual Incentive Scheme (“AIS”)
The maximum AIS opportunity will remain at 75%
of base salary for both Executive Directors, in line
with the Remuneration Policy. The approach to
setting targets will also remain consistent with
the Policy.
As such, 40% of the 2024 AIS will be based upon
Group NAV per share growth, which in the view of
the Committee represents the most appropriate
leading indicator of underlying business
performance. The conservative approach to
portfolio valuation, set out in more detail on
page 131 underpins the Committee’s faith in this
measure. This element will be awarded at 25% of
the maximum level provided a minimum level of
audited NAV per share of 120.5p is achieved by
the end of the year, and will be awarded in full if
audited NAV per share exceeds 132.0p.
A further 40% of the 2024 AIS will be based on
other in-year financial metrics which underpin our
strategy. For 2024, these metrics include the level
of realisations achieved from the portfolio and
access to third-party capital. These objectives
support long-term, sustainable growth. Targets
for these elements of bonus will be disclosed
retrospectively in the 2024 Annual Report.
For 2024, 15% of the AIS will be based on reducing
the discount between NAV per share and our
share price. Ensuring that our share price more
accurately reflects the underlying value of our
portfolio is key to ensuring that our shareholders
are able to share in the value we create. We
remain focused on improving this and so, for 2024,
our Executive Directors will be explicitly targeted
on improving this measure.
As has been the case since 2020, ESG will continue
to form part of our approach to AIS. We first
introduced this metric in 2020, and updated the
measure for 2023 to align with our developing
strategic focus on ESG. We intend to continue
this alignment to our strategic focus for 2024,
placing equal emphasis on the performance of
our own business against key ESG measures, and
the impact we have on the wider world through
our portfolio.
OUR FINANCIALS
BUSINESS OVERVIEW
115
IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR GOVERNANCE
ANNUAL REMUNERATION STATEMENT
.
STATEMENT OF IMPLEMENTATION OF REMUNERATION POLICY IN 2023
For 2024, the AIS outcomes will, therefore, be
determined based on the following mix of targets:
•
40% on achievement of the targeted levels for
the Group’s audited NAV per share
•
25% on the level of realisations generated from
the portfolio during the year
•
15% on sourcing managed third-party capital
in support of our strategy
•
15% on reducing the discount between share
price and NAV per share
•
5% based on ESG metrics aligned to our
sustainability strategy
Overall, the targets for all AIS measures set are
considered by the Committee to be aligned to
strategy and appropriately stretching, especially
in light of the current economic climate and
2023 performance. However, and in line with the
Remuneration Policy, the Committee may adjust
any 2024 outcome to take into account overall
business or individual performance or any other
factors it considers appropriate.
Restricted Share Plan
The Committee intends to make RSP awards
to Executive Directors at the normal maximum
level allowed by the Remuneration Policy, being
200% of base salary for the CEO and 133% of base
salary for the CFOO. As has been the case for
each award, the Committee will carefully monitor
both share price and performance in the lead up
to making these awards, and will adjust the final
award level if appropriate or necessary to do so.
Vesting of the 2024 awards will take place over
a three-year period commencing on 1 April 2024.
Any RSP awards that vest will be subject to a
further two-year holding period. Vesting will be
subject to a financial underpin based on adjusted
NAV per share growth over the vesting period. For
the 2024 awards, the financial underpin has again
been set such that NAV per share on the vesting
date must be no lower than 100% of NAV per share
on the award date, after making appropriate
adjustments for dividends, buybacks and any
other distributions.
The Committee will also monitor qualitative
performance to ensure that Executive Directors
are not rewarded where the Committee considers
there to have been a failure of performance.
This will include a serious breach of regulation,
failure to sufficiently progress against ESG
objectives, material reputational damage and
gross misconduct. In the event of any underpin
condition not being met, the Committee will
review the number of RSP awards which are due
to vest, and may reduce (in full or in part) the
number of shares that ultimately vest.
Chair and Non-executive Directors
With a small Board, the Group relies heavily upon
a deep level of commitment from the Chair and
all of the Non-executive Directors. The Chair and
each Non-executive Director serves on multiple
Committees as well as the Board itself.
Our Chair provides significant operational
support to the management team, committing
time and delivering value to the business and
its stakeholders well beyond that required by his
role. Fee levels for both Non-executive Directors
and our Chair were adjusted in 2023 to reflect
this and wider changes to market, and as such
our intention is to limit increases in 2024 to
the inflationary increase of 4.0% applied to the
wider workforce.
We will therefore increase our Non-executive
Director fee to £59,800 from the current level
of £57,500, and the Chair fee to £236,000 from
£227,000. Increases will be applied from April 2024.
Additional fees for Committee Chairs (including
the Valuation Committee Chair), Designated NED
and for being Senior Independent Director shall
remain unchanged at £10,000. There remains
no additional fee payable for membership of
a Committee.
116
IP GROUP PLC ANNUAL REPORT 2023
ANNUAL REMUNERATION STATEMENT
.
STATEMENT OF IMPLEMENTATION OF REMUNERATION POLICY IN 2023
Single figure for total remuneration (audited)
The following table sets out the single figure for total remuneration for Directors for the financial years ended 31 December 2023 and 2022.
Base salary/
fees
1
Benefits
2
Retirement
benefits
3
Total fixed
Annual bonus
(“AIS”)
4
LTIP
5
Total Variable
Total
All £000s
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Greg Smith
541
525
3
3
48
46
592
574
103
120
70
264
173
384
765
958
David Baynes
6
371
360
19
14
33
32
423
406
70
82
67
264
137
346
560
752
Douglas Flint
218
189
–
–
–
–
218
189
–
–
–
–
–
–
218
189
Elaine Sullivan
55
48
–
–
–
–
55
48
–
–
–
–
–
–
55
48
Caroline Brown
75
66
–
–
–
–
75
66
–
–
–
–
–
–
75
66
Aedhmar Hynes
75
68
21
29
–
–
96
97
–
–
–
–
–
–
96
97
Heejae Chae
66
58
–
–
–
–
66
58
–
–
–
–
–
–
66
58
Anita Kidgell
53
–
–
–
–
–
53
–
–
–
–
–
–
–
53
–
1
Base salary/fees represent each Director’s contractual entitlement during the calendar year in question, noting that the Group’s salary year runs from 1 April to 31 March.
2
Travel costs for Non-executive Directors are reimbursed and are subject to PAYE, and a consumable expenses payment of £26 (net) per month is paid to all employees, Executive and Non-executive
Directors to cover the additional costs of homeworking.
3
Retirement benefits include payments made to defined contribution schemes on behalf of the Directors or the value of a cash equivalent, if applicable. The pension available to the Executive Directors
is aligned to that available for the employee population.
4
AIS executive bonus outturn was 25.1% of the maximum for 2023, equating to 18.8% of bass salary. Consistent with the Remuneration Policy, the first £25,000 will be paid in cash and thereafter 50% will be
paid in cash and 50% deferred into shares over two years. AIS is calculated using the annual salary in effect from April 2023.
5
The 2023 LTIP value disclosure is based on the 2020 LTIP, which vested on 31 March 2023. The value shown has been calculated using the share price on the date of vesting (54.16p) and includes the
value of dividend equivalents accrued in the vesting period. As the share price on the date of vesting was below the price on the date of grant none of the amounts in the table are attributable to share
price appreciation.
6
David Baynes receives an annual car allowance or equivalent thereof of £12,000. He also participated in our Electric Vehicle salary sacrifice scheme during the year, sacrificing gross salary of £10,189
over the period, and has use of an electric vehicle with a taxable benefit of £998 in 2023. The benefits figure reported for David Baynes includes all of these amounts in aggregate, in addition to the
value of his other benefits.
Additional disclosures for single figure for total remuneration table
Annual Incentive Scheme
The targets for the 2023 AIS for Executive Directors were set in line with the Statement of Implementation for 2023 laid out in the 2022 Directors’ Remuneration
Report. That is, AIS outcomes for 2023 have been determined based upon the following mix of targets:
•
50% on the annual return achieved on the Group’s NAV per share
•
37.5% on the performance against key commercial objectives, which in 2023 were based on financial metrics
•
12.5% on a combined ESG performance metric
OUR FINANCIALS
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117
IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR GOVERNANCE
ANNUAL REMUNERATION STATEMENT
.
STATEMENT OF IMPLEMENTATION OF REMUNERATION POLICY IN 2023
The detailed performance conditions used to calculate initial AIS outturn for 2023 are set out in the table below.
Performance condition
(% weighting)
Payment criteria
2023 performance
(% of component awarded)
Performance commentary
Return on NAV (50%)
5% improvement in NAV per share (target
139.5p): 25% of maximum opportunity
(“threshold”)
15% improvement in NAV per share
(target 152.8p): 100% of maximum
opportunity
Below minimum target
(0% of component)
NAV and NAV per share reduced across
2023, primarily due to falls in the quoted
portfolio and a number of discrete
valuation adjustments (including in our
US portfolio)
(see pages 33 and 36 for details)
Liquidity as a strategic asset (25%)
£nil to £70.1m (sliding scale) excluding
any contribution from Oxford Nanopore
Technology
£38.6m
(55% of component)
Performance to plan with receipt
of deferred funds from Waveoptics
transaction
(see pages 35 and 37 for details)
Access to third-party capital (12.5%)
Access to new co-investment capital of
£20m (25% of maximum opportunity) to
£100m (100% of maximum opportunity)
Below minimum target
(0% of component)
FCA approval delay (Parkwalk Advisors)
and strategic shift impacting our China
Fund weighed on performance
(see pages 14 and 37 for details)
ESG Performance (12.5%)
50% plc performance: Based on
continued out-performance of sector
benchmarks for Refinitv, MSCI and ISS.
50% portfolio impact: Based upon making
sufficient progress in the agreement,
collection and analysis of data relating
to specific portfolio company ESG and
impact metrics.
100% achievement of plc element; 82.1%
achievement of portfolio impact
(91.0% of component awarded)
Outperformance of sector benchmarks
for all of Refinitv, MSCI and ISS
Definition and agreement of 52 new
Impact KPI’s within the portfolio,
alignment with investment teams and
partial completion of operationalisation/
data collection
(see page 41 for details)
Total weighted outturn
25.1% of maximum (equating to 18.8% of base salary)
The Committee discussed the output of the quantitative targets as shown above, and considered that this outturn appropriately reflected the broader overall
performance of the business for the year. The Committee particularly noted the impact of a number of external factors on the calculated bonus amount,
including the continuation of difficult macroeconomic conditions through the year, but also noted the significant progress in a range of areas expected to
underpin shareholder value growth as the Group moves forward.
As such, the Committee determined that the relatively low calculated outcome aligned with a fair assessment of performance over the year, and that no
discretionary adjustment to this calculated outcome was therefore required.
The resulting AIS outturn for 2023 for the Executive Directors was, therefore, determined as 25.1% of maximum opportunity. In accordance with the
Remuneration Policy, all amounts to individuals above an initial minimum amount paid in cash, which for the 2023 AIS is £25,000, will be paid 50% in cash and
50% in shares (deferred over two years under the Group’s Deferred Bonus Share Plan (“DBSP”)).
118
IP GROUP PLC ANNUAL REPORT 2023
ANNUAL REMUNERATION STATEMENT
.
Share-Based Incentive Schemes
2020 LTIP awards that vested in 2023
As reported in the 2022 Directors’ Remuneration Report, the performance of the Group over the vesting period of the 2020 LTIPs, which vested in March 2023,
was sufficient for the awards to partially vest.
Group NAV (the Group’s net assets excluding intangibles) growth to 31 December 2022 was just above the minimum threshold. The one-month average
share price at 31 March 2023 was below the lower Total Shareholder Return (“TSR”) target and that of the FTSE 250. On this basis, the 2020 LTIP award vested as
expected at 13.67% of maximum on 31 March 2023. The 2023 disclosure in the Single Figure For Total Remuneration table (page 117) relates to this vested award.
After the end of the vesting period, the Committee considered the calculated level of vesting in the context of performance delivered over the vesting period,
and determined that 13.67% was a fair reflection of performance over that period. In making this determination, the Committee considered the level of
overall performance during the vesting period, the shareholder experience over that time and the contribution of the individual Executive Directors over the
same period.
The vested 2020 LTIP awards are subject to a further two-year holding period, with shares only being issued to participants at the end of this period.
2021 LTIP awards due to vest in 2024
The final outstanding LTIP award was awarded in 2021. As with prior awards, vesting is based on the performance of the Group’s NAV for the three financial
years ending on 31 December 2023 and TSR from 1 April 2021 to the ordinary vesting date, being 31 March 2024, based on a one-month average share price at
that date. Both performance measures are combined into a matrix format as per the vesting table below. The total award is subject to an underpin based on
the relative performance of the Group’s TSR to that of the FTSE 250 index, which can reduce the awards by up to 50%.
Vesting matrix: estimated 2021 LTIP outturn
TSR (p.a.)
15%
60%
75%
90%
100%
10%
30%
45%
60%
90%
8%
12.5%
25%
45%
75%
<8%
0%
12.5%
30%
60%
<8%
8%
10%
15%
Growth in NAV (p.a.)
Performance condition
Target performance
Actual/forecast
performance
Group NAV
8%: £1.66bn
£1.19bn
(at 31 Dec 2023)
15%: £2.01bn
(-1.7% p.a.)
Annual TSR
1
8%: 149.2p
49.9p
(share price)
15%: 161.9p
(-27.1% p.a. growth)
Comparative TSR
FTSE 250 0.93%
IP Group -27.1%
1
TSR performance shown reflects the Group’s one-month average share price to 4 March 2024. Actual performance period is the one-month average to 31 March 2024.
OUR FINANCIALS
BUSINESS OVERVIEW
119
IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR GOVERNANCE
ANNUAL REMUNERATION STATEMENT
.
As the tables show, both measures are expected to be below the levels required to trigger vesting. As such, the 2021 award is expected to lapse in full on
the vesting date. Final vesting will be determined after the end of the vesting period on 31 March 2024, and will be subject to the Remuneration Committee
determination that the calculated vesting amount is a fair and reasonable reflection of performance through the vesting period and that it should not apply
the discretion it reserves for itself to adjust the outcome.
In making a final determination of the proportion of the 2021 LTIPs which will vest, the Committee will take into account the need to avoid windfall gains, but as
the award is expected to lapse in full the Committee does not currently envisage any adjustment would be necessary.
2023 Restricted Share Plan Awards
As set out in the 2022 Remuneration Policy, we introduced a Restricted Share Plan (“RSP”) in 2022 to replace the previous LTIP structure. In accordance with the
Policy, in 2023 an award of restricted shares was made to each Executive Director, as set out in the table below:
Executive Director
Type of
interest
Basis of
award
(% salary)
Face value
(000s)
End of
underpin
period
Greg Smith
2023 RSP
200%
£1,092
31 Mar 2026
David Baynes
2023 RSP
133%
£497
31 Mar 2026
The RSP awards made in 2023 were made at the normal maximum level permitted by the policy of 200% (CEO) and 133% (CFOO).
The Committee continues to believe that the maximum award permitted under the Policy (being 200% of salary for the CEO, 133% of salary for other Executive
Directors) is set at an appropriate and reasonable level. It also recognises the responsibility to make individual awards in a prudent and responsible way, only
utilising the maxima agreed under the Policy when it is confident that such awards are appropriate and in the best interests of shareholders. The Committee
believes that this condition held in 2023.
Change in remuneration of the Directors compared to Group employees
The table below sets out the change in the remuneration of the Directors and that of our UK employees (excluding Directors and new joiners/leavers):
% Change in base salary
% Change in bonus
% Change in benefits
(excluding pensions)
2022 to
2023
2021 to
2022
2020 to
2021
2019 to
2020
2022 to
2023
2021 to
2022
2020 to
2021
2019 to
2020
2022 to
2023
2021 to
2022
2020 to
2021
2019 to
2020
Greg Smith
3.0%
48.4%
20.8%
5.9%
(14.2)%
(65.0)%
23.5%
254.1%
(11.7)%
(2.3)%
4.2%
5.1%
David Baynes
3.0%
17.4%
7.7%
2.0%
(14.6)%
(72.3)%
11.2%
241.0%
33.2%
(14.1)%
17.6%
5.2%
Douglas Flint
15.5%
4.2%
2.0%
2.2%
–
–
–
–
–
–
–
–
Elaine Sullivan
13.7%
4.6%
2.2%
1.8%
–
–
–
–
–
–
–
–
Caroline Brown
13.9%
17.1%
1.8%
1.8%
–
–
–
–
–
–
–
–
Aedhmar Hynes
9.7%
19.6%
19.8%
1.8%
–
–
–
–
(26.9)%
142.0%
–
–
Heejae Chae
13.1%
3.8%
1.8%
1.8%
–
–
–
–
–
–
–
–
Anita Kidgell
–
–
–
–
–
–
–
–
–
–
–
–
UK employees
7.3%
10.4%
5.9%
8.0%
6.5%
(39.1)%
59.3%
78.7%
5.6%
11.9%
7.9%
4.7%
120
IP GROUP PLC ANNUAL REPORT 2023
ANNUAL REMUNERATION STATEMENT
.
Historical Executive pay and Group performance
The table and graph set out below enable a comparison of the TSR of the
Group and the Chief Executive Officer remuneration outcomes over the last
ten years.
The chart below shows the Company’s TSR performance against the
performance of the FTSE All Share, FTSE Small Cap and FTSE 250 indices
over the ten-year period to 31 December 2023. Taking into account IP
Group’s business model, there is no directly relevant FTSE sector index. The
Directors have therefore selected these indices as relevant equity indices for
comparison over the period in question.
0%
50%
100%
150%
200%
250%
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
%
change
Source: Datastream
IP Group
FT Small Cap
FTSE All Share
FTSE 250
Historical Chief Executive Officer remuneration outcomes
The table below summarises the Chief Executive Officer single figure for total remuneration, annual bonus pay-out and LTIP vesting as a percentage of
maximum opportunity for the current year and previous ten years.
Chief Executive Officer
2013
2014
2015
2016
2017
2018
2019
2020
2021
1
2022
2023
CEO single figure of remuneration (£000s)
2,231
902
669
265
552
413
498
797
730
958
765
Annual bonus pay-out (% of maximum)
100%
0%
100%
0%
57%
17%
28%
93%
96.3%
30.4%
25.1%
LTIP vesting (% of maximum)
100%
100%
57%
0%
0%
0%
0%
0%
0%
51.1%
13.7%
1
2021 and years thereafter relate to Greg Smith, who was appointed as CEO on 7 October 2021 (previously CFO). Previous years reported relate to Alan Aubrey.
OUR FINANCIALS
BUSINESS OVERVIEW
121
IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR GOVERNANCE
ANNUAL REMUNERATION STATEMENT
.
Directors’ shareholdings and share interests
The Group’s Remuneration Policy determines a minimum shareholding requirement for each of the Executive Directors. The Remuneration Policy approved in
2022 increased the minimum level to 350% of salary for the Chief Executive Officer (from 200%), and 250% of salary for other Executive Directors including the
CFOO (from 150%).
At the end of the year, neither Greg Smith nor David Baynes met this requirement. Both Executive Directors are ordinarily, at a minimum, expected to retain all
post-tax shares received under the RSP, LTIP and DBSP to ensure that minimum levels are met and maintained, in line with the Policy.
Interests in shares (audited)
The Directors who held office during 2023 had the following beneficial interests in the ordinary shares of the Company:
At 31 December 2023
Total interest in shares
Total unvested holdings
Current Directors
Shares
owned
Number
Shares which
have fully vested
but have not yet
been issued
Total
interest
Minimum
shareholding
requirement
met?
1
LTIP
DBSP
RSP
Greg Smith
522,001
411,602
933,603
No
483,253
166,754
2,856,999
David Baynes
458,620
407,071
865,691
No
465,709
122,859
1,306,024
Elaine Sullivan
–
–
–
–
–
–
–
Sir Douglas Flint
94,500
–
94,500
–
–
–
–
Heejae Chae
32,712
–
32,712
–
–
–
–
Caroline Brown
–
–
–
–
–
–
–
Aedhmar Hynes
21,000
–
21,000
–
–
–
–
Anita Kidgell
–
–
–
–
–
–
–
1
Based on owned/vested shares only.
There have been no changes in the interests of the Directors set out above between 31 December 2023 and 7 March 2024.
122
IP GROUP PLC ANNUAL REPORT 2023
ANNUAL REMUNERATION STATEMENT
.
Share-Based Incentive Plan Awards (audited)
The Executive Directors’ participations in the Group’s Long-Term Incentive Plan (“LTIP”) and Restricted Share Plan (“RSP”) are set out in the table below:
Number
of shares
conditionally
held at
1 January
2022
Conditional
shares
notionally
awarded in
the year
Vested
during
the year
1
Lapsed
during
the year
Potential
conditional
interest in
shares at
31 December
2023
Share price
at date of
conditional
award (p)
Earliest
vesting
date(s)
Greg Smith
2020 LTIP
894,869
–
122,328
772,541
–
61.40
31–Mar–23
2021 LTIP
483,253
–
–
–
483,253
125.40
31–Mar–24
2022 RSP
1,043,046
–
–
–
1,043,046
75.50
31–Mar–25
2023 RSP
–
1,813,953
–
–
1,813,953
60.20
31–Mar–26
2,421,168
1,813,953
122,328
772,541
3,340,252
David Baynes
2020 LTIP
861,726
–
117,797
743,929
–
61.40
31–Mar–23
2021 LTIP
465,709
–
–
–
465,709
125.40
31–Mar–24
2022 RSP
476,809
–
–
–
476,809
75.50
31–Mar–25
2023 RSP
–
829,215
–
–
829,215
60.20
31–Mar–26
1,804,244
829,215
117,797
743,929
1,771,733
1
LTIP awards vesting during the year will be subject to a further holding period of two years, with shares not being issued to participants until the end of the holding period. The actual number of shares
to be issued at the end of the holding period will be adjusted in aggregate to account for any dividends paid during the vesting and holding period.
OUR FINANCIALS
BUSINESS OVERVIEW
123
IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR GOVERNANCE
ANNUAL REMUNERATION STATEMENT
.
Deferred Bonus Share Plan (“DBSP”) (audited)
Directors’ interests in nil-cost options under the Group’s DBSP that have been granted in order to defer AIS bonuses in accordance with our Policy are as follows:
Options held at
1 January
2023
Option
awarded in
the year
Exercised
during
the year
1
Lapsed
during
the year
Options held at
31 December
2023
Share price
at date of
award (p)
Earliest
vesting
dates
Greg Smith
Deferral from 2020 AIS
50,259
–
50,259
–
–
125.40
31–Mar–23
Deferral from 2021 AIS
88,100
–
88,100
–
–
90.00
31–Mar–23
Deferral from 2021 AIS
88,100
–
–
–
88,100
90.00
31–Mar–24
Deferral from 2022 AIS
–
39,327
–
–
39,327
60,20
31–Mar–24
Deferral from 2022 AIS
–
39,327
–
–
39,237
60.20
31–Mar–25
226,459
78,654
138,359
–
166,754
David Baynes
Deferral from 2020 AIS
48,213
–
48,213
–
–
125.40
31–Mar–23
Deferral from 2021 AIS
75,451
–
75,451
–
–
90.00
31–Mar–23
Deferral from 2021 AIS
75,451
–
–
–
75,451
90.00
31–Mar–24
Deferral from 2022 AIS
–
23,704
–
–
23,704
60.20
31–Mar–24
Deferral from 2022 AIS
–
23,704
–
–
23,704
60.20
31–Mar–25
199,115
47,408
123,664
–
122,859
1
Actual number of options released for exercise is adjusted where relevant to reflect the adjustment made to account for dividend payments made during the holding period.
Save As You Earn (“SAYE”) (audited)
The Group operates an HMRC-registered SAYE share save scheme for all UK employees in which both Executive Directors have participated during the year:
Options held at
1 January
2023
Options
awarded in
the year
Exercised
during the
year
Lapsed
during the
year
Options held at
31 December
2023
Option
exercise
price (p)
Share price
at date of
award (p)
Earliest
vesting
date(s)
Greg Smith
2019 SAYE
34,816
–
–
34,816
–
51.70
64.60
01-Nov-22
2022 SAYE
27,692
–
–
27,692
–
65.0
81.25
01-Nov-25
2023 SAYE
–
39,586
–
–
39,586
46.86
58.56
01-Nov-26
David Baynes
2019 SAYE
34,816
–
–
34,816
–
51.70
64.60
01-Nov-22
2022 SAYE
27,692
–
–
–
27,692
65.0
81.25
01-Nov-25
124
IP GROUP PLC ANNUAL REPORT 2023
ANNUAL REMUNERATION STATEMENT
.
Relative importance of spend on pay
The table below shows total employee costs, change in shareholder distributions, change in NAV and change in share price from 2022 to 2023.
2023
2022
% change
Total employee costs (£m)
19
20.0
-5%
Distributions to shareholders (dividend or share buyback, £m)
13.1
20.7
-37%
NAV (£m)
1,182.5
1,381.2
-14%
Share price (p)
58.1
55.8
4%
The information shown in this chart is based on the following:
Total employee pay: total employee costs from note 9 on page 168 including wages and salaries, social security costs, pension and share-based payments.
Change in NAV: change in the Group’s net assets excluding goodwill and intangibles taken from the statement of financial position on page 153.
External appointments for Executive Directors
Any proposed external directorships are considered by the Board to ensure they do not cause a conflict of interest but, subject to this, Executive Directors
may accept a maximum of two external Non-executive appointments and, indeed, the Board believes that it is part of their ongoing development to do so.
Where an Executive Director accepts an appointment to the board of a company in which the Group is a shareholder, the Group generally retains the related
fees. In the circumstances where the Executive Director receives such fees directly, such sums are generally deducted from their base salary from the Group.
Fees earned for directorships of companies in which the Group does not have a shareholding are normally retained by the relevant Director. Key external
appointments (excluding companies in which the Group holds shares) held by Executive Directors are set out on pages 88 to 91.
Limits on the number of shares used to satisfy share awards (dilution limits)
All of the Group’s incentive schemes that contain an element that may be satisfied in IP Group shares incorporate provisions that in any ten-year period
(ending on the relevant date of grant), the maximum number of the shares that may be issued or issuable under all such schemes shall (i) not exceed 10%
of the issued ordinary share capital of the Company; and (ii) such shares issued on a discretionary basis shall not exceed 5% of the issued ordinary share
capital of the Company.
The Committee regularly monitors the position and prior to the making of any share-based award considers the effect of potential vesting of outstanding
awards to ensure that the Company remains within these limits. Any awards which are required to be satisfied by market-purchased shares are excluded
from such calculations, but any shares utilised from treasury to settle share-based awards are included, and are reflected within the chart shown.
OUR FINANCIALS
BUSINESS OVERVIEW
125
IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR GOVERNANCE
ANNUAL REMUNERATION STATEMENT
.
Service agreements
The Executive Directors have service contracts
that commenced on the dates set out in
the chart below and contain a contractual
notice period of six months by either party.
The Non-executive Directors have letters of
appointment that commenced on the dates
set out in the chart below, are generally for an
initial fixed term of three years, which is reviewed
and may be extended for two further three-year
periods and are terminable on three months’
notice by either party.
During the year, and as reported in the
Nomination Committee report, Anita Kidgell was
appointed as a Non-executive Director.
The letters of appointment and service contracts
are available for inspection at the Company’s
registered office. In accordance with the Code,
all Directors submit themselves for annual
re-election by shareholders at each AGM and will
do so at the AGM to be held on 12 June 2024.
Effective dates of service contracts of the
Executive Directors
Greg Smith
David Baynes
7 October 2021
7 October 2021
Effective dates of letters of appointment of the
Non-executive Directors
Dr Elaine Sullivan
Heejae Chae
30 July 2015
3 May 2018
Sir Douglas Flint
1
Dr Caroline Brown
17 September 2018
1 July 2019
Aedhmar Hynes
Anita Kidgell
1 August 2019
18 January 2023
1
Effective as Chair from November 2018.
As at 12 March 2023, the Company’s
headroom position, which remains
within such guidelines, was as shown in
the chart below.
2.5%
0.4%
0.5%
0.9%
0.6%
0.1%
Key
Vested LTIP awards in past ten years
– Executives
Vested LTIP awards in past ten years
– Other staff
Outstanding LTIP and awards –
Executives
Outstanding LTIP and Former Touchstone
LTIP awards – Other staff
Other share schemes
(Sharesave, DBSP, etc.)
Additional headroom (to 5%)
126
IP GROUP PLC ANNUAL REPORT 2023
ANNUAL REMUNERATION STATEMENT
.
Adherence to Corporate
Governance Code
principles
When considering the proposed
operation of the Remuneration
Policy for the forthcoming year, the
Committee took into consideration
the following principles set out in the
2018 Corporate Governance Code.
Clarity
•
The Company seeks to provide full transparency to shareholders on the operation of the Remuneration
Policy, including prospective disclosure of our NAV target range under the AIS
•
The Committee encourages frequent and open dialogue on Executive Director remuneration with
shareholders and, during the triennial review process, undertook significant consultation with advisors,
shareholders, proxy advisors and other stakeholders to optimise the proposed approach
Simplicity
•
Our ongoing remuneration arrangements for Executive Directors, including the AIS, are simple in
nature and well understood by participants and shareholders and other stakeholders, including our
employees
•
Our Restricted Share Plan is a simple and effective long-term incentive structure, and directly aligns the
interests of long-term shareholders with the management team
•
Incentive arrangements are cascaded down through the Group and provide alignment and overall
simplicity in our approach to remuneration. All employees participate in the AIS (with additional
components based on team and/or individual objectives for non-director employees), and the RSP is
extended to senior managerial levels and roles which are expected to have a material financial impact
on the Group’s outcomes
•
The Committee continuously reviews and challenges the Group’s wider remuneration arrangements
and will continue to do so in order to ensure that this principle continues to be appropriately met
Risk
•
Under each of the AIS, LTIP and RSP, discretion may be applied where formulaic outturns are not
considered reflective of overall business or individual performance or for any other reason considered
appropriate by the Committee
•
Deferral of a proportion of AIS awards, the LTIP and RSP holding periods and our higher than usual
minimum shareholding requirement (which has not yet been met) including a two-year post-cessation
shareholding requirement provide a strong link to the ongoing performance of the business and the
experience of our shareholders
•
Malus and clawback provisions apply to AIS, LTIP and RSP awards
Predictability
•
Our Remuneration Policy contains details of the maximum opportunities and pre-determined target
ranges under our AIS and RSP, with actual outcomes dependent on performance
Proportionality
•
We operate a performance-based philosophy with a focus on the long term
•
Our performance measures under the AIS and RSP underpin, including the use of NAV measures in both,
are selected based on their alignment to Company strategy and shareholder experience
•
The Committee’s ability to apply discretion ensures appropriate outturns in the context of long-term
Company performance
•
The focus on the long term within our remuneration approach, including the delivery of a significant
proportion of our incentives in the form of Company shares and the use of a long-term carried interest
scheme for non-director employees, provides significant alignment between employees’ and Executive
Directors’ remuneration outcomes and long-term Company performance
Alignment to
culture
•
All employees are entitled to participate in the pension scheme and the SAYE scheme. Executive
Director participation in these schemes is on the same terms as for other employees
•
Strong individual and Company performance is incentivised and recognised through our AIS and, for
our more senior employees, the RSP (and previously the LTIP)
OUR FINANCIALS
BUSINESS OVERVIEW
127
IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR GOVERNANCE
ANNUAL REMUNERATION STATEMENT
.
External advisors
The Remuneration Committee is authorised, if it wishes, to seek independent specialist services to provide information and advice on remuneration at the
Company’s expense, including attendance at Committee meetings.
During the year, the Remuneration Committee took into consideration independent professional advice from Deloitte LLP in respect of the application of the
Group’s Remuneration Policy, and reporting under the Directors’ Remuneration Reporting Regulations. During the year Deloitte also provided advice in relation
to shares schemes and related tax matters.
Deloitte is a founding member of the Remuneration Consultants Group and adheres to its Code in relation to Executive remuneration consulting in the UK.
The lead engagement partner has no other connection with the Company or individual Directors. Fees paid to Deloitte LLP in connection with advice to the
Committee in 2023 were £21,250.
Statement of shareholder voting
The table below sets out the proxy results of the votes on resolutions in respect of Directors’ remuneration at the 2022 AGM and the 2023 AGM.
Votes for
Votes against
Number
% of
votes cast
Number
% of
votes cast
Total votes
cast
Votes
withheld
Remuneration Policy (2022 AGM)
654,265,665
80.67%
156,765,453
19.33%
820,514,461
9,483,343
Remuneration Report (2023 AGM)
643,188,184
85.99%
104,756,327
14.01%
747,944,511
9,557,004
The Remuneration Committee was pleased with the level of support for the Remuneration Report at the 2023 AGM, and is looking forward to engaging with
shareholders on the next evolution of our remuneration policy later in 2024.
Remuneration disclosure
This report complies with the requirements of the Large and Medium-sized Companies and Groups Regulations 2008 as amended in 2013, the provisions of
the UK Corporate Governance Code (July 2018) and the Listing Rules.
On behalf of the Board
Heejae Chae
Chair of the Remuneration Committee
12 March 2024
128
IP GROUP PLC ANNUAL REPORT 2023
ANNUAL REMUNERATION STATEMENT
.
Dr Caroline Brown
Chair of the Audit and Risk Committee
AUDIT AND RISK COMMITTEE REPORT
.
Principal responsibilities
•
Monitor the integrity of the financial
statements of the Group including its
Annual and Half-yearly Reports, and other
formal announcements relating to its
financial performance with consideration
being given to any significant financial
reporting judgements contained
within them
•
Review and report to the Board on
significant financial reporting issues and
judgements contained in the financial
statements
•
Advise the Board on whether it believes the
Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable
and provides the information necessary
for shareholders to assess the Group’s
performance, business model and strategy
•
Review and monitor the Group’s risk
management system and carry out a
review of its effectiveness and approve the
statements included in the Annual Report
concerning risk management
•
Ensure that a robust assessment of the
principal risks facing the Group has been
undertaken
•
Assessing the Group’s ongoing viability and
going concern status
•
Recommend the appointment and
remuneration of the external auditor, assess
audit effectiveness and monitor provision
of non-audit services
•
Assess the content of the external auditor’s
independence report in providing both
audit and non-audit services
•
Review the remit, planned scope of
activities, performance and effectiveness of
the outsourced internal audit function
•
Monitor the Group’s systems and controls
for the prevention of bribery and fraud
•
Review the adequacy and security of the
Group’s arrangements for its employees to
speak up and raise concerns
Key activities in the year
The key areas of focus for the Committee in
2023 and early 2024 included:
•
Key areas of accounting judgement
and disclosure items were considered in
detail, including: (i) valuation of unquoted
investments at half-year and year-end
reporting; and (ii) IFRS 10 treatment of the
US platform and Istesso Limited
•
Conducted an audit tender process
including determining the firms to be
approached, agreeing the scorecard
criteria for the selection process,
meeting with each prospective audit
partner and attending each firm’s
proposal presentation and making a
recommendation to the Board
•
Reviewing the FRC’s consultation on the UK
Corporate Governance Code and inputting
into the Group’s response and interim
updates
•
Reviewed management updates on
preparation for a new internal controls
regime in line with expected requirements
to be contained within the updated UK
Corporate Governance Code
•
During the year the Committee received
three internal audit reviews performed
by the Group’s outsourced internal
audit function and continues to monitor
implementation of agreed improvements
•
The Committee monitored procedures
for the prevention of bribery and fraud.
It reviewed new and updated policies,
including the operation of the conflicts of
interest policy, and exceptions to regular
key risk indicator (“KRI”) monitoring
Committee membership
The Audit and Risk Committee currently comprises
the following independent Non-executive Directors
whose backgrounds and experience are summarised
on pages 88 to 91:
•
Dr Caroline Brown (Chair)
•
Aedhmar Hynes
•
Dr Elaine Sullivan
•
Heejae Chae
•
Anita Kidgell
Report contents
•
Principal responsibilities
•
Key activities in the year
•
Procedural and governance matters
•
Key accounting judgements and other priority
items reviewed by the Committee
OUR GOVERNANCE
STRATEGIC REPORT
BUSINESS OVERVIEW
OUR FINANCIALS
129
IP GROUP PLC ANNUAL REPORT 2023
AUDIT AND RISK COMMITTEE REPORT
.
Procedural and governance matters
•
The Group’s Chief Financial & Operating
Officer, Company Secretary, Finance Director,
outsourced Head of Internal Audit and the
external auditor are invited to attend each
Committee meeting, at which they present
reports and provide analysis on key areas of
significance to the Committee in relation to
audit and risk matters
•
At the request of the Committee, the Group’s
Chair and CEO also attended each Committee
meeting
•
Meetings cover regular agenda items on audit,
risk and internal controls, compliance and
policies. Additional matters are considered as
required and other members of management
are invited to attend for specific subjects
where required
•
In preparation for each Committee meeting,
I meet privately with management, the
external auditor and the outsourced Head of
Internal Audit
•
At the end of the annual audit process and
at several points throughout the year the
Committee meets with the external auditor
without any members of the executive
management team being present
•
As part of the annual evaluation of risk
management and internal controls the
Committee as a whole also met with the
Head of the outsourced Internal Audit function
without management being present
•
I continued to attend meetings of the Group’s
Valuation Committee as a member, which
provides both an element of independence
to the Committee and provides me with a
detailed understanding of the conclusions
reached on the portfolio company valuations.
My fellow Non-executive Director, Heejae Chae
joined the Committee as a member during the
year and attended the Valuation Committee
meetings from December. The Valuation
Committee met three times in 2023 and once
in early 2024 to review HY23 and FY23 reporting
•
The Committee met five times in 2023 as well
as one ad hoc meeting to attend tendering
audit firm presentations and discuss which
candidate auditor it would recommend to
the Board
•
Following her appointment as Non-executive
Director on 18 January 2023 the Committee
welcomed Anita Kidgell as a member
In relation to governance considerations:
•
The Committee comprises five independent
Non-executive Directors. All members are
considered to be appropriately experienced
to fulfil their role and allow the Committee to
perform its duties effectively
•
I am deemed by the Board to have recent and
relevant financial experience, being a Fellow
of the Chartered Institute of Management
Accountants, having held senior executive
financial positions and current Audit and Risk
Committee experience
•
The Board is satisfied that for the year under
review, and thereafter, the Group’s Audit and
Risk Committee, as a whole, has competence
relevant to the sector in which the Group
operates
•
The Committee assessed its performance in
2023 through externally facilitated interviews
with Committee members, members of
management and the external auditor and
the observation of a Committee meeting by a
third-party specialist evaluation firm
•
The Committee undertook an evaluation of the
external auditor’s performance in 2022, which
included input from the Finance Director, CFOO
and wider finance team. Through this process
minor areas for improvement were identified
and agreed with the auditor who was deemed
to have met the Committee’s expectation in
the year
•
The Committee undertook an assessment
of the outsourced internal audit function in
2023, which included input from the individual
members of the Group’s Risk Council, Non-
executive Directors and all those members
of management who had interacted with the
internal auditor in the year. The assessment
considered the internal audit function’s
understanding of the Group’s business risks,
their subject matter expertise, professionalism
and effectiveness in improving the Group’s
operations via recommendations that are
appropriate for the size, nature and scale
of the business. The Committee concluded
that the internal auditor performance had
met expectations and that the outsourced
internal audit model remained appropriate for
the Group
•
The Committee continues to review its terms
of reference at least annually and will propose
updates where necessary or appropriate to
reflect current market practice
130
IP GROUP PLC ANNUAL REPORT 2023
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR GOVERNANCE
AUDIT AND RISK COMMITTEE REPORT
.
Key accounting judgements
Valuation of unquoted equity and debt
investments:
The valuation of unquoted investments remains
the most material area of judgement in the
financial statements and is a key audit risk for
the Group. At each reporting date the Committee
receives updates from the Valuation Committee
and from the external auditor regarding the
approach that has been taken in assessing and
auditing, respectively, the key estimates and
judgements in respect of portfolio valuations.
Significant time at Committee meetings is
assigned to discuss portfolio valuations, which has
allowed the Committee to debate and challenge
the approach taken. The Group continued to
apply its valuation policy consistently across
investments at the year end, which included
consideration of the macro environment and
relevant industry metrics where available.
As in previous years, the Committee has paid
significant attention to the valuation of the
Group’s holdings in unquoted investments,
which have not completed a funding round
within the last twelve months, assets which
have seen significant positive or negative
developments in the year, companies which
require funding in the next twelve months, and
assets with active financings or sale processes
on or after the measurement date. We continue
to make extensive use of third-party valuations
specialists, with external valuation reports
being commissioned on eleven of our larger
investments (2022: ten). This increases the
independence of our process and incorporates
how other market participants are approaching
valuations for year end reporting.
The Valuation Committee assists in the
application and documentation of management’s
valuation judgements in line with the Group’s
accounting policies and industry valuation
guidance from IPEV. The Valuation Committee is
chaired by the CFOO, its members are the Group
CEO, myself and Heejae Chae who joined in the
second half of the year. Also in attendance were
the Managing Partners of the Technology and Life
Sciences investment partnerships, Non-executive
Director Anita Kidgell, Finance Director and
external auditor. During the year, the Committee
considered the Valuation Committee’s terms
of reference and composition, formalised that
at least one member would be independent to
management going forward noting that any
member of the Board would be able to attend
and observe. The Committee concluded that it
was satisfied with the current level of scrutiny and
challenge by the ARC at the Valuation Committee.
The Valuation Committee met three times in 2023
and once in early 2024 to review management’s
valuations for the half-year and full-year results
reporting and included a review of market data
and peer analysis. The 2023 Valuation Committee
meeting included a review of valuation
disclosures including the IFRS 13 requirements
around the disclosure of quantitative valuation
inputs and sensitivity disclosures. The Committee
agreed that, given greater emphasis placed on
revenue multiples for certain companies during
2022, disclosure of inputs and sensitivities for this
valuation method was now appropriate. For other
valuation methods, the Valuation Committee
concluded that quantitative unobservable
inputs were below a size threshold which would
warrant disclosure under IFRS 13, paragraph
93(d). Additionally, the Valuation Committee
concluded that because of the large number of
inputs used in the valuation of assets valued on
‘other methods’, any range of reasonably possible
alternative assumptions does not significantly
impact the fair value and hence does not require
disclosure. See further details in note 13 on
page 174.
Members
Attendees
Chief Executive Officer
Greg Smith
Managing Director
Tech Investment
Partnership
Mark Reilly
Finance Director
Chris Glasson
Chief Financial and
Operating Officer
David Baynes
(Chair)
Managing Director
Life Sciences Investment
Partnership
Sam Williams
External Audit Partner
Jonathan Martin
(Observer)
Non-executive Director
and ARC Chair
Dr Caroline Brown
Valuation Committee recommends reporting
date valuations to the
Audit and Risk Committee
Valuation Committee review and challenge
of the recommendations, request further
reviews or third-party support be utilised
Valuation assessments and
recommendations shared with
Committee, including relevant
supporting evidence
Group finance team prepare valuations with
input from:
Investment
Directors
External
valuation
specialists
Market data
sources
The Valuation Committee
Non-executive Director
Heejae Chae
(joined December 2023)
OUR FINANCIALS
BUSINESS OVERVIEW
131
IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR GOVERNANCE
AUDIT AND RISK COMMITTEE REPORT
.
Application of the consolidation
requirements of IFRS 10 in respect of
IPG Cayman LP and Istesso Limited
The Group’s US portfolio is held via a limited
partnership fund, IPG Cayman LP, which was set
up in 2018 to facilitate third-party investment into
the US portfolio. The fund is managed by Longview
Innovations, formerly IP Group, Inc. the Group’s US
operating subsidiary. In November 2021, the Group
disposed of its equity in IPG Cayman LP’s fund
manager, IP Group, Inc. and was deemed to no
longer control the fund manager of the fund and
was therefore deconsolidated from the Group’s
accounts from that date. In 2023, the Group made
an investment of $10m into IPG Cayman LP via a
Simple Agreement for Future Equity (“SAFE”) whose
terms were consistent with those of another third
party which also entered into a SAFE with IPG
Cayman LP in the year. The terms of the SAFE did
not confer additional substantive rights.
In respect of Istesso Limited, although the Group
has a 56.5% undiluted economic interest in the
company, the Group holds a significant proportion
of its equity via non-voting shares resulting in it
holding less than 50% of the voting rights at the
company. Additionally, the Group does not control
the board of Istesso Limited via a majority of board
directors and has no mechanism whereby it can
do so and therefore its results are not consolidated
with those of the Group. During the year, the Group
provided a £13.5m convertible loan to Istesso
Limited. This was in addition to a £10m convertible
loan which was provided in 2022. The terms of
the loans contain specific provisions preventing
their conversion where this would result in IP
Group obtaining control of Istesso. In addition, the
Group provided £1.5m equity funding to Istesso
in 2023. As part of this transaction, convertible
loans advanced by IP Group and a third party in
2020 converted into equity, leading to a marginal
increase in IP Group’s economic interest (from
56.4% to 56.5%), but a decrease in IP Group’s voting
rights as a result of IP Group’s debt conversion
being into non-voting shares. The new convertible
loan note does not confer additional substantive
rights. Istesso Limited updated its Articles of
Association in the year to clarify that IP Group
Board Directors would be required to resign if IP
Group were to be deemed to control the company.
The Committee reviewed and discussed
management’s detailed assessment and
conclusion that the Group does not control IPG
Cayman LP and Istesso Limited under IFRS 10
at its meetings in July 2023 and February 2024
and agreed that this judgment continued to
be appropriate.
Review of Annual Report and
Accounts and Half-yearly Report
The Committee carried out a thorough review
of the Group’s Annual Report and Accounts and
its Half-yearly Report for 2023 resulting in the
recommendation of both for approval by the
Board. In carrying out its review, the Committee
gave particular consideration to whether the
Annual Report, taken as a whole, was fair, balanced
and understandable, concluding that it was. It
did this primarily through consideration of the
reporting of the Group’s performance, business
model and strategy, the competitive landscape in
which it operates, the significant risks it faces, the
progress made against its strategic objectives and
by its portfolio companies during the year.
During the year, the Committee considered the
application of IFRS 10, segmental reporting, long-
term viability and going concern disclosures and
reviewed a summary of controls reliance obtained
in the year and related internal control disclosures
made within the Corporate Governance Report
and the use of Alternative Performance Measures
(“APMs”).
Going concern and long-term
viability review
On an annual basis the Committee reviews and
approves the long-term viability review prepared
by management and satisfies itself that the
Group remains a going concern for a period of at
least 12 months from the publication date of the
accounts, and that therefore the going concern
basis for the preparation of the Group’s results
remains appropriate.
The Committee reviewed management reports
setting out its view of the Group’s long-term
viability including a description of the factors
considered in forming an assessment of the
Group’s prospects. The long-term viability review
was based on the Group’s three-year strategic
plan, including forecast investment, realisations,
overheads, financing cash flows and dividends.
The Committee agreed to recommend the
Viability Statement to the Board for approval. For
the details of the viability assessment, including
stress-test scenarios, please refer to page 73.
Risk and internal controls
The key elements of the Group’s internal control
framework and procedures are set out on pages
60 to 63. The principal risks the Group faces are
set out on pages 64 to 72. During the year, the
Committee devoted part of each meeting to
items concerning risk and its management.
An important element of the Group’s risk
management framework is the Risk Council
whose purpose is to co-ordinate governance,
risk and controls internally prior to reporting
to the Committee and Board. Its permanent
members are the CFOO, Company Secretary,
Finance Director and Senior Compliance and Risk
Manager, with other executives and management
from across the business attending during the
year as necessary. The Risk Council met six times
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during the year and reported to the Committee at
each meeting.
During 2023, the Committee reviewed
management’s updated assessment of strategic
and principal risks and risk appetite statements
prepared using input from an executive
management workshop and took part in a risk
workshop to assess the Group’s principal risks,
risk appetite and desired control investment.
The Committee reviewed output from the Risk
Council summarising key themes arising from
the operational risk reviews and the Group’s
updated strategic and principal risk profiles.
The Committee also considered the Group’s
emerging risks and paid special attention to
economic and geopolitical uncertainty, cyber and
IT security including developing AI threats, global
government spending on healthcare and drug
development, competition and the use of AI and
climate change transition and technology risks.
The Committee also reviewed the output of
testing of key controls in place to mitigate the
Group’s principal risks. This review included all
material financial, operational and compliance
controls. PwC, on behalf of management,
assessed the control design and operating
effectiveness of these key controls over principal
risks using the COSO framework principles. No
significant failings or weaknesses were identified.
However, control deficiencies were identified
and recommendations for improvement were
agreed with management. Implementation of the
remedial actions is monitored by the Risk Council
and reported to the Committee.
During 2023, the Committee reviewed
management’s progress on an agreed
programme of work to support the Group’s
transition to a new internal controls regime,
reviewed the Group’s response to the FRC’s open
consultation on proposed changes to the UK
Corporate Governance Code released in May and
an interim update from the FRC in November.
The Committee’s review of risk management
systems in place includes an assessment of
performance of the Risk Council against agreed
objectives and monitoring of key risk indicators
against pre-agreed thresholds determined in
response to the Board’s annual assessment of the
Group’s principal risks and risk appetite.
Cybersecurity
The Board continues to consider cyberthreats as a
principal risk to the business with an overall “high”
risk rating. During the year the Committee has
been provided with regular updates on cyber and
information security in place across the Group
as well as specific results from a cyber-focused
internal audit review and the results of a serious
cyber incident scenario-based training session
with the Group’s “Silver Response Team” chaired
by the CFOO which was facilitated by Baker
Mckenzie. The Group continued to deploy regular
and interactive cyber threat training sessions in
response to the continued and increasing threats
posed by external threat actors in relation to
this risk.
Compliance
Ensuring compliance for regulated businesses
remains a priority from the perspective of the
Committee and regular updates are provided
to the Committee by the Group’s subsidiary
compliance officers and international equivalents.
Ongoing internal reviews are conducted through
the use of a compliance monitoring programme
and specialist advisory firms and local advisors
are employed to advise on areas of regulation
relevant to the Group’s operations where required.
The Committee reviewed and recommended the
approval of a new internal Conflicts of Interest
Policy, which formalises the conflict management
work already being undertaken at Group-level on
investment and divestment committee decision
making and also reviewed existing Group policies
on anti-bribery and corruption, speaking-up,
related-party transactions and modern slavery.
The Committee reviewed the summary findings
of procedures in place which review the nature
of gifts and hospitality received and provided in
the year to identify any instances of corruption
and bribery, and management carried out an
enhanced fraud risk assessment and determined
that there was a low risk of fraud occurring
undetected. We recognise this as an area of
importance and will seek to increase the level of
testing performed in relation to fraud in the future.
Internal audit
2023 was the fifth year that the Group operated
an outsourced internal audit function, delivered
by PwC. The internal audit function designed
a plan of work having considered the Group’s
principal, strategic and operational risks, which
the Committee approved. The internal audit
function delivered three internal control reviews
which were focused on (i) cybersecurity risk via
an ethical hacking style review; (ii) an Australian
investment approval process review; and (iii)
an ESG review which considered high-level
governance arrangements surrounding internal
and external ESG reporting.
The Committee values the work of the internal
auditor in providing independent and objective
assurance in meeting its corporate governance
and regulatory responsibilities.
The Committee considered the effectiveness
of the internal audit function by reviewing the
outcomes of their reports and recommendations,
management’s implementation of
recommendations and closure of the audits,
access to experts, the annual strategy document
and a management assessment of quality in the
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year. The Committee concluded that the internal
audit function had performed satisfactorily in the
year and recommended the continued use of an
outsourced internal audit function. See page 130
for more information on the review.
External audit
The Committee discussed the auditor’s plan
for the 2023 year end audit at its July and
December meetings. This included a summary
of the proposed audit scope and the auditor’s
assessment of the most significant financial
reporting risks facing the Group, together with
the auditor’s proposed audit approach. The
main areas of audit focus for the year were the
valuation of the Group’s unquoted investments,
the application of IFRS 10 as it relates to IPG
Cayman LP and Istesso Limited and the carried
interest liability.
As in previous years a number of the Group’s
small trading subsidiaries will be audited by
Moore Northern Home Counties Limited, which
has worked well in previous years and facilitates
an accelerated audit timetable for these
subsidiary audits.
Appointment and independence
The Committee advises the Board on the
appointment of the external auditor and on its
remuneration both for audit and non-audit work
and discusses the nature, scope and results of
the audit with the external auditor. The Committee
keeps under review the independence and
objectivity of the external auditor. Controls in
place include monitoring the independence and
effectiveness of the audit, implementing a policy
on the engagement of the external auditor to
supply non-audit services, and a review of the
scope of the audit and fee and performance of
the external auditor.
Mandatory audit firm rotation is required after
20 years, and a re-tender must be conducted at
least every ten years. The Code requires disclosure
of the length of tenure of the current audit firm
and when a tender was last conducted, as well as
advance notice of any re-tendering plans. KPMG
LLP have acted as the auditor to the Group since
2014 and the lead audit partner rotates every five
years to assure independence. Jonathan Martin
became lead audit partner responsible for the
Group’s statutory audit for the 2019 year end
onwards and the Committee has benefited from
Jonathan Martin’s extensive valuation expertise
and continues to believe he is a suitable audit
partner for the Group.
Audit tender
The 2023 audit was the tenth year of KPMG
audit. Therefore the Committee undertook
a comprehensive tender process in 2023 for
the audit in relation to the year ended
31 December 2024 which is described in
detail below.
The Committee conducted an audit tender
process in the year and in September 2023
recommended to the Board the re-appointment
of KPMG as the Group’s external auditor for the
year ending 31 December 2024. A resolution will
be proposed at the 2024 AGM for shareholders to
approve the re-appointment of KPMG.
As Chair of the Committee, I led the audit tender
process and oversaw the work of management
who supported the Committee in developing and
implementing the planned approach and met
with the audit tender working group (the CFO,
Finance Director and Senior Compliance and
Risk Manager) regularly throughout the process.
The Board received and commented on the
tender materials before they were issued to the
participating firms.
The process was designed to be transparent and
efficient and give each firm an equal opportunity
to tender and included meetings with key
members of management and myself as ARC
Chair in advance of the formal presentations to
the Committee. Materials to aid understanding
of the Group, its operations and its portfolio were
released via a data room and a technical exercise
which allowed the firms to showcase their
technical expertise and ability to engage with
non-technical members of the Committee was
included in the process.
No firm was prohibited from taking part in the
tender, however only KPMG, Grant Thornton and
Mazars were issued with a request for proposal.
Each firm was assessed against the key criteria
listed below. In line with the FRC’s latest minimum
standard for Audit Committees and the external
audit, these explicitly did not include price or
perceived cultural fit.
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Audit tender criteria
Audit quality; including valuation expertise
of private technology and life sciences
companies and FTSE 250 audit experience and
recent FRC AQR review results
Audit team capability; including lead audit
partner experience in private valuations and
listed company engagements, feedback from
professional references and ability to challenge
management
Ability to work productively with the
management and Board of Directors
Understanding of the Group’s business and risks
Efficiency and accuracy of costing
Transition planning
Each tendering audit firm was invited to present
to the Committee on the same day. After each
audit firm presentation there was time allocated
for each Committee member to document
their individual feedback via the balanced
scorecard criteria and for the Committee to
have a discussion on the presenting firm. After
all firms had presented the Committee received
feedback from management on their assessment
of the technical exercise which had been scored
and a verbal update on references obtained for
each firm. The Committee immediately ruled out
one firm and requested further information and
referencing to be carried out on the remaining
firms. A final recommendation was made by
the Committee to the Board to conditionally
re-appoint KPMG as the Group’s external auditor
in September 2023 based on their ability to
satisfy the Committee’s audit tender selection
requirements, noting they scored higher in each of
the evaluation criteria. Planning for the transition
to a new audit partner at KPMG has commenced
which includes shadowing Jonathan Martin on the
FY23 audit.
Non-audit work
The Group has a policy for setting out what non-
audit services can be procured by the Group from
the external auditor. The policy aims to support
and safeguard the objectivity and independence
of the external auditor and incorporates the
requirements of the FRC’s revised Ethical
Standards for auditors.
A copy of the Group’s non-audit services policy is
available at
https://www.ipgroupplc.com/investors/
corporate-governance
.
An analysis of audit and non-audit fees paid
to KPMG is provided in note 6 to the financial
statements on page 167. In 2023, the only non-
audit service provided by KPMG in the year was
the review of the Group’s half-yearly results.
The Committee prefers to engage other firms
to perform consulting engagements to ensure
that the independence of the auditor is not
compromised and during 2023 engaged
the services of PwC (internal audit, risk and
governance), Deloitte (valuations), Kroll
(valuations) and S&P (valuations).
Auditor independence
KPMG has reviewed its own independence in
line with the FRC’s Ethical Standards for auditors
and its own ethical guideline standards. KPMG
has confirmed to the Committee that following
its review it is satisfied that it has acted in
accordance with relevant regulatory and
professional requirements. KPMG has provided
the Committee with details of the safeguards
in place which include a culture of regular
training, internal accountability and independent
reviews performed by an engagement quality
control reviewer, who is a partner not otherwise
involved in the Group’s audit, and an annual
attestation from all KPMG partners and staff to
confirm their compliance with internal ethics
and independence policies and procedures
including in particular that the audit team have
no prohibited shareholdings which include IP
Group plc and portfolio company shares. Having
considered the aforementioned safeguards,
the level of non-audit services provided in the
year and a formal statement of independence,
the Audit and Risk Committee is satisfied that
the independence of the auditor has been
maintained.
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Auditor effectiveness
In order to assess the effectiveness of the
external audit process, the Committee
requested that management provide an
assessment of the outcome of the 2022
audit process, considering (i) the robustness
of planning, (ii) independence, objectivity
and ethics, (iii) robustness of the audit, (iv)
quality of delivery, (v) quality of people
and service and (vi) insight and ideas. The
memo highlighted potential areas for future
improvement including the front-loading of
more audit work into H2 2023 to reduce the
volume of critical audit work carried out in
the latter part of February 2024, which were
agreed between management and the
auditor, and discussed by the Committee.
These results were reviewed in conjunction
with KPMG’s reports to the Committee.
The Committee concurred with management’s
view that there had been appropriate focus
and challenge of the primary areas of audit
risk and the Committee concluded that the
substantive and detailed approach taken
by the auditor was entirely appropriate and
effective. As in the previous year, the vast
majority of the Group’s assets by value were
reviewed as part of the audit, and once
again there was particular emphasis on the
valuation of unquoted investments. I was able
to see first-hand how the auditor challenged
management on their assumptions used when
determining the valuation of certain unquoted
portfolio company valuations at each
Valuation Committee meeting. KPMG utilised
specialist corporate finance staff to support its
audit work on the valuation of Istesso Limited
and First Light Fusion Limited and, overall, the
auditor’s risk-based approach drew on both
their knowledge of the business and the wider
economic and business environment.
Dr Caroline Brown
Chair of the Audit and Risk Committee
12 March 2024
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Report of the Directors
The Directors present their report together with
the audited financial statements for IP Group plc
and its subsidiaries for the year ended
31 December 2023.
Corporate Governance Statement
Information that fulfils the requirements of the
Corporate Governance Statement can be found
on pages 86 to 101 and is incorporated into this
Directors’ Report by reference.
Results
During the period, the Group made an
overall loss after taxation for the year ended
31 December 2023 of £174.4m (2022: £344.5m loss).
Directors
The names of Directors who currently hold office
are as follows:
Executive Directors
•
Greg Smith
•
David Baynes
Non-executive Directors
•
Sir Douglas Flint (Chair)
•
Dr Caroline Brown
•
Heejae Chae
•
Aedhmar Hynes
•
Anita Kidgell
•
Dr Elaine Sullivan
Details of the interests of the Directors in the
share capital of the Company are set out in the
Directors’ Remuneration Report on page 122.
Principal risks and uncertainties and
financial instruments
The Group is exposed to a number of risks
through its operations, where risk mitigation is
most notably focused on ensuring continued
capabilities to support portfolio companies.
The Group’s risk management objectives and
policies are described on pages 60 to 73 and
in the Corporate Governance Report on page
100. Further information on the Group’s financial
risk management objectives and policies,
including those in relation to credit risk, liquidity
risk and market risk, is provided in note 3 to the
consolidated financial statements, along with
further information on the Group’s use of financial
instruments.
Significant events affecting the
Group
Details of the important events affecting the
Group and future development of the business
are described on pages 12 to 13 of the Strategic
Report.
Branches of the Group outside of
the UK
The Group has branches in Australia and
Hong Kong.
Significant agreements
The Group has entered into various agreements
to form partnerships or collaborations with nine
universities in Australasia, which contain certain
change of control provisions. In addition, in
2022 the Group entered into a Note Purchase
Agreement with Phoenix Group in relation to
private placement debt. This agreement contains
certain provisions that would apply in the event of
a change of control.
Share capital and related matters
Details of the structure of the Company’s share
capital and the rights attaching to the Company’s
shares are set out in note 1 to the consolidated
financial statements. There are no specific
restrictions on the size of a holding or on the
transfer of shares, which are both governed by
the general provisions of the Company’s Articles
of Association (the “Articles”) and prevailing
legislation.
At the last Annual General Meeting (“AGM”) of the
Company held on 15 June 2023 (the “2023 AGM”),
authority was given to the Directors pursuant to
the relevant provisions of the Companies Act 2006
(the “CA 2006”) to allot shares and grant rights
over securities in the Company up to a maximum
amount equivalent to approximately one-third of
the issued ordinary share capital on 19 April 2023
at any time up to the earlier of the conclusion of
the next AGM of the Company and 15 September
2024. In addition, at the 2023 AGM, the Directors
were also given authority effective for the same
period as the aforementioned authority to allot
shares and grant rights over securities in the
Company up to a maximum of approximately
two-thirds of the total ordinary share capital in
issue on 19 April 2023 in connection with an offer
by way of a fully pre-emptive rights issue. The
Directors propose to renew both authorities at
the Company’s next AGM to be held on 12 June
2024 (“2024 AGM”). The authorities being sought
are in accordance with guidance issued by the
Investment Association.
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A further special resolution passed at the 2023
AGM granted authority to the Directors to allot
equity securities in the Company for cash, without
regard to the pre-emption provisions of the CA
2006, both: (i) up to a maximum of approximately
10% of the aggregate nominal value of the
shares in issue on 19 April 2023 with an additional
authority of up to a maximum of approximately
2% of the aggregate nominal value of the shares
in issue on 19 April 2023 only for the purposes of
a follow-on offer that the Board determines to
be of a kind contemplated by paragraph 3 of
section 2B of the Pre-Emption Group’s Statement
of Principles (the “Statement of Principles”); and
(ii) up to a further maximum of approximately 10%
of the aggregate nominal value of the shares in
issue on 19 April 2023 with an additional authority
of up to a maximum of approximately 2% of the
aggregate nominal value of the shares in issue
on 19 April 2023 only for the purposes of a follow-
on offer that the Board determines to be of a kind
contemplated by paragraph 3 of section 2B of the
Statement of Principles, each authority exercisable
at any time up to the earlier of the conclusion of
the next AGM of the Company and 15 September
2024. The Directors will seek to renew these
authorities for a similar period at the 2024
AGM. The authorities sought are in accordance
with the revised Statement of Principles which
were published by the Pre-Emption Group in
November 2022.
Under Part 18, Chapter 5 of the CA 2006, the
Company has the power to purchase its own
shares. At the 2023 AGM, a special resolution was
passed which granted the Directors authority
to make market purchases of the Company’s
shares pursuant to these provisions of the CA
2006 up to a maximum of approximately 10% of
the Company’s issued share capital on 19 April
2023 provided that the authority granted set a
minimum and maximum price at which purchases
can be made and is exercisable at any time up to
the earlier of the conclusion of the next AGM and
15 September 2024. This authority has been utilised
during the year in connection with the Group’s
share buyback programme, further detail of which
can be found on page 35. The Directors will seek to
renew this authority within similar parameters and
for a similar period at the 2024 AGM.
Articles of Association
The Company’s Articles may be amended by a
special resolution of the shareholders and were
last amended at the 2021 AGM.
Substantial shareholders
As at the dates stated below the following
shareholders held interests of 3% or more in
the Company’s ordinary share capital. Other
than as shown, so far as the Company (and its
Directors) are aware, no other person held or was
beneficially interested in a disclosable interest in
the Company.
Shareholder
% as at
31 December
2023
% as at
29 February
2024
RPMI Railpen
15.66
15.71
BlackRock
4.66
4.70
Vanguard Group
4.46
4.53
Lombard Odier
Investment Managers
4.29
7.37
Baillie Gifford
4.28
4.19
Liontrust Sustainable
Investments
4.12
–
Schroder Investment
Management
3.91
3.93
Corporate and social responsibility
Details of the Group’s policies, activities and
aims with regard to its corporate and social
responsibilities, including details of its greenhouse
gas emissions, are included in the meaningful
impact section on pages 38 to 45, in the
Corporate Governance Statement on page 93
and in the s172(1) Statement on pages 74 to 85.
Directors’ indemnity and liability
insurance
During the year, the Company has maintained
liability insurance in respect of its Directors.
Subject to the provisions of the CA 2006, the
Articles provide that, to the extent that the
proceeds of any liability insurance are insufficient
to meet any liability in full, every Director is
entitled to be indemnified out of the funds of the
Company against any liabilities incurred in the
execution or discharge of his or her powers or
duties. A copy of the indemnity is available for
inspection as required by the CA 2006.
Regulation
Top Technology Ventures Limited and Parkwalk
Advisors Ltd, wholly owned subsidiaries of the
Company, are authorised and regulated by the
Financial Conduct Authority under the Financial
Services and Markets Act 2000. In Australia, the
Group’s wholly owned subsidiary, IP2IPO Australia
Management Pty Ltd is authorised and regulated
by the Australian Securities and Investment
Commission. IP Group Greater China Services
Limited, a wholly owned Hong Kong-incorporated
subsidiary of the Company, is authorised and
regulated by the Hong Kong Securities and
Futures Commission.
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Post balance sheet events
Material events occurring since the balance
sheet date are disclosed in note 29 to the Group’s
financial statements.
Political expenditure
It is the Board’s policy not to incur political
expenditure or otherwise make cash contributions
to political parties and there is no intention of
changing that policy. However, the CA 2006 is
very broadly drafted in this area and the Board
has raised a concern that it may include activities
such as funding conferences or supporting
certain bodies involved in policy review and law
reform. Accordingly, at the 2023 AGM and as at
previous AGMs, the shareholders supported a
resolution on a precautionary basis to authorise
the Group to incur political expenditure (as
defined in Section 365 of the CA 2006) not
exceeding £50,000 in total at any time from
the date of the 2023 AGM up to the conclusion
of the 2024 AGM. The Board intends to seek
renewed authority for the Group to incur political
expenditure of not more than £50,000 in total at
the Company’s 2024 AGM, which the Group might
otherwise be prohibited from making or incurring
under the terms of the CA 2006.
Political donations
The Group did not make any political donations
during 2023.
Disclosure of information to auditor
Each Director at the date of approval of this
Annual Report confirms that:
•
so far as the Director is aware, there is no
relevant audit information of which the
Company’s auditor is unaware
•
the Director has taken all steps that they
ought to have taken as a Director in order
to make themselves aware of any relevant
audit information and to establish that
the Company’s auditor is aware of that
information
This confirmation is given and should be
interpreted in accordance with the provisions of
Section 418 of the CA 2006.
Going concern
The Directors confirm that they have a reasonable
expectation that the Group will have adequate
resources to continue in operational existence
for at least the next twelve months from the date
of the accounts and, accordingly, they continue
to adopt the going concern basis in preparing
the financial statements. A viability statement,
as required by the Code, can be found in the
Strategic Report on page 73.
Appointment of auditor
During the year the Audit and Risk Committee
conducted an audit tender process and
recommended the re-appointment of KPMG
LLP as the Group’s external auditor to the Board.
Having reviewed KPMG’s ability to satisfy the
audit tender selection requirements and the
Committee’s assessment that they were the best
candidate for the Group, the Board agreed to
recommend the re-appointment of KPMG as the
Group’s auditors, subject to both agreement on
the terms of the engagement letter and approval
by shareholders at the 2024 AGM. For further
information relating to the audit tender process,
please refer to pages 134 and 135 of the Audit and
Risk Committee Report. A resolution to appoint
KPMG LLP, together with a resolution to authorise
the Directors to determine their remuneration, will
be proposed at the 2024 AGM.
On behalf of the Board
Angela Leach
Company Secretary
12 March 2024
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STATEMENT OF DIRECTORS’ RESPONSIBILITIES
.
IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS
In respect of the Annual Report and
the financial statements
The Directors are responsible for preparing the
Annual Report, Strategic Report, Directors’ Report,
the Directors’ Remuneration Report, the Corporate
Governance Statement and the Group and parent
Company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare
Group and parent Company financial statements
for each financial year. Under that law they have
elected to prepare the Group financial statements
in accordance with UK-adopted international
accounting standards and applicable law and
have elected to prepare the parent Company
financial statements in accordance with UK
accounting standards and applicable law
(UK Generally Accepted Accounting Practice),
including FRS 101 Reduced Disclosure Framework.
Under company law, the Directors must not
approve the financial statements unless they
are satisfied that they give a true and fair view
of the state of affairs of the Group and parent
Company and of the Group’s profit or loss for that
period. In preparing each of the Group and parent
Company financial statements, the Directors are
required to:
•
select suitable accounting policies and then
apply them consistently
•
make judgements and estimates that are
reasonable, relevant, reliable and prudent
•
for the Group financial statements, state
whether they have been prepared in
accordance with UK-adopted international
accounting standards
•
for the parent Company financial statements,
state whether applicable UK accounting
standards have been followed, subject to any
material departures disclosed and explained in
the parent Company financial statements
•
assess the Group and parent Company’s
ability to continue as a going concern,
disclosing, as applicable, matters related to
going concern
•
use the going concern basis of accounting
unless they either intend to liquidate the Group
or the parent Company or to cease operations,
or have no realistic alternative but to do so
The Directors are responsible for keeping
adequate accounting records that are sufficient
to show and explain the parent Company’s
transactions and disclose with reasonable
accuracy at any time the financial position
of the parent Company and enable them to
ensure that its financial statements comply with
the Companies Act 2006. They are responsible
for such internal control as they determine
is necessary to enable the preparation of
financial statements that are free from material
misstatement, whether due to fraud or error, and
have general responsibility for taking such steps
as are reasonably open to them to safeguard the
assets of the Group and to prevent and detect
fraud and other irregularities.
The Directors are responsible for the maintenance
and integrity of the corporate and financial
information included on the Company’s website.
Legislation in the UK governing the preparation
and dissemination of financial statements may
differ from legislation in other jurisdictions.
In accordance with Disclosure Guidance and
Transparency Rule (“DTR”) 4.1.16R, the financial
statements will form part of the annual financial
report prepared under DTR 4.1.17R and 4.1.18R. The
auditor’s report on these financial statements
provides no assurance over whether the annual
financial report has been prepared in accordance
with those requirements.
Responsibility statement of the
Directors in respect of the annual
financial report
The Directors confirm that to the best of our
knowledge:
•
the financial statements, prepared in
accordance with the applicable set of
accounting standards, give a true and fair
view of the assets, liabilities, financial position
and profit or loss of the Company and the
undertakings included in the consolidation
taken as a whole
•
the Strategic Report includes a fair review of the
development and performance of the business
and the position of the Company and the
undertakings included in the consolidation taken
as a whole, together with a description of the
principal risks and uncertainties that they face
The Directors consider the Annual Report and
Accounts, taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the Group’s
position and performance, business model and
strategy.
On behalf of the Board
Sir Douglas Flint
Chair
12 March 2024
140
IP GROUP PLC ANNUAL REPORT 2023
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR GOVERNANCE
INDEPENDENT AUDITOR’S REPORT
.
TO THE MEMBERS OF IP GROUP PLC
1.
Our opinion is unmodified
We have audited the financial statements of IP Group plc (“the Group”)
for the year ended 31 December 2023 which comprise the Consolidated
Statement of Comprehensive Income, the Consolidated Statement
of Financial Position, the Consolidated Statement of Cash Flows, the
Consolidated Statement of Changes in Equity, the Company Balance
Sheet, the Company Statement of Changes in Equity, and the related notes,
including the accounting policies in note 1.
In our opinion:
•
the financial statements give a true and fair view of the state of the
Group’s and of the Parent Company’s affairs as at 31 December 2023 and
of the Group’s loss for the year then ended;
•
the Group financial statements have been properly prepared in
accordance with UK-adopted international accounting standards;
•
the parent Company financial statements have been properly prepared
in accordance with UK accounting standards, including FRS 101 Reduced
Disclosure Framework; and
•
the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are
described below. We believe that the audit evidence we have obtained
is a sufficient and appropriate basis for our opinion. Our audit opinion is
consistent with our report to the Audit and Risk Committee.
We were first appointed as auditor by the shareholders on 13 May 2014.
The period of total uninterrupted engagement is for the ten financial years
ended 31 December 2023. We have fulfilled our ethical responsibilities under,
and we remain independent of the Group in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied to listed public
interest entities. No non-audit services prohibited by that standard were
provided.
Overview
Materiality: group financial
statements as a whole
£12.4m (2022: £12.5m)
0.9% (2022: 0.8%) of total assets
Coverage
100% (2022: 100%) of total assets
Key audit matters
vs 2022
Recurring risks
Valuation of certain unquoted
investments (Group)
Application of IFRS 10 in
respect of Istesso Limited and
IP Cayman LP (Group)
Recoverability of investments
in subsidiary undertakings
(Parent Company)
2.
Key audit matters: our assessment of risks
of material misstatement
Key audit matters are those matters that, in our professional judgement,
were of most significance in the audit of the financial statements and
include the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by us, including those which had the
greatest effect on: the overall audit strategy; the allocation of resources in
the audit; and directing the efforts of the engagement team. We summarise
below the key audit matters (unchanged from 2022), in decreasing order
of audit significance, in arriving at our audit opinion above, together with
our key audit procedures to address those matters and our findings from
those procedures in order that the Company’s members, as a body, may
better understand the process by which we arrived at our audit opinion.
These matters were addressed, and our findings are based on procedures
undertaken, in the context of, and solely for the purpose of, our audit of
the financial statements as a whole, and in forming our opinion thereon,
and consequently are incidental to that opinion, and we do not provide a
separate opinion on these matters.
OUR GOVERNANCE
BUSINESS OVERVIEW
141
IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR FINANCIALS
INDEPENDENT AUDITOR’S REPORT
.
KEY AUDIT MATTERS
The risk
Our response
Valuation of certain
unquoted investments
(Certain specific
investments within total
unquoted investments
of £961.1 million (2022:
£817.9 million) of which,
£630.2 million are
included within “The Top
20” investment)
Refer to page 129
(Audit
and Risk Committee
Report)
, page 152
(accounting policy)
and
page 152
(accounting
policy and financial
disclosures).
Subjective Valuation
Certain of the unquoted investments within the
total unquoted investments balance of £961.1m
are subject to significant inherent estimation
uncertainty in determining their valuation.
The factors considered in assessing which
unquoted investments were subject to
significant risk included the prominence in
the financial statements (“The Top 20”), the
quantum of the individual investment, time
since funding round aligned with time until
“cash out”, performance of the investment and
changes in the valuation methodology.
Unquoted investments are measured at fair
value, which is established in accordance
with the International Private Equity and
Venture Capital Valuation Guidelines, by using
measurements of value such as prices of recent
orderly transactions, discounted cash flows, and
earnings multiples.
We assessed that there is a significant risk
associated with this matter due to the quantum
of the balance, and the level of judgement
associated with certain unobservable inputs.
The effect of these matters is that, as part of
our risk assessment, we determined that the
valuation of certain unquoted investments has
a high degree of estimation uncertainty, with
a potential range of reasonable outcomes
greater than our materiality for the financial
statements as a whole, and possibly many
times that amount.
The financial statements (note 13) disclose the
sensitivity estimated by the Group in respect of
all the unquoted investments held.
We performed the tests below rather than seeking to rely on any of the
Group’s controls, because the nature of the balance is such that we would
expect to obtain audit evidence primarily through the detailed procedures
described below:
Our procedures included:
•
Historical comparisons
: Assessment of investment valuations, comparing
current period valuations and movements to prior period valuations
in the absence of any exits, to understand the reasons for significant
variances and determine whether they are indicative of bias or error in
the Company’s approach to valuations;
•
Methodology choice
: In the context of observed industry best practice
and the provisions of the International Private Equity and Venture Capital
Valuation Guidelines, we challenged the appropriateness of the valuation
basis selected;
•
Our valuation experience
: Challenging key judgements affecting
investee company valuations, such as calibration to latest funding
rounds or adjustments to reported NAVs. We compared key underlying
financial data inputs to external sources, investee company audited
accounts where available and management information as applicable.
Our work included consideration of events which occurred subsequent to
the period end until the date of this audit report;
•
Comparing valuations
: Where a recent transaction has been used to
value a holding, we obtained an understanding of the circumstances
surrounding the transaction and whether it was considered to be on an
arms-length basis and suitable as an input into a valuation;
•
Our corporate finance expertise
: Utilising the expertise of KPMG Corporate
Finance specialists to assist the audit team in assessing specific areas for
a selection of assets, such as evaluating the appropriateness of valuation
assumptions (e.g. discount rates) and methodologies; and
•
Assessing transparency
: Consideration of the appropriateness, in
accordance with relevant accounting standards, of the disclosures in
respect of unlisted investments and the effect of changing one or more
inputs to reasonably possible alternative valuation assumptions.
Our findings:
We found the Company’s valuation of certain specific unquoted investments
to be mildly cautious (2022: mildly cautious) and the related disclosures to
be proportionate (2022: proportionate).
142
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OUR GOVERNANCE
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR FINANCIALS
INDEPENDENT AUDITOR’S REPORT
.
KEY AUDIT MATTERS
The risk
Our response
Application of IFRS 10
in respect of Istesso
Limited and IPG
Cayman LP
Refer to page 129
(Audit
and Risk Committee
Report)
, and page 152
(accounting policy and
financial disclosures)
.
Significant accounting judgement
In determining whether an entity is classified
as a subsidiary and is therefore required to be
consolidated under the principles of IFRS 10, the
directors assess whether the Group has control
over the entities.
In respect of Istesso Limited, the directors have
concluded that the Group does not control this
entity. This is because although the Group has
56.5% of the undiluted economic interest in the
entity, it holds less than 50% of the voting rights
at the company and does not control the Board.
However, there is significant judgement involved
in the application of IFRS 10 in respect of Istesso
Limited. Given that the Group holds close to 50%
of the voting rights at the company, it must be
determined whether the Group has de facto
control under the principles of IFRS 10.
During the year, the Group purchased £1.5m of
A shares in Istesso and had a convertible loan
note convert into A shares. The A shares have
no voting rights and both the share purchase
and conversion involved other investors who
acquired ordinary shares which have voting
rights which slightly diluted the Group voting
rights. Additionally, the Group provided a £13.5m
convertible loan to Istesso Limited. Given this
change in circumstances, the application of
IFRS 10 in respect of Istesso Limited remains an
area of focus in the current year audit.
We performed the tests below rather than seeking to rely on any of the
Group’s controls because the nature of the judgement is such that we would
expect to obtain audit evidence primarily through the detailed procedures
described.
Our procedures included:
Accounting analysis:
For Istesso Limited:
•
We inspected the articles of association for Istesso Limited to understand
the voting rights of the entity.
•
We evaluated the independence of the other shareholders of Istesso
Limited from the Group through inspecting evidence of their identities
and relationships with the Group.
•
We inspected the terms of the convertible loan and additional capital
invested in the period to determine whether it provides the Group with
any substantive rights.
•
We challenged whether the Group has de facto control with reference
to the size of the Group’s holding of voting rights relative to the size
and dispersion of the holdings of other vote holders and historic voting
patterns of vote holders.
For IPG Cayman LP:
•
We inspected the Limited Partnership Agreement of IPG Cayman LP to
understand the contractual decision making authority.
•
We evaluated the kick-out rights of the Group and other LPs.
•
We inspected the terms of the SAFE to determine whether it provides the
Group with any substantive rights.
•
We challenged whether the Group has de facto control with reference to
its relationship and influence over the fund manager.
OUR GOVERNANCE
BUSINESS OVERVIEW
143
IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR FINANCIALS
INDEPENDENT AUDITOR’S REPORT
.
KEY AUDIT MATTERS
The risk
Our response
Application of IFRS 10
in respect of Istesso
Limited and IPG
Cayman LP - continued
Refer to page 129
(Audit
and Risk Committee
Report)
, and page 152
(accounting policy and
financial disclosures)
.
During the year, the Group provided IPG
Cayman LP with $10m through a Simple
Agreement for Future Equity (“SAFE”). Given this
change in circumstances, the application of
IFRS 10 in respect of IPG Cayman LP has been
an area of increased focus in the current
year audit. The directors have concluded that
the Group does not control this entity. This is
because although the Group has 58.1% of the
undiluted economic interest in the entity, the
decision making authority is established within
the LPA which designates Longview Innovation
Corp as the sole fund manager and does
not provide the Group with substantive kick-
out rights. Therefore, the relevant decisions
are controlled via the respective contractual
arrangements, rather than direct voting rights.
Assessing transparency:
•
We considered the appropriateness of the disclosures related to the
application of IFRS 10 in respect of Istesso Limited and IPG Cayman LP.
Our findings:
In determining the application of IFRS 10 in respect of Istesso Limited there is
room for judgement and we found that the Group’s judgement gave slightly
more weight to arguments favouring the conclusion that Istesso Limited is
not required to be consolidated (2022 finding: the Group’s judgement gave
slightly more weight to arguments favouring the conclusion that Istesso
Limited is not required to be consolidated).
In determining the application of IFRS 10 in respect of IP Cayman LP there
is room for judgement and we found that the Group’s judgement was
balanced (2022 finding: balanced).
We found the related disclosures to be proportionate (2022: proportionate).
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OUR GOVERNANCE
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR FINANCIALS
INDEPENDENT AUDITOR’S REPORT
.
KEY AUDIT MATTERS
The risk
Our response
Recoverability
of investment
in subsidiary
undertakings (Parent
Company)
(£330.4 million; 2022:
£329.2 million)
Refer to page 152
(accounting policy and
financial disclosures)
.
Low risk, high value
The carrying amount of the Parent Company’s
investments in subsidiaries represents 34%
(2022: 35%) of the Parent Company’s total
assets. Their recoverability is not at a high
risk of significant misstatement or subject
to significant judgement. However, due to
their materiality in the context of the Parent
Company financial statements, this is
considered to be the area that had the greatest
effect on our overall Parent Company audit.
We performed the tests below rather than seeking to rely on any of the
Parent Company’s controls because the nature of the balance is such that
we would expect to obtain audit evidence primarily through the detailed
procedures described.
Our procedures included:
Tests of detail:
•
We compared the carrying amount of 100% of investments in subsidiaries
draft balance sheet to identify whether their net assets, being an
approximation of their minimum recoverable amount, were in excess of
their carrying amount and assessed whether those subsidiaries have
historically been profit-making therefore supporting the recoverability of
the debt owed.
Assessing transparency:
•
We considered the appropriateness, in accordance with relevant
accounting standards, of the disclosures related to the Parent Company’s
investment in subsidiaries.
Our findings:
We found the recoverability of the Parent Company’s investment in
subsidiary undertakings to be balanced (2022 findings: balanced) and the
related disclosures to be proportionate (FY22: proportionate).
We continue to perform procedures over loans to subsidiary undertakings in the Parent Company. However, following a reassessment of the risk of material
misstatement we no longer consider the loans, which are repayable on demand, to have a significant risk of non payment, we have not assessed this as one
of the most significant risks in our current year audit and, therefore, it is not separately identified in our report this year.
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BUSINESS OVERVIEW
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STRATEGIC REPORT
OUR FINANCIALS
INDEPENDENT AUDITOR’S REPORT
.
3.
Our application of materiality and an
overview of the scope of our audit
Materiality for the Group financial statements as a
whole was set at £12.4m (2022: £12.5m), determined with
reference to a benchmark of Group total assets, of which
it represents 0.9% (2022: 0.8%).
Materiality for the Parent Company financial statements
as a whole was set at £10.3m (2022: £7.2m), determined
with reference to a benchmark of Parent Company total
assets, of which it represents 1.0% (2022: 0.8%).
In line with our audit methodology, our procedures
on individual account balances and disclosures were
performed to a lower threshold, performance materiality,
so as to reduce to an acceptable level the risk that
individually immaterial misstatements in individual
account balances add up to a material amount across
the financial statements as a whole.
Performance materiality was set at 75% (2022: 75%)
of materiality for the financial statements as a whole,
which equates to £9.3m (2022: £9.4m) for the Group and
£7.7m (2022: £5.4m) for the Parent Company. We applied
this percentage in our determination of performance
materiality because we did not identify any factors
indicating an elevated level of risk.
We agreed to report to the Audit and Risk Committee
any corrected or uncorrected identified misstatements
exceeding £0.6m (2022: £0.6m), in addition to other
identified misstatements that warranted reporting on
qualitative grounds.
The Group team performed the audit of the Group as if
it was a single aggregated set of financial information.
The audit was performed using the materiality and
performance materiality levels set out above.
The scope of the audit work performed was fully
substantive as we did not rely upon the Group’s internal
control over financial reporting.
Total assets
£1,411.6m
(2022: £1,558m)
Group materiality
£12.4m
(2022: £12.5m)
Total assets
Group materiality
£12.4m
Whole financial statements materiality
(2022: £12.5m)
£9.3m
Whole financial statements
performance materiality
(2022: £9.4m)
£0.6m
Misstatements reported to the
Audit and Risk Committee
(2022: £0.6m)
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OUR GOVERNANCE
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR FINANCIALS
INDEPENDENT AUDITOR’S REPORT
.
4.
The impact of climate change on our audit
In planning our audit we have considered the potential impacts of climate
change on the Group’s business and its financial statements.
Climate change impacts the Group principally through the valuation of
investments and through potential reputational risk associated with the
Group’s strategy. The Group’s exposure to climate change is primarily
through the investee companies, as the key valuation assumptions and
estimates could be impacted by climate risks, for example where a new low
carbon technology is more likely to attract greater investment; this is most
apparent in the Cleantech investments.
As part of our audit we have made enquiries of directors to understand the
extent of the potential impact of climate change risk on the Group’s financial
statements and the Group’s preparedness. We have performed a risk
assessment of how the impact of climate change may affect the financial
statements and our audit, in particular over the valuation of unquoted
investments and the related key audit matter above.
Given the nature of the current investment portfolio, the valuation methods
and investing strategy of the Group, we consider that climate risks do not
have a significant effect on our key audit matters.
We have read the disclosure of climate related information in the front half of
the annual report and considered consistency with the financial statements
and our audit knowledge.
5.
Going concern
The directors have prepared the financial statements on the going concern
basis as they do not intend to liquidate the Group or the Company or to
cease their operations, and as they have concluded that the Group’s and
the Company’s financial position means that this is realistic. They have also
concluded that there are no material uncertainties that could have cast
significant doubt over their ability to continue as a going concern for at least
a year from the date of approval of the financial statements (“the going
concern period”).
We used our knowledge of the Group, its industry, and the general economic
environment to identify the inherent risks to its business model and analysed
how those risks might affect the Group’s and Parent Company’s financial
resources or ability to continue operations over the going concern period.
The risks that we considered most likely to adversely affect the Group’s and
Parent Company’s available financial resources and metrics relevant to debt
covenants over this period were:
•
Significant additional funding being made into current and future
investee companies;
•
Reduction in realisations over the period including from listed investments.
We considered whether these risks could plausibly affect the liquidity or
covenant compliance in the going concern period by comparing severe, but
plausible downside scenarios that could arise from these risks individually
and collectively against the level of available financial resources and
covenants indicated by the Group’s financial forecasts.
We considered whether the going concern disclosure in note 1 to the
financial statements gives a full and accurate description of the Directors’
assessment of going concern.
Our conclusions based on this work:
•
we consider that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate;
•
we have not identified, and concur with the directors’ assessment that
there is not, a material uncertainty related to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s or
Company’s ability to continue as a going concern for the going concern
period;
•
we have nothing material to add or draw attention to in relation to the
directors’ statement in note 1 to the financial statements on the use of
the going concern basis of accounting with no material uncertainties
that may cast significant doubt over the Group and Company’s use of
that basis for the going concern period, and we found the going concern
disclosure in note 1 to be acceptable; and
•
the related statement under the Listing Rules set out on page 140
is materially consistent with the financial statements and our audit
knowledge.
However, as we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent with
judgements that were reasonable at the time they were made, the above
conclusions are not a guarantee that the Group or the Company will
continue in operation.
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BUSINESS OVERVIEW
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STRATEGIC REPORT
OUR FINANCIALS
INDEPENDENT AUDITOR’S REPORT
.
6.
Fraud and breaches of laws and regulations
– ability to detect
Identifying and responding to risks of material misstatement
due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”) we
assessed events or conditions that could indicate an incentive or pressure to
commit fraud or provide an opportunity to commit fraud.
Our risk assessment procedures included:
•
Enquiring of directors and the Audit and Risk Committee as to the Group’s
high-level policies and procedures to prevent and detect fraud as well as
whether they have knowledge of any actual, suspected or alleged fraud;
•
Reading minutes of meetings of those charged with governance;
•
Considering remuneration incentive schemes and performance
targets; and
•
Holding discussions with fraud specialists to challenge our risk
assessment conclusions on fraud risks.
We communicated identified fraud risks throughout the audit team and
remained alert to any indications of fraud throughout the audit.
As required by auditing standards, and taking into account our overall
knowledge of the control environment, we performed procedures to
address the risk of management override of controls, in particular the risk
that management may be in a position to make inappropriate accounting
entries and the risk of bias in accounting entries and judgements such as
valuation of certain unquoted investments and application of IFRS 10 with
regard to Istesso Limited and IPG Cayman LP.
On this audit, we do not believe there is a fraud risk related to revenue
recognition because revenue from services and other income are simple
in nature with respect to accounting policy choice, and are easily verifiable
to external data sources or agreements with little or no requirement for
estimation.
We did not identify any additional fraud risks.
We performed procedures including identifying journal entries to test
based on risk criteria and comparing the identified entries to supporting
documentation. These included unusual account pairings and material post
closing journals.
Identifying and responding to risks of material misstatement
due to non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be
expected to have a material effect on the financial statements from our
general commercial and sector experience and through discussion with
the directors (as required by auditing standards), and discussed with the
directors and other management the policies and procedures regarding
compliance with laws and regulations.
As certain entities within the Group are regulated, our assessment of risks
involved gaining an understanding of the control environment including the
entity’s procedures for complying with regulatory requirements.
We communicated identified laws and regulations throughout our team and
remained alert to any indications of non-compliance throughout the audit.
The potential effect of these laws and regulations on the financial
statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect the
financial statements including financial reporting legislation (including
related companies legislation), distributable profits legislation and taxation
legislation including the Substantial Shareholding Exemption (“SSE”), and we
assessed the extent of compliance with these laws and regulations as part of
our procedures on the related financial statement items.
Secondly, the Group is subject to many other laws and regulations where the
consequences of non-compliance could have a material effect on amounts
or disclosures in the financial statements, for instance through the imposition
of fines or litigation. We identified the following areas as those most likely to
have such an effect: liquidity and certain aspects of company legislation
recognising the nature of the Group’s activities. Auditing standards limit
the required audit procedures to identify non-compliance with these laws
and regulations to enquiry of the directors and other management and
inspection of regulatory and legal correspondence, if any. Therefore, if a
breach of operational regulations is not disclosed to us or evidence from
relevant correspondence, an audit will not detect that breach.
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STRATEGIC REPORT
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INDEPENDENT AUDITOR’S REPORT
.
Context of the ability of the audit to detect fraud or breaches
of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that
we may not have detected some material misstatements in the financial
statements, even though we have properly planned and performed our
audit in accordance with auditing standards. For example, the further
removed non-compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less likely the inherently
limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk of non-detection
of fraud, as these may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. Our audit procedures
are designed to detect material misstatement. We are not responsible for
preventing non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
7.
We have nothing to report on the other information
in the Annual Report
The directors are responsible for the other information presented in the
Annual Report together with the financial statements. Our opinion on the
financial statements does not cover the other information and, accordingly,
we do not express an audit opinion or, except as explicitly stated below, any
form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether, based on our financial statements audit work, the information
therein is materially misstated or inconsistent with the financial statements
or our audit knowledge. Based solely on that work we have not identified
material misstatements in the other information.
Strategic Report and Directors’ Report
Based solely on our work on the other Information:
•
we have not identified material misstatements in the Strategic Report and
the Directors’ Report;
•
in our opinion the information given in those reports for the financial year
is consistent with the financial statements; and
•
in our opinion those reports have been prepared in accordance with the
Companies Act 2006.
Directors’ Remuneration Report
In our opinion the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the Companies Act 2006.
Disclosures of emerging and principal risks and
longer-term viability
We are required to perform procedures to identify whether there is a material
inconsistency between the directors’ disclosures in respect of emerging and
principal risks and the viability statement, and the financial statements and
our audit knowledge.
Based on those procedures, we have nothing material to add or draw
attention to in relation to:
•
the directors’ confirmation within the viability statement on page 73 that
they have carried out a robust assessment of the emerging and principal
risks facing the Group, including those that would threaten its business
model, future performance, solvency and liquidity;
•
the risks and internal controls disclosures on page 132 describing these
risks and how emerging risks are identified, and explaining how they are
being managed and mitigated; and
•
the directors’ explanation in the viability statement of how they have
assessed the prospects of the Group, over what period they have done
so and why they considered that period to be appropriate, and their
statement as to whether they have a reasonable expectation that
the Group will be able to continue in operation and meet its liabilities
as they fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary qualifications
or assumptions.
We are also required to review the viability statement, set out on page 73
under the Listing Rules. Based on the above procedures, we have concluded
that the above disclosures are materially consistent with the financial
statements and our audit knowledge.
Our work is limited to assessing these matters in the context of only the
knowledge acquired during our financial statements audit. As we cannot
predict all future events or conditions and as subsequent events may result in
outcomes that are inconsistent with judgements that were reasonable at the
time they were made, the absence of anything to report on these statements
is not a guarantee as to the Group’s and Company’s longer-term viability.
OUR GOVERNANCE
BUSINESS OVERVIEW
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IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR FINANCIALS
INDEPENDENT AUDITOR’S REPORT
.
Corporate governance disclosures
We are required to perform procedures to identify whether there is a material
inconsistency between the directors’ corporate governance disclosures and
the Financial Statements and our audit knowledge.
Based on those procedures, we have concluded that each of the following is
materially consistent with the financial statements and our audit knowledge:
•
the directors’ statement that they consider that the Annual Report
and Financial Statements taken as a whole is fair, balanced and
understandable, and provides the information necessary for shareholders
to assess the Group’s position and performance, business model and
strategy;
•
the section of the Annual Report describing the work of the Audit and
Risk Committee, including the significant issues that the Audit and Risk
Committee considered in relation to the Financial Statements, and how
these issues were addressed; and
•
the section of the Annual Report that describes the review of the
effectiveness of the Group’s risk management and internal control
systems.
We are required to review the part of the Corporate Governance Statement
relating to the Group’s compliance with the provisions of the UK Corporate
Governance Code specified by the Listing Rules for our review. We have
nothing to report in this respect.
8.
We have nothing to report on the other matters on
which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in
our opinion:
•
adequate accounting records have not been kept by the parent
Company, or returns adequate for our audit have not been received from
branches not visited by us; or
•
the parent Company financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
•
certain disclosures of directors’ remuneration specified by law are not
made; or
•
we have not received all the information and explanations we require for
our audit.
We have nothing to report in these respects.
150
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR FINANCIALS
INDEPENDENT AUDITOR’S REPORT
.
9.
Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 140, the directors
are responsible for: the preparation of the financial statements including
being satisfied that they give a true and fair view; such internal control
as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud
or error; assessing the Group and parent Company’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 they either intend to
liquidate the Group or the parent Company or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue our opinion in an auditor’s report.
Reasonable assurance is a high level of assurance, but does not guarantee
that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken
on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at
www.frc.org.uk/auditorsresponsibilities.
The Company is required to include these financial statements in an
annual financial report prepared using the single electronic reporting
format specified in the TD ESEF Regulation under Disclosure Guidance and
Transparency Rule (“DTR”) 4.1.17R and 4.1.18R. This auditor’s report provides no
assurance over whether the annual financial report has been prepared in
accordance with those requirements that format.
10.
The purpose of our audit work and to whom we owe
our responsibilities
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006 and
the terms of our engagement by the Company. Our audit work has been
undertaken so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report, and the
further matters we are required to state to them in accordance with the
terms agreed with the Company, 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 and the Company’s members, as a body,
for our audit work, for this report, or for the opinions we have formed.
Jonathan Martin (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London, E14 5GL
12 March 2024
OUR GOVERNANCE
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IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR FINANCIALS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
.
FOR THE YEAR ENDED 31 DECEMBER 2023
Note
2023
£m
2022
£m
Portfolio return and revenue
Change in fair value of equity and debt investments
13
(110.9 )
(303.4 )
(Loss) on disposal of equity and debt investments
15
(10.8 )
(7.8 )
Change in fair value of limited and limited liability partnership interests
14
(38.8 )
Revenue from services and other income
4
(154.6 )
(302.0 )
Administrative expenses
Carried interest plan credit/(charge)
23
(12.0 )
Share-based payment charge
22
(2.6 )
(2.9 )
Other administrative expenses
8
(28.0 )
(27.4 )
(25.9 )
(42.3 )
Operating loss
7
(180.5 )
(344.3 )
Finance income
Finance costs
(5.6 )
(1.4 )
Loss before taxation
(176.3 )
(343.5 )
Taxation
10
(1.0 )
Loss for the year
(174.4 )
(344.5 )
Other comprehensive income
Exchange differences on translating foreign operations
(0.4 )
Total comprehensive loss for the year
(174.8 )
(344.0 )
Attributable to:
Equity holders of the parent
(171.3 )
(341.5 )
Non-controlling interest
(3.5 )
(2.5 )
(174.8 )
(344.0 )
Loss per share
Basic (p)
11
(16.53 )
(33.01 )
Diluted (p)
11
(16.53 )
(33.01 )
152
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR FINANCIALS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION.
AS AT 31 DECEMBER 2023
Note
2023
£m
2022
£m
ASSETS
Non-current assets
Goodwill
Property, plant and equipment
Joint venture investment
Portfolio:
Equity investments
13
Debt investments
13
Limited and limited liability partnership interests
14
Receivable on sale of debt and equity investments
15, 17
Total non-current assets
Current assets
Trade and other receivables
16
Receivable on sale of debt and equity investments
15, 17
Deposits
3
Cash and cash equivalents
3
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Called up share capital
21
Share premium account
Retained earnings
Total equity attributable to equity holders
Non-controlling interest
(9.1 )
(5.6 )
Total equity
Current liabilities
Trade and other payables
18
Borrowings
19
Total current liabilities
Non-current liabilities
Borrowings
19
Carried interest plan liability
23
Deferred tax liability
10
Loans from limited partners of consolidated funds
19
Revenue share liability
20
Total non-current liabilities
Total liabilities
Total equity and liabilities
Registered number: 04204490
form an integral part of the financial statements
on pages 152 to 220. The financial statements
were approved by the Board of Directors and
authorised for issue on 12 March 2024 and were
signed on its behalf by:
Greg Smith
David Baynes
Chief Executive Officer
OUR GOVERNANCE
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IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR FINANCIALS
CONSOLIDATED STATEMENT OF CASH FLOWS
.
FOR THE YEAR ENDED 31 DECEMBER 2023
Note
2023
£m
2022
£m
Operating activities
Loss before taxation for the period
(176.3 )
(343.5 )
Adjusted for:
Change in fair value of equity and debt investments
13
Change in fair value of limited and limited liability partnership interests
14
(2.1 )
Loss on disposal of equity investments
15
Long-term incentive carry scheme (credit)/charge
23
(4.7 )
Carried interest scheme payments
23
(1.3 )
(1.0 )
Share-based payment charge
22
Finance income
(9.8 )
(2.2 )
Finance costs
Depreciation of right-of-use asset, property, plant and equipment
Corporate finance fees settled in the form of portfolio company equity
(0.1 )
(0.5 )
Changes in working capital
Decrease/(Increase) in trade and other receivables
16
(0.5 )
Decrease in trade and other payables
18
(0.3 )
(2.8 )
Drawdowns from limited partners of consolidated funds
Other operating cash flows
Interest received
1
Net interest received
Net cash outflow from operating activities
(17.9 )
(23.5 )
Investing activities
Purchase of property, plant and equipment
(0.3 )
Purchase of equity and debt investments
13
(63.4 )
(88.9 )
Investment in limited and limited liability partnership funds
14
(9.8 )
(4.6 )
Investment in joint venture
(0.6 )
Interest received on deposits
1
Cash flow to deposits
(191.7 )
(208.7 )
Cash flow from deposits
Proceeds from sale of equity and debt investments
15
Distribution from limited partnership funds
14
Net cash outflow from investing activities
(4.4 )
(2.3 )
Financing activities
Dividends paid
27
(13.0 )
(12.3 )
Repurchase of own shares – treasury shares
21
(0.1 )
(8.0 )
Lease principal payment
(0.5 )
(0.5 )
Interest paid
1
(5.5 )
Repayment of EIB loan facility
19
(6.2 )
(29.8 )
Drawdown of loan facility (net of costs)
19
Net cash inflow from financing activities
Net decrease in cash and cash equivalents
(17.0 )
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes
(0.2 )
Cash and cash equivalents at the end of the year
1
In the current year interest paid and interest received on
deposits have been shown separately. The directors have
chosen not to represent the prior year comparatives as the
amounts are immaterial.
The accompanying notes on pages 156 to 203
form an integral part of the financial statements.
154
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR FINANCIALS
1
Share premium – Amount subscribed for
share capital in excess of nominal value, net
of directly attributable issue costs.
2
Retained earnings – Cumulative net gains
and losses recognised in the consolidated
statement of comprehensive income net of
associated share-based payments credits
and distributions to shareholders.
3
Non-controlling interest – Share of profits
attributable to the Limited Partners of IP
Venture Fund II LP.
4
Currency translation – Reflects currency
translation differences on reserves non-GBP
functional currency subsidiaries. Exchange
differences on translating foreign operations
are presented before tax.
5
Issue of shares – Share premium in
connection with the Interim Scrip Dividend,
the Group has received valid elections from
shareholders resulting in a requirement to
issue new ordinary shares of 2 p each
(“New Shares”).
6
Purchase of treasury shares – Reflects
the issue of 220,302 ordinary shares, with
an aggregate value of £0.1 m, these were
purchased by the Company during the
year and are held in treasury. Total value
including costs was £0.1 m. (2022: 7,429,494
shares purchased for total value of £8.0 m,
total including costs of £8.0 m). These shares
were purchased for the £20m share buyback
share buyback approved by the Board in
December 2023.
7
Equity-settled share-based payments
– amounts recognised in respect of the
Group’s share-based payments schemes
recognised as a subsidiary investment in the
Company accounts with a corresponding
entry against equity.
8
Ordinary dividends – Of the £13.0m dividends
paid in 2023, £13.0m was settled in cash
(2022: £12.7m total, £12.3m cash, £0.4m Scrip).
No new shares were issued in respect of
scrip dividends in 2023 (2022: 485,569 shares
issued).
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
.
FOR THE YEAR ENDED 31 DECEMBER 2023
Attributable to equity holders of the parent
Share
capital
Share
premium
1
£m
Retained
earnings
2
£m
Total
£m
Non-
controlling
interest
3
£m
Total
equity
£m
At 1 January 2022
(3.1 )
Total comprehensive income for the period
Loss for the year
(342.0 )
(342.0 )
(2.5 )
(344.5 )
Currency translation
4
Total comprehensive income for the period
(341.8 )
(341.8 )
(2.5 )
(344.3 )
Transactions with owners, recorded directly in equity
Issue of shares
5
Purchase of treasury shares
6
(8.0 )
(8.0 )
(8.0 )
Equity-settled share-based payments
7
Ordinary dividends
8
(12.7 )
(12.7 )
(12.7 )
Total contributions by and distributions to owners
(17.8 )
(17.7 )
(17.7 )
At 1 January 2023
(5.6 )
Total comprehensive income for the period
Loss for the year
(170.9 )
(170.9 )
(3.5 )
(174.4 )
Currency translation
4
(0.9 )
(0.9 )
(0.9 )
Total comprehensive income for the period
(171.8 )
(171.8 )
(3.5 )
(175.3 )
Transactions with owners, recorded directly in equity
Purchase of treasury shares
5
(0.1 )
(0.1 )
(0.1 )
Equity-settled share-based payments
7
Ordinary dividends
8
(13.0 )
(13.0 )
(13.0 )
Total contributions by and distributions to owners
(10.5 )
(10.5 )
(10.5 )
At 31 December 2023
(9.1 )
OUR GOVERNANCE
BUSINESS OVERVIEW
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IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR FINANCIALS
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR GOVERNANCE
OUR FINANCIALS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
.
156
IP GROUP PLC ANNUAL REPORT 2023
A) Basis of preparation
The Annual Report and Accounts of IP Group plc
“Company”) and its subsidiary companies (together, the “Group”)
are for the year ended 31 December 2023 . The principal accounting
policies adopted in the preparation of the financial statements are
set out below. The policies have been consistently applied to all
the years presented, unless otherwise stated. The Group financial
statements have been prepared and approved by the directors in
accordance with UK–adopted international accounting standards
(“UK–adopted IFRS”).
The preparation of financial statements in compliance with IFRS
requires the use of certain critical accounting estimates. It also
requires Group management to exercise judgement in the most
appropriate selection of the Group’s accounting policies. The areas
where significant judgements and estimates have been made in
preparing the financial statements and their effect are disclosed in
note 2.
The financial statements are prepared on a going concern
basis. The directors have completed a detailed financial forecast
alongside severe but plausible scenario–based downside stress–
testing, including the impact of declining portfolio values and a
reduced ability to generate portfolio realisations.
At the balance sheet date, the Group had cash and deposits
of £226.9m, providing liquidity for at least two years’ operating
expenses, portfolio investment and debt repayments at recent
levels. Furthermore, the Group has a portfolio of investments
valued at around £1.2bn, which is anticipated to provide further
liquidity over the forecast period. Accordingly, our forecasting
indicates that the Group has adequate resources to enable it to
meet its obligations including its debt covenants and to continue
in operational existence for at least the next twelve months from
the approval date of the accounts. For further details see the
(i) New standards, interpretations and amendments effective
from 1 January 2023
No new standards, interpretations and amendments effective
in the year have had a material effect on the Group’s financial
statements.
(ii) New standards, interpretations and amendments not yet
effective
No new standards, interpretations and amendments not yet
effective are expected to have a material effect on the Group’s
IFRS 10 Investment Entity Exemption
IFRS 10 defines an investment entity as one which:
a.
Obtains funds from one or more investors for the purpose
of providing those investors with investment management
services
b.
Commits to its investors that its business purpose is to invest
funds solely for returns from capital appreciation, investment
income or both
c.
Measures and evaluates the performance of substantially all of
its investments on a fair value basis
We believe that IP Group plc does not meet this definition of an
investment entity with the key factors behind this conclusion being:
•
the absence of specific exit strategies for early–stage assets
(indicating condition (b) above is not satisfied)
•
the ability to hold investments indefinitely (indicating condition
(b) above is not satisfied)
•
the flexibility to explore the direct commercialisation of
intellectual property within the Group if that is determined to be
the most attractive means of generating value for shareholders.
(indicating condition (a) above is not satisfied)
Accordingly, we have applied IFRS 10 consolidation principles for
each group of entities as follows:
continued
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR GOVERNANCE
OUR FINANCIALS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
.
IP GROUP PLC ANNUAL REPORT 2023
157
Where the Group has control over an entity, it is classified as a
subsidiary. Typically, the Group owns a non–controlling interest
in its portfolio companies; however, in certain circumstances,
the Group takes a controlling interest and hence categorises
the portfolio company as a subsidiary. As per IFRS 10, an entity is
classed as under the control of the Group when all three of the
following elements are present: power over the entity; exposure to
variable returns from the entity; and the ability of the Group to use
its power to affect those variable returns.
In situations where the Company has the practical ability to direct
the relevant activities of the investee without holding the majority
of the voting rights, it is considered that de facto control exists. In
determining whether de facto control exists the Group considers
the relevant facts and circumstances, including:
•
The size of the Company’s voting rights relative to both the size
and dispersion of other parties who hold voting rights;
•
Substantive potential voting rights held by the Company and by
other parties;
•
Other contractual arrangements; and
•
Historic patterns in voting attendance.
In assessing the IFRS 10 control criteria in respect of the Group’s
private portfolio companies, direction of the relevant activities
of the company is usually considered to be exercised by the
company’s board, therefore the key control consideration is
whether the Group currently has a majority of board seats on a
given company’s board, or is able to obtain a majority of board
seats via the exercise of its voting rights. Control is reassessed
whenever facts and circumstances indicate that there may be a
change in any of these elements of control.
The consolidated financial statements present the results of
the Company and its subsidiaries as if they formed a single
entity. Intercompany transactions and balances between Group
companies are therefore eliminated in full. The consolidated
financial statements incorporate the results of business
combinations using the acquisition method. In the statement of
financial position, the acquiree’s identifiable assets and liabilities
are initially recognised at their fair values at the acquisition date.
Contingent liabilities dependent on the disposed value of an
associated investment are only recognised when the fair value is
above the associated threshold. The results of acquired operations
are included in the consolidated statement of comprehensive
income from the date on which control is obtained. They are
The majority of the Group’s portfolio companies are deemed to
be Associates, as the Group has significant influence (generally
accompanied by a shareholding of between 20% and 50% of
the voting rights) but not control. A small number of the Group’s
portfolio companies are controlled and hence consolidated, as per
section (i) above.
As permitted under IAS 28, the Group elects to hold investments
in Associates at fair value through profit and loss in accordance
with IFRS 9. This treatment is specified by IAS 28 Investment in
Associates and Joint Ventures, which permits investments held
by a venture capital organisation or similar entity to be excluded
from its measurement methodology requirements where those
investments are designated, upon initial recognition, as at fair
value through profit or loss and accounted for in accordance
with IFRS 9 Financial Instruments. Therefore, no associates are
presented on the consolidated statement of financial position.
Changes in fair value of associates are recognised in profit or
loss in the period of the change. The Group has no interests in
Associates through which it carries on its operating business.
During 2023, the Group made a £0.6m investment into a Joint
Venture established in preparation for potential fund operations
in China. Joint ventures are held at fair value with any change in
value recognised through the income statement.
The disclosures required by Section 409 of the Companies Act
2006 for associated undertakings are included in note 13 of the
Company financial statements. Similarly, those investments which
may not have qualified as an Associate but fall within the wider
scope of significant holdings and so are subject to Section 409
disclosures of the Companies Act 2006 are included in note 11 of
BUSINESS OVERVIEW
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OUR FINANCIALS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
.
158
IP GROUP PLC ANNUAL REPORT 2023
(iii) Limited Partnerships and Limited Liability Partnerships
(“Limited Partnerships”)
a) Consolidated Limited Partnership fund holdings
The Group has a holding in the following Limited Partnership fund,
which it determines that it controls and hence consolidates on a
line by line basis:
Interest in Limited | |
partnership | |
Name | % |
IP Venture Fund II LP (“IPVFII”) | 33.3 |
In order to determine whether the Group controls the above funds,
it has considered the IFRS 10 control model and related application
guidance. In respect of IPVFII, the Group has power via its role as
fund manager of the partnership, and exposure to variable returns
via its 33.3% ownership interest, resulting in the conclusion that the
Group controls and hence consolidates the fund.
b) Other non-consolidated Limited Partnership fund holdings
In addition to Limited Partnerships where Group entities act as
general partner and investment manager, the Group has interests
in three further entities which are managed by third parties:
Interest in Limited | |
partnership | |
Name | % |
IPG Cayman LP | 58.1 |
UCL Technology Fund LP (“UCL Fund”) | 46.4 |
Technikos LLP (“Technikos”) | 17.7 |
The rationale for IPG Cayman LP’s categorisation as a
non-consolidated fund is considered a significant accounting
judgment and is set out in note 2.
The Group has a 46.4% interest in the total capital commitments
of the UCL Fund. The Group has committed £24.8m to the fund
alongside the European Investment Fund (“EIF”), University College
London and other investors. Participation in the UCL Fund provides
the Group with the opportunity to generate financial returns and
visibility of potential intellectual property from across University
College London’s research base.
The Group has an 17.7% interest in the total capital commitments of
Technikos, a fund with an exclusive pipeline agreement with Oxford
University’s Institute of Biomedical Engineering.
See note 26 for disclosure of outstanding commitments in respect
of Limited Partnerships.
iv) Other third-party funds under management
In addition to the Limited Partnership fund IPVFII, described above,
the Group also manages other third-party funds, including within
its Parkwalk Advisors business unit, and on behalf of Australian
superannuation fund Hostplus. In both cases, the Group has no
direct beneficial interest in the assets being managed, and its sole
exposure to variable returns relates to performance fees payable
on exits above a specified hurdle. As a result, the Group is not
deemed to control these managed assets under IFRS10 and they
are not consolidated.
The total comprehensive income, assets and liabilities of non–
wholly owned entities are attributed to owners of the parent and
to the non–controlling interests in proportion to their relative
The Group accounts for business combinations using the
acquisition method from the date that control is transferred to the
Group (see (i) Subsidiaries above). Both the identifiable net assets
and the consideration transferred in the acquisition are measured
at fair value at the date of acquisition and transaction costs are
expensed as incurred. Goodwill arising on acquisitions is tested at
least annually for impairment. In instances where the Group owns
a non–controlling stake prior to acquisition the step acquisition
method is applied, and any gain or losses on the fair value of
the pre–acquisition holding is recognised in the consolidated
C) Other accounting policies
Regulated capital
Top Technology Ventures Limited and Parkwalk Advisors Ltd,
are Group subsidiaries which are subject to external capital
requirements imposed by the Financial Conduct Authority (“FCA”).
Similarly, the Group’s subsidiary in Hong Kong IP Group Greater
China Services Limited is subject to external capital requirements
imposed by the Securities and Futures Commission of Hong Kong
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
.
(“SFC”). As such these entities must ensure that they have sufficient
capital to satisfy their respective requirements. The Group ensures
it remains compliant with these requirements as described in their
respective financial statements.
Cash flow relating to portfolio investments have been presented
as investing cash flows as opposed to cash flows from operating
activities. Management considers this to be an appropriate
classification representing the fact that the relevant cashflows are
allocated towards resources intended to generate future income
and judgements
The directors make judgements and estimates concerning the
future. Estimates and judgements are continually evaluated and
are based on historical experience and other factors, such as
expectations of future events, and are believed to be reasonable
under the circumstances. Actual results may differ from these
estimates. The estimates and assumptions which have the most
significant effects on the carrying amounts of the assets and
liabilities in the financial statements are discussed below.
(i) Valuation of unquoted equity and debt investments and
limited partnership interests (significant estimate)
The Group’s accounting policy in respect of the valuation of
unquoted equity and debt investments is set out in note 13, and in
respect of limited partnership interests in note 14. In applying this
policy, the key areas over which judgement are exercised include:
•
Consideration of whether a funding round is at arm’s length
and therefore representative of fair value.
•
The relevance of the price of recent investment as an input to
fair value, which typically becomes more subjective as the time
elapsed between the recent investment date and the balance
sheet date increases.
•
In the case of companies with complex capital structures,
the appropriate methodology for assigning value to different
classes of equity based on their differing economic rights.
•
Where an upwards or downwards calibration adjustment to
a funding transaction valuation to reflect positive or negative
developments within the company in question, the size of the
adjustment made.
•
Where using valuation methods such as discounted cash flows
or revenue multiples, the assumptions around inputs including
the probability of achieving milestones and the discount rate
used, and the choice of comparable companies used within
revenue multiple analysis.
•
Where valuations are based on future events such as sales
processes or future funding rounds, the appropriate level of
execution risk to be applied to the anticipated event when
assessing its valuation impact as at the balance sheet date.
•
Debt investments typically represent convertible debt; in such
cases judgement is exercised in respect of the estimated equity
value received on conversion of the loan.
Valuations are based on management’s judgement after
consideration of the above and upon available information
believed to be reliable, which may be affected by conditions in the
financial markets. Due to the inherent uncertainty of the investment
valuations, the estimated values may differ significantly from the
values that would have been used had a ready market for the
investments existed, and the differences could be material. Note 13
provides disclosure details on sensitivity and estimation uncertainty.
(ii) Application of IFRS 10 in respect of Istesso Limited and IPG
Cayman LP (significant judgement)
Istesso Limited
In respect of Istesso Limited, although the Group has a 56.5%
undiluted economic interest in the company, the Group holds a
significant proportion of its equity via non–voting shares resulting in
it holding less than 50% of the voting rights at the company. Under
Istesso’s Articles of Association, strategic and day-to-day decisions
over running of the business rest with Istesso’s board of directors
rather than through shareholder voting rights attached to direct
ownership of equity interests held in the entity. In this respect, power
over Istesso is exercised predominantly through directors’ meetings,
on which IP Group is not deemed to have majority representation.
As such, the relationship between Istesso and IP Group is designed
in such a way that “shareholder” voting rights are not the dominant
factor in deciding who directs the investee’s relevant activities, but
it is the directors who do so. IP Group does not control the board of
Istesso Limited via a majority of board directors, and is specifically
prevented from appointing additional directors to gain control of
the board via restrictions in Istesso’s Articles of Association.
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During the year, the Group provided a £13.5m convertible loan to
Istesso Limited. This was in addition to a £10m convertible loan
which was provided in 2022. The terms of the loans contain specific
provisions preventing their conversion where this would result in IP
Group obtaining control of Istesso. In addition, the Group provided
£1.5m equity funding to Istesso in 2023. As part of this transaction,
convertible loans advanced by IP Group and a third party in
2020 converted into equity, leading to a marginal increase in IP
Group’s economic interest (from 56.4% to 56.5%), but a decrease
in IP Group’s voting rights as a result of IP Group’s debt conversion
being into non-voting shares.
Based on an updated control assessment, including
considerations around whether IP Group has ‘de facto’ control of
Istesso including inter alia the number of voting shares held by
the Group and its connected parties and the dispersion of other
parties’ voting rights, we have concluded that the Group does not
control Istesso Limited under IFRS 10.
Had we concluded that consolidation in the current year was
appropriate, the impact on the Group Balance Sheet would have
been to recognise Istesso Limited’s assets and liabilities and to
recognise additional intangible assets including goodwill based
on the fair value of the company at acquisition. The impact on
the Group Income Statement would have been the recognition of
Istesso Limited’s costs from the point of acquisition. Furthermore,
any subsequent fair value movements in the debt and equity of
Istesso Limited would not be recognised until the point where IP
Group was no longer deemed to control Istesso Limited.
IPG Cayman LP
The Group’s US portfolio is held via a limited partnership fund,
IPG Cayman LP, which was set up in 2018 to facilitate third-party
investment into this portfolio. The fund is managed by Longview
Innovations Inc., formerly an operating subsidiary of the Group.
Prior to 2021, the Group was judged to control both IPG Cayman
LP and Longview innovations Inc. under IFRS 10 and hence both
entities were consolidated.
In 2021, several events took place which caused us to reassess the
Group’s control of both entities:
•
IPG Cayman LP raised additional third–party funds in the
first half of 2021, which reduced the Group’s stake in the fund
from 80.7% to 58.1% and revised the fund’s Limited Partnership
Agreement to reduced the Group’s rights to replace the fund
manager.
•
Investors in the 2021 IPG Cayman LP funding round hold an
option to subscribe additional funds which, if exercised, would
result in IP Group holding less than 50% in the fund.
•
In November 2021 the Group disposed of its equity in IPG
Cayman LP’s fund manager, Longview Innovations Inc. and
hence no longer controls the fund manager.
As a result of these changes, our control assessment concluded
that Longview Innovations Inc, is acting as an agent on behalf of
all investors in the Cayman LP and not solely IPG plc, therefore
the Group no longer controls IPG Cayman LP. The Group therefore
ceased to consolidate it from November 2021.
Arriving at this conclusion required the application of judgement,
most significantly in assessing the application guidance contained
in IFRS 10 B19 which suggests that in some instances a special
relationship may exist (such as the fact that we remain the largest
individual investor in the fund), implying that an investor has a
more than passive interest in the investee. Having considered this
guidance we have concluded that on balance the Group does not
have power over IPG Cayman LP and hence does not control it.
During 2023, the Group advanced $10m into IPG Cayman LP via a
Simple Agreement for Future Equity (“SAFE”). The terms of this SAFE
were consistent with those of another third party who entered
into a SAFE with IPG Cayman LP in the year and did not confer any
additional substantive rights to the Group in the normal course
of business and as a result did not change the consolidation
conclusion in respect of IPG Cayman LP.
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161
Had we concluded that consolidation was appropriate in the
current year, the impact on the Group Balance Sheet would have
been a gross-up adjustment to reflect the full value of IPG Cayman
LP’s assets and liabilities, with no impact on the Group’s net assets.
The impact on the Group Income Statement would have been to
recognise IPG’s gross portfolio fair value movements and costs
from the date of acquisition, with profits attributable to minority
interest in IPG Cayman LP being reflected as a movement in
As set out in the principal risks and uncertainties section on
pages 64 to 72, the Group is exposed, through its normal
operations, to a number of financial risks, the most significant of
which are market, liquidity and credit risks.
In general, risk management is carried out throughout the Group
under policies approved by the Board of Directors. The following
further describes the Group’s objectives, policies and processes
for managing those risks and the methods used to measure
them. Further quantitative information in respect of these risks is
presented throughout these financial statements.
Price risk
The Group is exposed to equity securities price risk as a result
of the equity and debt investments, and investments in Limited
Partnerships held by the Group and recognised as at fair value
through profit or loss.
The Group mitigates this risk by having established investment
appraisal processes and asset monitoring procedures which
are subject to overall review by the Board. The Group has also
established corporate finance and communications teams
dedicated to supporting portfolio companies with fundraising
activities and investor relations.
The Group holds ten investments valued at £203.8m which are
publicly traded (2022: 13, £228.7m), and the remainder of its
investments are not traded on an active market.
The net portfolio loss in 2023 of £160.5m represents a 13%
decrease against the opening balance (2022: loss of £304.3m,
21.5%). Sensitivity analysis showing the impact of movements in
quoted equity and debt investments is disclosed in note 13, and
movements in Limited and Limited Liability interests is shown in
The Groups’ main exposure to foreign currency risk is via its
investment portfolio, which is partially denominated in US dollars,
Australian dollars, Euros and Swedish Krona. Further details of
currency exposure in the portfolio are given in notes 13 and 14.
The Group’s US dollar-denominated proceeds included in deferred
consideration at December 2023 was £9.4m (2022: £35.5m). The
reduction is largely due to the receipt of US dollar-denominated
proceeds totalling £30.8m in the first half of 2023 relating to the
disposal of WaveOptics.
The Group periodically enters into forward foreign exchange
contracts to mitigate risk of exchange rate exposure in respect
of non GPD-denominated proceeds. As at 31 December 2023 the
notional amount of the forward foreign exchange contracts held
by the Company was £nil (2022: $26.3m). The settlement date of
(iii) Interest rate risk
The Group holds a debt facility with the European Investment
Bank and a loan note facility primarily with Phoenix Group with the
overall balance as at 31 December 2023 amounting to £135.6m
(excluding setup costs). These loans are all subject to fixed rate
interest (following the repayment of variable rate loans in the year)
being subject to an average fixed rate interest of 4.99% (2022:
4.65%).
For further details of the Group’s loans including covenant details
see note 19.
The other primary impact of interest rate risk to the Group is the
impact on the income and operating cash flows as a result of the
interest–bearing deposits and cash and cash equivalents held by
the Group.
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(iv) Concentrations of risk
The Group is exposed to concentration risk via the significant majority of the portfolio being UK–based companies and thus subject to the
performance of the UK economy. In recent years, the Group has decreased the scale of its operations in the US as a result of the dilution
of its holding in IPG Cayman LP. The group has, however, the scale of its operations in Australia have increased as a result of additional
investment in this geography and portfolio value gains.
The Group mitigates this risk, in co–ordination with liquidity risk, by managing its proportion of fixed to floating rate financial assets.
The table below summarises the interest rate profile of the Group.
2023 | 2022 | |||||||
Fixed | Floating | Interest | Fixed | Floating | Interest | |||
rate | rate | free | Total | rate | rate | free | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | |
Financial assets | ||||||||
Equity investments | – | – | 1,011.5 | 1,011.5 | – | – | 1,120.8 | 1,120.8 |
Debt investments | – | – | 83.7 | 83.7 | – | – | 38.1 | 38.1 |
Limited and limited liability partnership | ||||||||
interests | – | – | 69.7 | 69.7 | – | – | 99.6 | 99.6 |
Trade receivables | – | – | 0.6 | 0.6 | – | – | 2.1 | 2.1 |
Other receivables | – | – | 7.6 | 7.6 | – | – | 6.7 | 6.7 |
Receivable on sale of debt and equity | ||||||||
investments | – | – | 9.2 | 9.2 | – | – | 48.2 | 48.2 |
Deposits | 126.0 | – | – | 126.0 | 152.8 | – | – | 152.8 |
Cash and cash equivalents | 16.8 | 83.9 | 0.2 | 100.9 | – | 88.7 | – | 88.7 |
Total | 142.8 | 83.9 | 1,182.5 | 1,409.2 | 152.8 | 88.7 | 1,315.5 | 1,557.0 |
Financial liabilities | ||||||||
Trade payables | – | – | (0.5) | (0.5) | – | – | (1.3) | (1.3) |
Other accruals and deferred income | – | – | (16.5) | (16.5) | – | – | (15.6) | (15.6) |
Borrowings | (135.2) | – | – | (135.2) | (81.4) | – | – | (81.4) |
Carried interest plan liability | – | – | (38.0) | (38.0) | – | – | (44.1) | (44.1) |
Deferred tax liability | – | – | (4.8) | (4.8) | – | – | (6.8) | (6.8) |
Loans from Limited Partners of | ||||||||
consolidated funds | – | – | (19.8) | (19.8) | – | – | (19.5) | (19.5) |
Revenue share liability | – | – | (6.4) | (6.4) | – | – | (13.0) | (13.0) |
Total | (135.2) | – | (86.0) | (221.2) | (81.4) | – | (100.3) | (181.7) |
At 31 December 2023, if interest rates had been 1% higher/lower, post-tax loss for the year, and other components of equity, would have
been £2.2m (2022: £2.0m) higher/lower as a result of higher interest received on cash and deposits.
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163
The Group seeks to manage liquidity risk, to ensure sufficient liquidity is available to meet foreseeable needs and to invest cash assets
safely and profitably. The Group’s treasury management policy asserts that at any one point in time no more than 60% of the Group’s
cash and cash equivalents will be placed in fixed-term deposits with a holding period greater than three months. Accordingly, the Group
only invests working capital in short-term instruments issued by reputable counterparties. The Group continually monitors rolling cash
The Group’s credit risk is primarily attributable to its deposits, cash and cash equivalents, debt investments and trade receivables. The
Group seeks to mitigate its credit risk on cash and cash equivalents by making short-term deposits with counterparties, or by investing in
treasury funds with an “AA” credit rating or above managed by institutions. Short-term deposit counterparties are required to have most
recently reported total assets in excess of £5bn and, where applicable, a prime short-term credit rating at the time of investment (ratings
are generally determined by Moody’s or Standard & Poor’s). Moody’s prime credit ratings of “P1”, “P2” and “P3” indicate respectively that
the rating agency considers the counterparty to have a “superior”, “strong” or “acceptable” ability to repay short-term debt obligations
(generally defined as having an original maturity not exceeding 13 months). An analysis of the Group’s deposits and cash and cash
equivalents balance analysed by credit rating as at the reporting date is shown in the table opposite. All other financial assets are unrated.
2023 | 2022 | |
Credit rating | £m | £m |
P1 | 158.9 | 177.4 |
AAAMMF 1 | 66.7 | 54.6 |
Other 2 | 1.3 | 9.5 |
Total deposits and cash and cash equivalents | 226.9 | 241.5 |
1
The Group holds £66.7m (2022: £54.6m) with JP Morgan GBP liquidity fund, which has a AAAMMF credit rating with Fitch.
2
The Group holds £1.3m (2022: £9.5m) with Arbuthnot Latham, a private bank with no debt in issue and, accordingly, on which a credit rating is not applicable. Bloomberg assess
Arbuthnot Latham’s 1-year default probability at 0.020408% (2022: 0.2107%).
The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.
The Group has detailed policies and strategies which seek to minimise these associated risks including defining maximum counterparty
exposure limits for term deposits based on their perceived financial strength at the commencement of the deposit. The single
counterparty limit for fixed term deposits in excess of 3 months at 31 December 2023 was the greater of 60% of total group cash or £50m
(2022: 60%, £50m). In addition, no single institution may hold more than the higher of 50% of total cash or £50m. (2022: 50%, £50m).
The group’s exposure to credit risk on debt investments is managed in a similar way to equity security price risk, as described above,
through the Group’s investment appraisal processes and asset monitoring procedures which are subject to overall review by the Board.
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4. Revenue from services and other income
Revenue from services and other income is generated primarily from within the United Kingdom and is stated exclusive of value
added tax, with further revenue generated in the Group’s Australian operations. Revenue is recognised when the Group satisfies its
performance obligations, in line with IFRS 15. Revenue breakdown and disclosure requirements under IFRS 15 have not been presented
as they are considered immaterial. Revenue from services and other income comprises:
Fund management services
Fund management fees include fiduciary fund management fees which are generally earned as a fixed percentage of total funds
under management and are recognised as the related services are provided and performance fees payable from realisation of
agreed returns to investors which are recognised as performance criterion are met.
Licence and royalty income
The Group’s Intellectual Property licences typically constitute separate performance obligations, being separate from other promised
goods or services. Revenue is recognised in line with the performance obligations included in the licence, which can include sales-
based, usage-based or milestone-based royalties.
Advisory and corporate finance fees
Fees earned from the provision of business support services including executive search services and fees for IP Group representation
on portfolio company boards are recognised as the related services are provided. Corporate finance advisory fees are generally
earned as a fixed percentage of total funds raised and recognised at the time the related transaction is successfully concluded. In
some instances, these fees are settled via the issue of equity in the company receiving the corporate finance services at the same
For both the year ended 31 December 2023 and the year ended 31 December 2022, the Group’s revenue and profit before taxation were
derived largely from its principal activities within the UK.
For management reporting purposes, the Group is currently organised into five operating segments:
i.
Venture Capital investing within our ‘Healthier future’ thematic area
ii.
Venture Capital investing within our ‘Tech-enriched future’ thematic area
iii.
Venture Capital investing within our ‘Regenerative future’ thematic area
iv. Venture Capital investing: Other, representing investments not included within our three thematic areas above, including
platform investments
v.
the management of third-party funds and the provision of corporate finance advice
Reporting line items within Venture Capital investing which are not allocated by thematic sector are presented in the ‘Venture Capital
investing: other’ segment. The element of our ‘Healthier future’ thematic area relating to Oxford Nanopore Technologies Limited is
disclosed separately given its size.
BUSINESS OVERVIEW
STRATEGIC REPORT
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OUR FINANCIALS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
.
debt investments
3.7
–
33.2
0.1
1.6
38.6
–
38.6
These activities are described in further detail in the strategic report on pages 22 to 30.
Year ended 31 December 2023 | ||||||||
Venture | ||||||||
Venture | capital | Venture | ||||||
capital | investing: | capital | Venture | Venture | ||||
investing: | Of which | Tech- | investing: | capital | capital | Third-party | ||
Healthier | Oxford | enriched | Regenerative | investing: | investing: | fund | ||
STATEMENT OF | future | Nanopore | future | future | Other | Total | management | Consolidated |
COMPREHENSIVE INCOME | £m | £m | £m | £m | £m | £m | £m | £m |
Portfolio return and revenue | ||||||||
Change in fair value of equity and | ||||||||
debt investments | (92.9) | (31.9) | (7.0) | (8.7) | (2.3) | (110.9) | – | (110.9) |
(Loss)/gain on disposal of equity | ||||||||
and debt investments | (12.9) | – | 2.1 | – | – | (10.8) | – | (10.8) |
Change in fair value of limited and | ||||||||
limited liability partnership interests | (38.8) | (38.8) | – | (38.8) | ||||
Revenue from services and other | ||||||||
income | 1.3 | 1.3 | 4.6 | 5.9 | ||||
(105.8) | (31.9) | (4.9) | (8.7) | (39.8) | (159.2) | 4.6 | (154.6) | |
Administrative expenses 1 | ||||||||
Carried interest plan charge 1 | 4.7 | 4.7 | – | 4.7 | ||||
Share-based payment charge 1 | (2.3) | (2.3) | (0.3) | (2.6) | ||||
Other administrative expenses 1 | (22.6) | (22.6) | (5.4) | (28.0) | ||||
(20.2) | (20.2) | (5.7) | (25.9) | |||||
Operating loss | (105.8) | (31.9) | (4.9) | (8.7) | (60.0) | (179.4) | (1.1) | (180.5) |
Finance income 1 | 9.4 | 9.4 | 0.4 | 9.8 | ||||
Finance costs 1 | (5.6) | (5.6) | – | (5.6) | ||||
Loss before taxation | (105.8) | (31.9) | (4.9) | (8.7) | (56.2) | (175.6) | (0.7) | (176.3) |
Taxation 1 | 1.9 | 1.9 | – | 1.9 | ||||
Loss for the year | (105.8) | (31.9) | (4.9) | (8.7) | (54.3) | (173.7) | (0.7) | (174.4) |
STATEMENT OF FINANCIAL POSITION | ||||||||
Assets | 576.5 | 173.6 | 231.4 | 275.3 | 310.2 | 1,393.4 | 18.2 | 1,411.6 |
Liabilities 1 | (214.7) | (214.7) | (6.6) | (221.3) | ||||
Net Assets | 576.5 | 173.6 | 231.4 | 275.3 | 95.5 | 1,178.7 | 11.6 | 1,190.3 |
Other segment items | ||||||||
Portfolio Investment | (33.9) | – | (11.9) | (17.6) | (9.8) | (73.2) | – | (73.2) |
Proceeds from sale of equity and | ||||||||
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Year ended 31 December 2022 | ||||||||
Venture | ||||||||
Venture | capital | Venture | ||||||
capital | investing: | capital | Venture | Venture | ||||
investing: | Of which | Tech- | investing: | capital | capital | Third-party | ||
Healthier | Oxford | enriched | Regenerative | investing: | investing: | fund | ||
STATEMENT OF | future | Nanopore | future | future | Other | Total | management | Consolidated |
COMPREHENSIVE INCOME | £m | £m | £m | £m | £m | £m | £m | £m |
Portfolio return and revenue | ||||||||
Change in fair value of equity and | ||||||||
debt investments | (400.9) | (369.7) | (22.2) | 121.7 | 2.0 | (303.4) | – | (303.4) |
(Loss)/gain on disposal of equity | ||||||||
and debt investments | (12.0) | – | 4.0 | – | 0.2 | (7.8) | – | (7.8) |
Change in fair value of limited and | ||||||||
limited liability partnership interests | 2.1 | 2.1 | – | 2.1 | ||||
Revenue from services and other | ||||||||
income | 1.1 | 1.1 | 6.0 | 7.1 | ||||
(412.9) | (369.7) | (18.1) | 121.7 | 1.4 | (308.0) | 6.0 | (302.0) | |
Administrative expenses 1 | ||||||||
Carried interest plan charge 1 | (12.0) | (12.0) | – | (12.0) | ||||
Share-based payment charge 1 | (2.6) | (2.6) | (0.3) | (2.9) | ||||
Other administrative expenses 1 | (22.1) | (22.1) | (5.3) | (27.4) | ||||
(36.7) | (36.7) | (5.6) | (42.3) | |||||
Operating loss | (412.9) | (369.7) | (18.1) | 121.7 | (35.3) | (334.7) | 0.4 | (344.3) |
Finance income 1 | 2.1 | 2.1 | 0.1 | 2.2 | ||||
Finance costs 1 | (1.4) | (1.4) | – | (1.4) | ||||
Loss before taxation | (412.9) | (369.7) | (18.1) | 121.7 | (34.6) | (344.0) | 0.5 | (343.5) |
Taxation 1 | (1.0) | (1.0) | – | (1.0) | ||||
Loss for the year | (412.9) | (369.7) | (18.1) | 121.7 | (35.6) | (345.0) | 0.5 | (344.5) |
STATEMENT OF FINANCIAL POSITION | ||||||||
Assets | 659.2 | 205.5 | 257.3 | 266.4 | 357.1 | 1,540.0 | 17.8 | 1,557.8 |
Liabilities 1 | (176.0) | (176.0) | (5.7) | (181.7) | ||||
Net Assets | 659.2 | 205.5 | 257.3 | 266.4 | 181.1 | 1,364.0 | 12.1 | 1,376. 1 |
Other segment items | ||||||||
Portfolio Investment | (40.9) | (3.2) | (21.7) | (26.2) | (4.7) | (93.5) | – | (93.5) |
Proceeds from sale of equity and | ||||||||
debt investments | 15.6 | – | 4.0 | 3.5 | 0.3 | 28.1 | – | 28.1 |
1
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167
Details of the auditor’s remuneration are set out below:
2023 | 2022 | |
£000 | £000 | |
Audit of these financial statements (KPMG LLP) | 525.3 | 470.0 |
Audit of financial statements of funds and subsidiaries of the companies (KPMG LLP) | 139.2 | 123.9 |
Audit related assurance services (KPMG LLP) | 72.3 | 60.0 |
Total assurance services | 736.8 | 653.9 |
Operating loss has been arrived at after charging:
2023 | 2022 | |
£000 | £000 | |
Depreciation of right-of-use asset, property, plant and equipment | (0.6) | (0.6) |
Total staff costs (see note 9) | (19.0) | (20.0) |
Other administrative expenses comprise:
2023 | 2022 | |
£000 | £000 | |
Employee costs (less share-based payment charge) | 16.4 | 17.1 |
Professional services | 4.2 | 4.0 |
Consolidated portfolio company costs | - | 0.1 |
Depreciation of tangible assets | 0.6 | 0.6 |
Other expenses | 6.8 | 5.6 |
Total | 28.0 | 27.4 |
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9. Employee costs
Employee benefits
Pension obligations
The Group operates a company defined contribution pension scheme for which all employees are eligible. The assets of the scheme
are held separately from those of the Group in independently administered funds. The Group currently makes contributions on behalf
of employees to this scheme or to employee personal pension schemes on an individual basis. The Group has no further payment
obligations once the contributions have been paid. The contributions are recognised as employee benefit expenses when they are due.
The Group engages in equity-settled share-based payment transactions in respect of services receivable from employees, by
granting employees conditional awards of ordinary shares subject to certain vesting conditions. Conditional awards of shares are
made pursuant to the Group’s Long-Term Incentive Plan (“LTIP”) awards and/or the Group’s Annual Incentive Scheme (“AIS”). The fair
value of the shares is estimated at the date of grant, taking into account the terms and conditions of the award, including market-
based performance conditions.
The fair value at the date of grant is recognised as an expense over the period that the employee provides services, generally the
period between the start of the performance period and the vesting date of the shares. The corresponding credit is recognised
in retained earnings within total equity. The fair value of services is calculated using the market value on the date of award and is
adjusted for expected and actual levels of vesting. Where conditional awards of shares lapse, the expense recognised to date is
credited to the statement of comprehensive income in the year in which they lapse. Where the terms for an equity-settled award are
modified, and the modification increases the total fair value of the share-based payment or is otherwise beneficial to the employee
at the date of modification, the incremental fair value is amortised over the vesting period.
2023 | 2022 | |
£000 | £000 | |
Salaries | 11.3 | 11.6 |
Defined contribution pension cost | 1.1 | 1.0 |
Other bonuses accrued in the year | 2.6 | 3.0 |
Social security | 1.4 | 1.5 |
Employee costs | 16.4 | 17.1 |
Share–based payment charge (see note 22) | 2.6 | 2.9 |
Total staff costs | 19.0 | 20.0 |
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10. Taxation
Full provision is made for deferred tax on all temporary differences resulting from the carrying value of an asset or liability and its
tax base. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting
date and are expected to apply when the related deferred tax asset is realised or deferred tax liability settled. Deferred tax assets are
2023 | 2022 | |
£000 | £000 | |
Current tax | ||
UK corporation tax on profits for the year | – | – |
Foreign tax | – | – |
– | – | |
Deferred tax | (1.9) | 1.0 |
Total tax | (1.9) | 1.0 |
The Group primarily seeks to generate capital gains from its holdings in spin-out companies over the longer term. The majority of these
capital gains qualify for UK Substantial Shareholding Exemption (“SSE”) and are therefore not taxable, resulting in the Group making
annual net operating losses from its operations from a UK tax perspective.
Gains arising on sales of holdings which do not qualify for SSE will ordinarily give rise to taxable profits for the Group, to the extent that
these exceed the Group’s ability to offset gains against current and brought forward tax losses (subject to the relevant restrictions on the
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The amount for the year can be reconciled to the profit per the statement of comprehensive income as follows:
2023 | 2022 | |
£000 | £000 | |
Loss before tax | (176.3) | (343.5) |
Tax at the UK corporation tax rate of 23.52% (2022: 19%) | (41.5) | (65.3) |
Expenses not deductible for tax purposes | (1.1) | 2.3 |
Income not taxable | 2.5 | 1.5 |
Prior year adjustment on deferred tax | – | 0.4 |
Fair value movement on investments qualifying for SSE | 40.9 | 58.4 |
Movement on share–based payments | 0.6 | 0.4 |
Movement in tax losses arising not recognised | 0.1 | 2.9 |
CIR reactivation | (3.1) | – |
Foreign tax | 0.1 | – |
Rate change on deferred tax | (0.4) | 0.4 |
Total tax charge/(credit) | (1.9) | 1.0 |
At 31 December 2023, deductible temporary differences and unused tax losses, for which no deferred tax asset has been recognised,
totalled £298.3m (2022: £278.7m). An analysis is shown below:
2023 | 2022 | |||
Deferred | Deferred | |||
Amount | tax | Amount | tax | |
£m | £m | £m | £m | |
Accelerated capital allowances | – | – | (0.5) | (0.1) |
Share–based payment costs and other temporary differences | (48.1) | (12.0) | (15.5) | (3.9) |
Unused tax losses | (250.2) | (62.6) | (262.7) | (65.7) |
Total | (298.3) | (74.6) | (278.7) | (69.7) |
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At 31 December 2023, deductible temporary differences and unused tax losses, for which a deferred tax liability has been recognised,
totalled £18.9m (2022: £27.3m). An analysis is shown below:
2023 | 2022 | |||
Deferred | Deferred | |||
Amount | tax | Amount | tax | |
£m | £m | £m | £m | |
Temporary timing differences | 54.1 | 13.5 | 79.7 | 19.9 |
Unused tax losses | (35.2) | (8.7) | (52.4) | (13.1) |
Total | 18.9 | 4.8 | 27.3 | 6.8 |
Earnings
2023 | 2022 | |
£m | £m | |
Earnings for the purposes of basic and dilutive earnings per share | (171.3) | (341.5) |
2023 | 2022 | |
Number of | Number of | |
Number of shares | shares | shares |
Weighted average number of ordinary shares for the purposes of basic | ||
earnings per share | 1,036,400,406 | 1,034,483,278 |
Effect of dilutive potential ordinary shares: | ||
Options or contingently issuable shares | – | – |
Weighted average number of ordinary shares for the purposes of diluted | ||
earnings per share | 1,036,400,406 | 1,034,483,278 |
2023 | 2022 | |
pence | pence | |
Basic | (16.53) | (33.01) |
Diluted | (16.53) | (33.01) |
No adjustment has been made to the basic loss per share in the years ended 31 December 2023 and 31 December 2022, as the exercise
of share options would have the effect of reducing the loss per ordinary share, and therefore is not dilutive.
Potentially dilutive ordinary shares include contingently issuable shares arising under the Group’s LTIP arrangements, and options issued
as part of the Group’s Sharesave schemes and Deferred Bonus Share Plan (for annual bonuses deferred under the terms of the Group’s
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Financial assets and liabilities
Financial assets and liabilities are recognised in the balance
sheet when the relevant Group entity becomes a party to the
contractual provisions of the instrument. De–recognition occurs
when rights to cash flows from a financial asset expire, or when a
liability is extinguished.
Derivative financial instruments are accounted for at fair value
through profit and loss in accordance with IFRS 9. They are
revalued at the balance sheet date based on market prices,
with any change in fair value being recorded in profit and loss.
Derivatives are recognised in the Consolidated statement of
financial position as a financial asset when their fair value
is positive and as a financial liability whey their fair value is
negative. The Group’s derivative financial instruments are not
designated as hedging instruments.
In respect of regular way purchases or sales, the Group uses trade
date accounting to recognise or derecognise financial assets.
The Group classifies its financial assets into one of the categories
listed below, depending on the purpose for which the asset was
acquired.
Held for trading and financial assets are recognised at fair
value through profit and loss. This category includes equity
investments, debt investments and investments in limited
partnerships. Investments in associated undertakings, which
are held by the Group with a view to the ultimate realisation of
capital gains, are also categorised as at fair value through profit
or loss. This measurement basis is consistent with the fact that
the Group’s performance in respect of investments in equity
investments, limited partnerships and associated undertakings
is evaluated on a fair value basis in accordance with an
established investment strategy.
Financial assets at fair value through profit or loss are initially
recognised at fair value and any gains or losses arising from
subsequent changes in fair value are presented in profit or loss
in the statement of comprehensive income in the period which
These assets are non–derivative financial assets with fixed
and determinable payments that are not quoted in an active
market. They arise principally through the provision of services
to customers (trade receivables) and are carried at cost less
Deposits
Deposits comprise longer–term deposits held with financial
institutions with an original maturity of greater than three
months and, in line with IAS 7 are not included within cash and
cash equivalents. Cash flows related to investments in, and
maturities of amounts held on deposit are presented within
investing activities in the consolidated statement of cash flows.
Interest income related to deposits is included within cashflows
from operating activities.
Cash and cash equivalents include cash in hand and short-
term deposits held with financial institutions with an original
maturity of three months or less. Interest income related to
Current financial liabilities are composed of trade payables
and other short–term monetary liabilities, which are recognised
at amortised cost.
Non–current liabilities are composed of loans from Limited
Partners of consolidated funds, outstanding amounts drawn
down from a debt facility provided by the European Investment
Bank, loan notes provided by Phoenix Group, carried interest
plans liabilities, and revenue share liabilities arising as a result
of the Group’s former Technology Pipeline Agreement with
University College London.
Unless otherwise indicated, the carrying amounts of the
Group’s financial liabilities are a reasonable approximation to
their fair value. Non–current liabilities are recognised initially at
fair value net of transaction costs incurred, and subsequently
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At fair | |||
value | |||
through | Amortised | ||
profit or loss | cost | Total | |
Financial assets | £m | £m | £m |
Equity investments | 1,011.5 | – | 1,011.5 |
Debt investments | 83.7 | – | 83.7 |
Limited and limited liability partnership interests | 69.7 | – | 69.7 |
Trade and other receivables | – | 8.2 | 8.2 |
Receivables on sale of debt and equity investments | 9.2 | – | 9.2 |
Deposits | – | 126.0 | 126.0 |
Cash and cash equivalents | – | 100.9 | 100.9 |
At 31 December 2023 | 1,174.1 | 235.1 | 1,409.2 |
Equity investments | 1,120.8 | – | 1,120.8 |
Debt investments | 38.1 | – | 38.1 |
Limited and limited liability partnership interests | 99.6 | – | 99.6 |
Trade and other receivables | – | 8.8 | 8.8 |
Receivables on sale of debt and equity investments | 48.2 | – | 48.2 |
Deposits | – | 152.8 | 152.8 |
Cash and cash equivalents | – | 88.7 | 88.7 |
At 31 December 2022 | 1,306.7 | 250.3 | 1,557.0 |
In light of the credit ratings applicable to the Group’s cash and cash equivalent and deposits, (see note 3 for further details), we estimate
expected credit losses on the Group’s receivables to be under £0.1m and therefore not disclosed further (2022: less than £0.1m), similarly
we have not presented an analysis of credit ratings of trade and other receivable and receivables on sale of debt and equity investments.
All net fair value gains in the year are attributable to financial assets designated at fair value through profit or loss on initial recognition
(2022: all net fair value gains in the year are attributable to financial assets designated at fair value through profit or loss on initial recognition).
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IP GROUP PLC ANNUAL REPORT 2023
Fair value hierarchy
The Group classifies financial assets using a fair value hierarchy that reflects the significance of the inputs used in making the related fair value
measurements. The level in the fair value hierarchy, within which a financial asset is classified, is determined on the basis of the lowest level input that is
significant to that asset’s fair value measurement. The fair value hierarchy has the following levels:
Level 1 – Quoted prices in active markets.
Level 2 – Inputs other than quoted prices that are observable, such as prices from market transactions.
Level 3 – One or more inputs that are not based on observable market data.
Equity investments
Fair value is the underlying principle and is defined as “the price that would be received to sell an asset in an orderly transaction between market
participants at the measurement date” (IPEV guidelines, December 2022).
Where the equity structure of a portfolio company involves different class rights in a sale or liquidity event, the Group takes these different rights into
account when forming a view on the value of its investment.
Valuation techniques used
The fair value of unlisted securities is established using appropriate valuation techniques in line with December 2022 IPEV guidelines. The selection
of appropriate valuation techniques is considered on an individual basis in light of the nature, facts and circumstances of the investment and in the
expected view of market participants. The Group selects valuation techniques which make maximum use of market–based inputs. Techniques are
applied consistently from period to period, except where a change would result in better estimates of fair value. Several valuation techniques may be
used so that the results of one technique may be used as a cross check/corroboration of an alternative technique.
Valuation techniques used include:
•
Quoted bid price: The fair values of quoted investments are based on bid prices in an active market at the reporting date.
•
Funding transaction: The fair value of unquoted investments which have recently raised equity financing may be calculated with reference to the price
of the recent investment. For investments for which the capital structure involves different class rights in a sale or liquidity event, a full scenario analysis
via the use of the probability–weighted expected return method (PWERM) is used to calculate the implied values of the existing share classes.
•
Other: Future market/commercial events: Scenario analysis is used, which is a forward–looking method that considers one or more possible future
scenarios. These methods include simplified scenario analysis and relative value scenario analysis, which tie to the fully diluted (“post–money”) equity
value. The PWERM method may be utilised for this valuation technique for investments which have an equity structure which involves different class
rights in a sale or liquidity event.
•
Other: Adjusted funding transaction price based on past performance – upwards/downwards: The milestone approach involves making an
assessment as to whether there is an indication of change in fair value based on a consideration of the relevant milestones, typically agreed at the
time of making the investment decision.
•
Other: Discounted cash flows: deriving the value of a business by calculating the present value of expected future cash flows.
•
Other: Revenue multiple: the application of an appropriate multiple to a performance measure (such as earnings or revenue) of the investee company
in order to derive a value for the business.
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175
The fair value indicated by a recent transaction is used to calibrate inputs used with valuation techniques including those noted on page 174. At each
measurement date, an assessment is made as to whether changes or events subsequent to the relevant transaction would imply a change in the
investment’s fair value. The Price of a Recent Investment is not considered a standalone valuation technique (see further considerations below). Where the
current fair value of an investment is unchanged from the price of a funding transaction, the Group refers to the valuation basis as ‘Funding transaction’.
Price of recent investment as an input in assessing fair value
The Group considers that fair value estimates which are based primarily on observable market data will be of greater reliability than those based on
assumptions. Given the nature of the Group’s investments in seed, start–up and early–stage companies, where there are often no current and no short–
term future earnings or positive cash flows, it can be difficult to gauge the probability and financial impact of the success or failure of development or
research activities and to make reliable cash flow forecasts. Consequently, in many cases the most appropriate approach to fair value is a valuation
technique which is based on market data such as the price of a recent investment, and market participant assumptions as to potential outcomes.
Calibrating such scenarios or milestones may result in a fair value equal to price of recent investment for a limited period of time. Often qualitative
milestones provide a directional indication of the movement of fair value.
In applying a calibrated scenario or milestone-approach to determine fair value, consideration is given to performance against milestones that were
set at the time of the original investment decision, as well as taking into consideration the key market drivers of the investee company and the overall
economic environment. Factors that the Group considers include, inter alia, technical measures such as product development phases and patent
approvals, financial measures such as cash burn rate and profitability expectations, and market and sales measures such as testing phases, product
launches and market introduction.
Where the Group considers that there is an indication that the fair value has changed, an estimation is made of the required amount of any adjustment
from the last price of recent investment.
Where a deterioration in value has occurred, the Group reduces the carrying value of the investment to reflect the estimated decrease. If there is
evidence of value creation the Group may consider increasing the carrying value of the investment; however, in the absence of additional financing
rounds or profit generation it can be difficult to determine the value that a market participant may place on positive developments given the potential
outcome and the costs and risks to achieving that outcome and accordingly caution is applied.
Debt investments
Debt investments are generally unquoted debt instruments which are convertible to equity at a future point in time. Such instruments are considered
to be hybrid instruments containing a fixed rate debt host contract with an embedded equity derivative. The Group designates the entire hybrid
contract at fair value through profit or loss on initial recognition and, accordingly, the embedded derivative is not separated from the host contract and
accounted for separately. The price at which the debt investment was made may be a reliable indicator of fair value at that date depending on facts and
circumstances. Any subsequent remeasurement will be recognised as changes in fair value in the statement of comprehensive income.
Disclosure of unrealised and realised gains and losses
‘Change in fair value of equity and debt investments’ per the Group Income Statement represents unrealised revaluation gains and losses on the Group’s
portfolio of investment.
Gains on disposal of equity investments represents the difference between the fair value of consideration received and the carrying value at the start of
the accounting period for the investment in question.
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Equity and Debt Investments within the Top 20 by holding value
The following table lists information on the debt and equity investments within the most valuable 20 portfolio company investments,
which constitute 18 of the top 20 portfolio investments (the other two being holdings in Limited Partnerships), representing 70% of the
total portfolio value (2022: 71%). Detail on the performance of these companies is included in the Life Sciences, Deeptech and Cleantech
portfolio reviews.
The Group engages third-party valuation specialists to provide valuation support where required; during the period we commissioned
third-party valuations on nine out of the top 20 holdings (2022: nine).
Fair value | Fair value | ||
of Group | of Group | ||
holding at | holding at | ||
31 Dec 2023 | 31 Dec 2022 | ||
Company name | Primary valuation basis | £m | £m |
Oxford Nanopore Technologies plc | Quoted bid price | 173.6 | 205.5 |
Istesso Limited * | DCF | 113.8 | 95.6 |
Featurespace Limited * | Revenue multiple | 73.0 | 64.1 |
Hysata Pty Ltd | Funding transaction < 12 months, PWERM | 70.0 | 18.7 |
Oxa Autonomy Limited * | Funding transaction > 12 months, PWERM | 65.7 | 65.9 |
First Light Fusion Limited * | Other: Adjusted financing price based on past performance – Upwards | 64.9 | 114.5 |
Hinge Health, Inc. * | Other: Adjusted financing price based on past performance – Downwards | 34.0 | 53.6 |
Garrison Technology Limited | Funding transaction < 12 months | 31.6 | 27.7 |
Ultraleap Holdings Limited * | Other: Adjusted financing price based on past performance – Downwards | 31.0 | 37.9 |
Bramble Energy Limited | Funding transaction > 12 months, PWERM | 20.9 | 20.9 |
Crescendo Biologics Limited | Funding transaction > 12 months, PWERM | 19.6 | 18.7 |
Pulmocide Limited | Other: Adjusted financing price based on past performance – Upwards | 19.2 | 14.7 |
Ieso Digital Health Limited * | Other: Adjusted financing price based on past performance – Downwards | 18.9 | 21.8 |
Oxford Science Enterprises plc | Other: Adjusted financing price based on past performance – Downwards | 18.3 | 20.6 |
Artios Pharma Limited * | Other: Adjusted financing price based on past performance – Downwards | 17.4 | 18.3 |
Microbiotica Limited | Funding transaction > 12 months, PWERM | 16.1 | 16.1 |
Mission Therapeutics Limited * | Other: Adjusted financing price based on past performance – Downwards | 15.8 | 18.1 |
Centessa Pharmaceuticals plc | Quoted bid price | 15.7 | 6.5 |
Total | 819.5 | 839.2 |
* Third-party valuation specialists used for 31 December 2023 valuation. In these instances, the valuation basis is management’s assessment of the primary valuation input used
by the third-party valuation specialist.
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177
continued
Level 1 | Level 3 | |||
Equity | Unquoted | Debt | ||
investments | equity | investments | ||
in quoted | investments | in unquoted | ||
spin–out | in spin–out | spin–out | ||
companies | companies | companies | Total | |
£m | £m | £m | £m | |
At 1 January 2023 | 228.7 | 892.1 | 38.1 | 1,158.9 |
Investments | – | 32.8 | 30.6 | 63.4 |
Transaction–based reclassifications | – | 7.8 | (7.8) | – |
Other transfers between hierarchy levels | 1.8 | (1.8) | – | – |
Disposals | (1.6) | (7.6) | (0.3) | (9.5) |
Fees settled via equity | – | 0.1 | – | 0.1 |
Change in revenue share 1 | – | (6.8) | – | (6.8) |
Change in fair value 2 | (24.5) | (103.7) | 23.5 | (104.7) |
Change in FX 2 | (0.6) | (5.2) | (0.4) | (6.2) |
At 31 December 2023 | 203.8 | 807.7 | 83.7 | 1,095.2 |
At 1 January 2022 | 662.7 | 729.1 | 22.8 | 1,414.6 |
Investments | 7.3 | 61.4 | 20.2 | 88.9 |
Transaction–based reclassifications | – | 8.4 | (8.4) | – |
Other transfers between hierarchy levels | – | – | – | – |
Disposals | (27.5) | (14.2) | – | (41.7) |
Fees settled via equity | – | 0.5 | – | 0.5 |
Change in revenue share 1 | – | – | – | – |
Change in fair value 2 | (416.0) | 93.6 | 3.1 | (319.3) |
Change in FX 2 | 2.2 | 13.3 | 0.4 | 15.9 |
At 31 December 2022 | 228.7 | 892.1 | 38.1 | 1,158.9 |
1
For description of revenue share arrangement see description in note 19.
2
The total unrealised change in fair value and FX in respect of Level 3 investments was a loss of £85.8m (2022: gain of £110.4m).
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Unquoted equity and debt investment are measured in accordance with IPEV guidelines with reference to the most appropriate
information available at the time of measurement. Where relevant, several valuation approaches are used in arriving at an estimate of
fair value for an individual asset.
For assets and liabilities that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred
between levels in the hierarchy by re–assessing categorisation (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period. Transfers between levels are then made as if the transfer took place
on the first day of the period in question, except in the cases of transfers between tiers based on an initial public offering (“IPO”) of an
investment wherein the changes in value prior to the IPO are calculated and reported in level 3, and those changes post are attributed to
level 1.
Transfers between level 3 and level 1 occur when a previously unquoted investment undertakes an initial public offering, resulting in its
equity becoming quoted on an active market. In the current period, transfers of this nature amounted to £1.8m (2022: £nil). Transfers
between level 1 and level 3 would occur when a quoted investment’s market becomes inactive, or the portfolio company elects to delist.
There has been one instance in the current year, totalling £0.0m (2022: no instances).
Transfers between level 3 debt and level 3 equity occur upon conversion of convertible debt into equity. In the current year, transfers of
this nature amounted to £7.8m (2022: £8.4m).
The Group has considered the impact of ESG and climate change issues on its portfolio, including performing a materiality assessment
(see summary TCFD disclosures on page 54) which suggested the Group’s portfolio has a relatively low level of climate change risk,
and clear areas of opportunity via the Group’s Cleantech investments. For an overview of the portfolio split by sector, please refer to the
portfolio analysis by sector on page 21. We believe our current valuation approach, based largely on quoted valuations, and funding
transactions, reflects market participant assessment of the ESG and climate risks and opportunities of our portfolio.
Valuation inputs and sensitivities
Unobservable inputs are typically portfolio company-specific and, based on a materiality assessment, are not considered significant
either at an individual company level or in aggregate where relevant for common factors such as discount rates.
The sensitivity analysis table on page 179 has been prepared in recognition of the fact that some of the valuation methodologies applied
by the Group in valuing the portfolio investments involve subjectivity in their significant unobservable inputs. The table illustrates the
sensitivity of the valuations to these inputs. The inputs of investments valued using techniques which involve significant subjectivity have
been flexed, as below.
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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).
Variable | |||||||||
Fair value of | input | Fair value of | |||||||
Valuation technique | investments | Variable inputs | sensitivity | Positive impact | Negative impact | investments | |||
2023 | 2022 | ||||||||
£m | % | £m | % of NAV | £m | % of NAV | £m | |||
Quoted | 203.8 | n/a | n/a | n/a | n/a | n/a | n/a | 228.7 | |
Funding transaction | 187.9 | n/a | +/–5 | 9.4 | 0.8 | (9.4) | (0.8) | 289.8 | |
<12 months | |||||||||
Funding transaction | 162.7 | n/a | +/–5 | 8.1 | 0.7 | (8.1) | (0.7) | 117.8 | |
>12 months | |||||||||
Other: Future market/ | 25.0 | • | Estimated impact of future event | +/–10 | 2.5 | 0.2 | (2.5) | (0.2) | 40.7 |
commercial events | • | 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 | 99.9 | • | Company-specific milestone analysis resulting | +/–10 | 10.0 | 0.8 | (10.0) | (0.8) | 149.8 |
financing price based | in a positive calibration adjustment versus the | ||||||||
on past performance – | previous funding transaction price | ||||||||
Upwards* | |||||||||
Other: Adjusted | 203.9 | • | Company-specific milestone analysis resulting | +/–10 | 20.4 | 1.7 | (20.4) | (1.7) | 156.5 |
financing price based | in a negative calibration adjustment versus the | ||||||||
on past performance – | previous funding transaction price | ||||||||
Downwards* | |||||||||
Other: Revenue | 85.4 | • | Estimate of future recurring revenues | +/–10 | 8.5 | 0.7 | (8.5) | (0.7) | 77.9 |
multiple* | • | Selection of comparable companies | |||||||
• | Discount/premium to multiple | ||||||||
Other: DCF* | 126.6 | • | Discount rate | +/–20 | 25.3 | 2.1 | (25.3) | (2.1) | 97.7 |
• | Clinical trial and drug approval success rates | ||||||||
• | Estimate of likelihood, value and structure of a | ||||||||
potential pharmaceutical partnership | |||||||||
• | Estimate of addressable market | ||||||||
• | Market share and royalty rates | ||||||||
• | Probability estimation of liquidity event | ||||||||
• | Estimate of forward exchange rates | ||||||||
Total | 1,095.2 | 84.3 | 7.0 | (84.2) | (7.1) | 1,158.9 | |||
* Due to the large number of inputs used in the valuation of these assets, unobservable inputs are below a size threshold that would warrant disclosure under IFRS 13, paragraph 93(d). Due to the large
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Within the ‘Other: DCF’ category on page 179 is Istesso Limited, in which we value the equity of IP Group’s holding at £86.7m as at
31 December 2023 (2022: £80.8m). The valuation of the equity in this company is based on a DCF model in which the key inputs include
the discount rate, probability of clinical trial success, market share and royalty rates and the selection of relevant comparable deal sizes.
The DCF model assesses the value of the future cash flows which would arise from the successful development of the company’s lead
asset Leramistat, which is in a PhIIb trial, within Rheumatoid Arthritis. Our estimated range for the value of the Group’s equity investment
as at 31 December 2023 is £80m to £120m (2022: £65m to £105m). A valuation range was not calculated in respect of the Group’s debt
investment in Istesso Limited, which totals £27.0m (2022: £14.8m)
Within the ‘Adjusted valuation’ category on page 179 is First Light Fusion Limited, whose equity is valued at £64.9m as at 31 December
2023 (2022: £114.5m). The valuation of this company is based on the last financing round price, calibrated upwards to reflect (inter alia) its
achievement of fusion subsequent to the fundraise, and an assessment of recent comparable company financing transactions.
Our estimated range for the value of the Group’s equity investment in First Light Fusion based on this model as at 31 December 2023
is £48m to £99m (2022: £93m to £186m).
In addition to Istesso Limited and First Light Fusion Limited, nine other assets were reviewed by external valuers, using a broad range of
relevant inputs. The aggregate of the range of valuations they concluded upon for these nine assets was £252.2m-£317.5m, and we have
selected points within these ranges which in aggregate total £267.3m (2022: £234.7m-286.5m; £246.7m).
2023 | 2022 | |
Change in fair value in the year (including fx) | £m | £m |
Fair value gains | 97.4 | 183.3 |
Fair value losses | (208.3) | (486.7) |
Total | (110.9) | (303.4) |
The Company’s interests in subsidiary undertakings are listed in note 10 to the Company’s financial statements.
Currency risk
Exposure to currency risk through asset allocation, which is calculated by reference to the currency in which the asset or liability is quoted,
is shown below. A +/-1% sensitivity has been included to demonstrate the effect of fluctuations in foreign exchange rates. 1% is considered
to be appropriate due to the stable currencies in which we hold cash.
At 31 December 2023 | ||
Sensitivity | ||
Investments | +/- 1% | |
£m | £m | |
US dollar | 85.5 | 0.8 |
Australian dollar | 99.9 | 1.0 |
Euro | 6.7 | 0.1 |
Swedish Krona | 1.6 | – |
Total | 193.7 | 1.9 |
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At 31 December 2022 | ||
Sensitivity | ||
Investments | +/- 1% | |
£m | £m | |
US dollar | 102.2 | 1.0 |
Australian dollar | 49.6 | 0.5 |
Euro | 3.0 | – |
Swedish Krona | 1.5 | – |
Total | 156.3 | 1.5 |
14. Portfolio: Limited and limited liability partnership interests
Valuations in respect of Limited and Limited Liability Funds are based on IP Group’s share of the Net Asset Value of the fund as per the
audited financial statements prepared by the fund manager. The key judgements in the preparation of these accounts relate to the
valuation of unquoted investments.
Investments in these Limited and Limited Liability Partnerships are recognised at fair value through profit and loss in accordance with
IFRS 9.
‘Changes in fair value of Limited Partnership investments’ per the Group Income Statement represents revaluation gains and losses
Fund interests are valued on a net asset basis, estimated based on the managers’ NAVs. Manager’s NAVs apply valuation techniques
consistent with IFRS and are subject to audit. Where audited accounts are received in arrears of the publication of the Group’s results
hence these are marked as unaudited in the table below, however a retrospective review of audited accounts versus earlier unaudited
results is carried out. Managers’ NAVs are usually published quarterly, two to four months after the quarter end. The below table analyses
the fund valuations with reference to manager NAV dates used at 31 December.
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14. Portfolio: Limited and limited liability partnership interests
continued
Functional | 2023 | 2022 | ||
Limited & Limited Liability Partnerships | currency | Status | £m | £m |
IPG Cayman Fund L.P. (Longview Innovation) | USD | Unaudited & Adjusted downwards | 46.0 | 80.0 |
UCL Technology Fund L.P. | GBP | Unaudited | 20.7 | 16.9 |
Technikos LLP | GBP | Unaudited & Adjusted downwards | 3.0 | 2.7 |
Total | 69.7 | 99.6 |
We reviewed the underlying valuation methodologies adopted by our Fund managers for all Fund investments of material value.
Following our review of valuation methodologies we were satisfied that the techniques utilised were appropriate, other than in respect of
IPG Cayman Fund L.P. where a downwards adjustment was made to the fund manager’s NAV estimate.
Limited & Limited Liability Partnerships movements in year | £m |
At 1 January 2023 | 99.6 |
Investments during the year | 9.8 |
Distribution from Limited Partnership funds | (0.9) |
Change in fair value during the year | (36.5) |
Currency revaluation | (2.3) |
At 31 December 2023 | 69.7 |
At 1 January 2022 | 92.9 |
Investments during the year | 4.6 |
Distribution from Limited Partnership funds | – |
Change in fair value during the year | 8.5 |
Currency revaluation | (6.4) |
At 31 December 2022 | 99.6 |
The Group considers interests in limited and limited liability partnerships to be level 3 in the fair value hierarchy throughout the current
and previous financial years.
The valuation of the Group’s interests in limited and limited liability partnerships is a significant accounting estimate, as management has
applied judgment in adjusting the NAV estimates provided by the fund manager. Such adjustments were based on an assessment of the
valuations of specific equity and debt investments in portfolio companies held within the fund in question. In making these assessments,
the Group has applied a valuation methodology consistent with that set out in note 13. Unobservable inputs are were portfolio
company-specific and, based on a materiality assessment, are not considered individually significant either at an individual company
level or in aggregate where relevant for common factors such as discount rates.
If no adjustment had been made to the NAV estimates provided by the fund manager, the carrying value of Limited Liability investments
would be higher by £9.8m.
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2023 | 2022 | |
£m | £m | |
Proceeds from sale of equity and debt investments | 37.7 | 28.1 |
Movement in amounts receivable on sale of debt and equity investments | (39.0) | 5.8 |
Carrying value of investments | (9.5) | (41.7) |
(Loss) on disposal | (10.8) | (7.8) |
(Loss) 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
2023 | 2022 | |
Current assets | £m | £m |
Trade debtors | 0.6 | 2.1 |
Prepayments | 0.8 | 0.8 |
Right-of-use asset 1 | – | 0.7 |
Interest receivable | 2.9 | – |
Other receivables | 6.8 | 5.2 |
Trade and other receivables | 8.2 | 8.8 |
1
Now presented under long-term assets on the Group Balance Sheet.
The directors consider the carrying amount of trade and other receivables at amortised cost to approximate their fair value.
All receivables are interest free, repayable on demand and unsecured.
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17. Receivable on sale of debt and equity investments
Consideration in respect of the sale of debt and equity investments may include elements of deferred consideration where payment
is received at a pre–agreed future date, and/or elements of contingent consideration where payment is received based on, for
example, achievement of specific drug development milestones. In such instances, these amounts are designated at fair value
through profit and loss on initial recognition. Any subsequent remeasurement will be recognised as changes in fair value in the
2023 | 2022 | |
£m | £m | |
Deferred and contingent consideration (non-current) | 7.8 | 6.9 |
Deferred and contingent consideration (current) | 1.4 | 41.3 |
Total deferred and contingent consideration | 9.2 | 48.2 |
The following table summarises the primary valuation basis used to value the deferred and contingent consideration:
2023 | 2022 | ||
Investment | Primary Valuation Basis | £m | £m |
WaveOptics Limited | Discounted sale amount | – | 28.8 |
Probability-weighted DFC model reflecting potential | |||
Enterprise Therapeutics Holdings Limited | milestone payments | 7.7 | 12.5 |
Probability-weighted DFC model reflecting potential | |||
Athenex, Inc. | milestone payments | – | 5.6 |
Reinfer Limited | Discounted sale amount | – | 1.1 |
Perpetuum Limited | Discounted sale amount | – | 0.2 |
Probability-weighted DFC model reflecting potential | |||
Zihipp Limited | milestone payments | 1.5 | – |
Total | 9.2 | 48.2 |
During 2023, consideration of £30.8m was received in 2023 relating to WaveOptics Limited, £1.5m was received relating to Reinfer
and £0.1m was received relating to Perpetuum. Athenex, Inc. entered liquidation in 2023 and the fair value estimate of contingent
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2023 | 2022 | |
Current liabilities | £m | £m |
Trade payables | 0.5 | 1.3 |
Social security expenses | 0.6 | 0.6 |
Bonus accrual | 3.0 | 2.8 |
Lease liability | 1.4 | 0.9 |
Payable to Imperial College and other third parties under revenue share obligations (see note 20) | 6.9 | 7.1 |
Other accruals and deferred income | 4.7 | 4.2 |
Trade and other payables | 17.1 | 16.9 |
2023 | 2022 | |
Current liabilities | £m | £m |
Borrowings | 6.3 | 6.3 |
Total | 6.3 | 6.3 |
2023 | 2022 | |
Non–current liabilities | £m | £m |
Loans drawn down from the Limited Partners of consolidated funds | 19.8 | 19.5 |
Borrowings | 128.9 | 75.1 |
Total | 148.7 | 94.6 |
Loans drawn down from the Limited Partners of consolidated funds
The Group consolidates the assets of a co–investment fund, IP Venture Fund II LP, which it manages. Loans from third parties of
consolidated funds represent third–party LP loans into this partnership. Under the terms of the Limited Partnership Agreement, these
loans are repayable only upon these funds generating sufficient realisations to repay the Limited Partners. Management anticipates
The classification of these loans as non–current reflects the forecast timing of returns and subsequent repayment of loans, which is not
anticipated to occur within one year.
As at 31 December, loans from Limited Partners of consolidated funds comprised loans into IP Venture Fund II LP £19.8m (2022: £19.5m).
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Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised
cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated
statement of comprehensive income over the period of the borrowing using the effective interest rate method. Costs incurred in the
course of issuing additional debt are recognised on the balance sheet and charged to the income statement on a straight line basis
In 2023, the Group drew a second £60m tranche of the £120m private placing it agreed with investors including Phoenix Group in 2022.
The terms of the facilities are summarised below:
Repayment | ||||||
Initial | Outstanding | Repayment | commencement | |||
Description | amount | amount | Date drawn | Interest rate | terms | date |
EIB Facility | £50.0m | £15.6m | Feb 2017 | Fixed 3.026% | 8 years | Jul 2018 |
IP Group Series A Notes | £20.0m | £20.0m | Dec 2022 | Fixed 5.230% | 5 years | Dec 2027 |
IP Group Series B Notes | £20.0m | £20.0m | Dec 2022 | Fixed 5.210% | 6 years | Dec 2028 |
IP Group Series C Notes | £20.0m | £20.0m | Dec 2022 | Fixed 5.300% | 7 years | Dec 2029 |
IP Group Series D Notes | £20.0m | £20.0m | Jun 2023 | Fixed 5.230% | 5 years | Dec 2027 |
IP Group Series E Notes | £20.0m | £20.0m | Jun 2023 | Fixed 5.210% | 6 years | Dec 2028 |
IP Group Series F Notes | £20.0m | £20.0m | Jun 2023 | Fixed 5.30% | 7 years | Dec 2029 |
Total
£170.0m
£135.6m
Loans totalling £135.6m (2022: £81.9m) are subject to fixed interest rates and are recognised at amortised cost. The fair value of these
loans as at 31 December 2023 is £125.3m (2022: £76.9m).
In December 2022, the Group drew down the first Tranche of £60m of a £120m loan Note Purchase Agreement (“NPA”) and a further £60m
in June 2023. The NPA contains the following covenants:
•
Total equity must be at least £500m as at the Group’s 30 June and 31 December reporting dates
•
Gross debt less restricted cash must not exceed 25% of total equity as at the Group’s 30 June and 31 December reporting dates
•
The Group must maintain cash and cash equivalents of not less than £25m at any time
Breach of any of the above covenants constitutes default under the NPA.
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The NPA also includes the concept of a ‘Cash Trap’, which is triggered based on conditions listed below. In the event of the Cash Trap
being triggered, the Group is not permitted to pay or declare a dividend or purchase any of its shares. In addition, investments are
restricted to £2.5m per calendar quarter other than those legally committed to. The Group is also required to place the net proceeds of
all realisations (over a threshold of £1m) into a blocked bank account. Entering a Cash Trap does not constitute a default under the NPA.
A Cash Trap period is entered if any of the following conditions are breached.
•
Total equity must be at least £750m as at the Group’s 30 June and 31 December reporting dates
•
Gross debt less restricted cash must not exceed 20% of total equity as at the Group’s 30 June and 31 December reporting dates
•
The Group must maintain cash and cash equivalents of not less than £50m at any time.
A cash trap period can be remedied by:
•
Transferring sufficient cash into the restricted cash account so that gross debt less restricted cash is less than 20% of total equity
•
If because of low equity of high leverage, once these are restored at a subsequent 30 June or 31 December measurement date
•
If because of low liquidity, once two month-ends have passed with liquidity > £50m
The EIB loan contains a debt covenant requiring that the ratio of the total fair value of IP Group investments plus cash and qualifying
liquidity to debt should at no time fall below 6:1. The Group must maintain that the amount of unencumbered funds freely available to the
Group set with reference to the outstanding EIB facility which was £15.6m at December 2023 (2022: £21.9m). The loan also stipulates that
on any date, the aggregate of all amounts scheduled for payment to the EIB in the following six months should be kept in a separate bank
account, which totalled £3.3m on 31 December 2023 (2022: £3.4m) The Group is required to maintain a minimum cash balance of £9.4m
(2022: £13.1m).
The Group closely monitors that the covenants are adhered to on an ongoing basis and has complied with these covenants throughout
the year. The Group will continue to monitor the covenants’ position against forecasts and budgets to ensure that it operates within the
prescribed limits.
The 2023 NPA includes fixed and floating charges over the Company’s assets, details of which are available on Companies House.
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The maturity profile of the borrowings including undiscounted cash flows and fixed interest is as follows:
2023 | 2022 | |
£m | £m | |
Due within 6 months | 6.4 | 4.8 |
Due 6 to 12 months | 6.4 | 4.8 |
Due 1 to 5 years | 112.4 | 48.4 |
Due after 5 years | 42.1 | 43.1 |
Total 1 | 167.3 | 101.1 |
The maturity profile of the borrowings was as follows:
2023 | 2022 | |
£m | £m | |
Due within 6 months | 3.1 | 3.1 |
Due 6 to 12 months | 3.1 | 3.2 |
Due 1 to 5 years | 89.4 | 35.6 |
Due after 5 years | 40.0 | 40.0 |
Total 1 | 135.6 | 81.9 |
1
These are gross amounts repayable and exclude amortised costs of £0.4m (2022: £0.5) incurred on obtaining the Phoenix loans, these are amortised on a straight-line basis
over the life of the borrowings.
A reconciliation in the movement in borrowings is as follows:
2023 | 2022 | |
£m | £m | |
At 1 January | 81.4 | 51.8 |
Amortisation of costs | – | – |
Capitalised loan costs | – | (0.6) |
Repayment of debt | (6.2) | (29.8) |
New borrowings | 60.0 | 60.0 |
At 31 December | 135.2 | 81.4 |
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20. Revenue share liability
The Group provides for liabilities in respect of revenue sharing obligations arising under the former Technology Pipeline Agreement
with Imperial College London. Under this agreement, the Group received founder equity in spin out companies from Imperial College,
and following a sale of such founder equity, a pre–specified “revenue share” (typically 50%) is payable to Imperial College and other
third parties. The liability for this revenue share, based on fair value, is recognised as part of the movement in fair value through profit
2023 | 2022 | |
£m | £m | |
Current liabilities: revenue share liability (note 18) | 6.9 | 7.1 |
Non–current liabilities: revenue share liability (note 13) | 6.4 | 13.0 |
Revenue share liability | 13.3 | 20.1 |
Prior to 2018, the Group operated the Technology Transfer Office of Imperial College, under a contract referred to as the Technology
Pipeline Agreement (“TPA”). Under the terms of this TPA, the Group owns licences, patents and equity in spin–out companies generated
through Intellectual Property commercialised from Imperial College but is subject to various revenue–sharing arrangements whereby
income generated from this Intellectual Property is shared with Imperial College (and other third parties where they have provided
funding to research which is subsequently commercialised). These are categorised into short-term and long-term liabilities as follows:
Short-term liabilities: Revenue share arrangement
These represent a share of invoiced revenue in respect of licences and patents governed by the TPA, and a share of proceeds from the
disposal of equity where a disposal of equity which is subject to revenue share (see further details below) has taken place. The maturity
date on such liabilities is typically less than six months.
Long-term liabilities: Revenue share arrangement
Under the Group’s former Technology Pipeline Agreement with Imperial College London, the Group received founder equity in spin
out companies from Imperial College. Following any sale of such founder equity stakes, a pre–specified revenue share (typically 50%)
is payable to Imperial College and other third parties. As at 31 December 2023, £6.4m (2022: £13.0m) of our equity investments were
payable on their disposal to Imperial College and other third parties under these arrangements (i.e. 50% of a gross investment amount of
approximately £13.0m) (2022: £26.0m). A corresponding non–current liability is recognised in respect of these revenue sharing obligations
based on the fair value of the related assets. There is no fixed maturity on the liability as it becomes payable following the sale of the
related portfolio equity investment.
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20. Revenue share liability
continued
Movements in long-term revenue share are as follows:
2023 | 2022 | |
£m | £m | |
At 1 January | 13.0 | 13.1 |
Movements in value of equity investments where revenue share is payable | (0.3) | (0.1) |
Disposals in year resulting in transfer to short-term revenue share | (6.3) | – |
At 31 December | 6.4 | 13.0 |
Financial instruments issued by the Group are treated as equity if the holders have only a residual interest in the Group’s assets after
deducting all liabilities. The objective of the Group is to manage capital so as to provide shareholders with above-average returns
through capital growth over the medium-to-long term. The Group considers its capital to comprise its share capital, share premium,
2023 | 2022 | |||
Issued and fully paid: | Number | £m | Number | £m |
Ordinary shares of 2p each | ||||
At 1 January | 1,063,188,005 | 21.3 | 1,063,033,287 | 21.3 |
Issued in respect of scrip dividend | – | – | 154,718 | – |
Share capital at 31 December | 1,063,188,005 | 21.3 | 1,063,188,005 | 21.3 |
Existing treasury shares at 1 January | (28,110,373) | (0.6) | (22,279,127) | (0.4) |
Purchase of treasury shares | (220,302) | – | (7,429,494) | (0.1) |
Transfer of shares in respect of scrip dividend | – | – | 330,851 | – |
Shares transferred out of treasury for SAYE | 285,335 | – | 497,249 | – |
Settlement of employee share-based payments | 1,551,820 | – | 770,148 | – |
Outstanding at 31 December | 1,036,694,485 | 20.7 | 1,035,077,632 | 20.8 |
The Company has one class of ordinary shares with a par value of 2p (“Ordinary Shares”) which carry equal voting rights, equal rights
to income and distributions of assets on liquidation, or otherwise, and no right to fixed income.
During 2023, the Company purchased 220,302 ordinary shares (2022: 7,429,494 ordinary shares), with an aggregate value of £0.2k
(2022: £8.0m), and they are held in treasury. Retained profits have been reduced by £0.2k (2022: £7.9m), being the net consideration
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In 2023, the Group continued to incentivise employees through its LTIP and AIS. The main terms of both are described in more detail in the
Directors’ Remuneration Report on pages 119 to 120.
Deferred bonus share plan (“DBSP”)
Awards made to employees under the Group’s AIS above a certain threshold include 50% deferred into IP Group equity through the grant
of nil–cost options under the Group’s DBSP. The number of nil–cost options granted under the Group’s DBSP is determined by the share
price at the vesting date. The DBSP options are subject to further time–based vesting over two years (typically 50% after year one and
50% after year two).
An analysis of movements in the DBSP options outstanding is as follows:
Weighted- | Weighted- | |||
average | average | |||
Number of | exercise | Number of | exercise | |
options | price | options | price | |
2023 | 2023 | 2022 | 2022 | |
At 1 January | 2,556,682 | – | 1,311,615 | – |
AIS deferral shares award during the year | 1,120,292 | – | 2,066,174 | – |
Exercised during the year | (1,523,595) | – | (821,107) | – |
At 31 December | 2,153,379 | – | 2,556,682 | – |
Exercisable at 31 December | – | – | 2,881 | – |
1,551,820 shares were transferred from treasury in respect of DBSP scheme during the year, comprising 1,523,595 DBSP options exercised on
14th April 2023 and 28,25 relating to dividends accrued on those options.
The options outstanding at 31 December 2023 had an exercise price of £nil (2022: £nil) and a weighted–average remaining contractual
life of 0.5 years (2022: 0.6 years).
The weighted average share price at the date of exercise for share options exercised in 2023 was 61.0p (2022: 84.4p). The aggregate gain
made by directors on the exercise of options in the year (all of which related to the DBSP) was £0.2m.
As the 2023 AIS financial performance targets were met and as the number of DBSP options to be granted in order to defer such elements
of the AIS payments as are required under our remuneration policy are based on a percentage of employees’ salary, the share–based
payments line includes the associated share–based payments expense incurred in 2023.
IP Group Restricted Share Plan (“RSP”)
As set out in the Remuneration Policy approved by shareholders in 2022, a Restricted Share Plan was introduced in 2022 to replace the
previous LTIP structure. Vesting of these awards will take place over a three-year period commencing on 1 April 2023. Any RSP awards that
vest will be subject to a further two-year holding period. Vesting may be subject to a financial underpin based on NAV growth over the
vesting period. For 2022 awards, the financial underpin has been set such that NAV per share on the vesting date must be no lower than
100% of NAV per share on the award date, after making appropriate adjustments for dividends, buybacks and any other distributions.
Further information on the Group’s RSP is set out in the Directors’ Remuneration Report on page 119.
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The 2023 RSP awards were made on 13 April 2023. The awards will ordinarily vest on 31 March 2026, to the extent that the performance
conditions have been met.
The movement in the number of shares conditionally awarded under the RSP is set out below:
Weighted- | Weighted- | |||
average | average | |||
Number of | exercise | Number of | exercise | |
options | price | options | price | |
2023 | 2023 | 2022 | 2022 | |
At 1 January | 3,458,509 | – | – | – |
Lapsed during the year | – | – | – | – |
Forfeited during the year | (16,367) | – | (74,235) | – |
Notionally awarded during the year | 6,796,721 | – | 3,532,744 | – |
At 31 December | 10,238,863 | – | 3,458,509 | – |
Exercisable at 31 December | – | – | – | – |
The options outstanding at 31 December 2023 had an exercise price in the range of £nil (2022: £nil) and a weighted–average remaining
contractual life of 3.9 years (2022: 4.2 years).
The fair value of the RSP shares notionally awarded in 2023 was calculated using the Finnerty pricing model with the following key
assumptions:
2023 | 2022 | |
IP Group share price as of valuation date | £0.602 | £0.558 |
Exercise price | £nil | £nil |
Indicated Discount for Lack of Marketability | 15% | 15% |
Adjusted probability assigned for performance conditions | 20% | 20% |
Fair value at grant date | £0.24 | £0.21 |
Pre-2022 IP Group Long-Term Incentive Plan (“LTIP”)
Awards under the LTIP take the form of conditional awards of ordinary shares of 2p each in the Group which vest over the prescribed
performance period to the extent that performance conditions have been met. The Remuneration Committee imposes objective
conditions on the vesting of awards and these take into consideration the guidance of the Group’s institutional investors from time to
time. General information on the Group’s LTIP is set out in the Directors’ Remuneration Report on page 119.
The 2021 LTIP awards were made on 6 May 2021. The awards will ordinarily vest on 31 March 2024, to the extent that the performance
conditions have been met. The awards are based on the performance of the Group’s NAV and Total Shareholder Return (“TSR”). Both
performance measures are combined into a matrix format to most appropriately measure performance relative to the business, as
shown in the Directors’ Remuneration Report within the Group’s 2021 Annual Report and Accounts. The total award is subject to an
underpin based on the relative performance of the Group’s TSR to that of the FTSE 250 index, which can reduce the awards by up to 50%.
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The 2021 LTIP matrix is designed such that up to 100% of the award (prior to the application of the underpin) will vest in full in the event
of both NAV increasing by 15% per year on a cumulative basis, from 1 January 2021 to 31 December 2023, and TSR increasing by 15% per
year on a cumulative basis from the date of award to 31 March 2024, using an industry–standard average price period at the beginning
and end of the performance period. Further, the matrix is designed such that 30% of the award shall vest (again prior to the application
of the underpin) if the cumulative increase is 8% per annum for both measures over their respective performance periods (“threshold
performance”). A straight–line sliding scale is applied for performance between the distinct points on the matrix of vesting targets.
The 2020 awards partially met the threshold performance target and 1,066,196 vested, 6,759,628 lapsed on 31 March 2023. NAV growth to
31 December 2022 was above the minimum threshold and below the maximum threshold. The one-month average share price at
31 March 2023 was below the minimum TSR target. As a result 13.67% of the 2020 LTIP awards vested on 31 March 2023.Vested shares
are subject to a further two-year holding period until 31 March 2025 and will be issued to participants only at the end of this period.
The table below sets out the performance measures relating to the 2020 LTIP awards and the actual performance achieved.
Target | Actual | |
Performance condition | Performance | Performance |
NAV (at 31 Dec 2022) | 8%: £1.37bn | £1.38bn |
15%: £1.66bn | (+8.1% p.a.) | |
Annual TSR (share price) | 8%: 69.9p | 57.6p |
15%: 82.3p | (+0.2% p.a. growth) | |
Comparative TSR | FTSE 250 | IP Group 0.2% |
-3.7% |
The movement in the number of shares conditionally awarded under the LTIP is set out below:
Weighted- | Weighted- | |||
average | average | |||
Number of | exercise | Number of | exercise | |
options | price | options | price | |
2023 | 2023 | 2022 | 2022 | |
At 1 January | 14,490,039 | – | 17,113,631 | – |
Lapsed during the year | (6,759,628) | – | (2,534,571) | – |
Forfeited during the year | (1,918) | – | (89,021) | – |
Notionally awarded during the year | – | – | – | – |
At 31 December | 7,728,493 | – | 14,490,039 | – |
Exercisable at 31 December | 4,596,014 | – | 3,529,818 | – |
The options outstanding at 31 December 2023 had an exercise price in the range of £nil (2022: £nil) and a weighted–average remaining
contractual life of 0.8 years (2022: 2.0 years).
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The fair value of LTIP shares awarded in 2021 for which a charge has been recognised in the year was calculated using Monte Carlo
pricing models with the following key assumptions:
2021 | |
LTIP award | |
Share price at date of award | £1.254 |
Exercise price | £nil |
Fair value at grant date | £0.35 |
Expected volatility (median of historical 50-day moving average) | 39% |
Expected life (years) | 3.0 |
Expected dividend yield | 0% |
Risk-free interest rate | 0.3% |
The fair value charge recognised in the statement of comprehensive income during the year in respect of all share–based payments,
23. Long–term incentive carry scheme – Carried interest plan liability
The Group operates a number of Long-Term Incentive Carry Schemes (“LTICS”) for eligible employees which may result in payments
to scheme participants relating to returns from investments.
Under the Group’s LTICS arrangements, a profit–sharing mechanism exists whereby if a specific vintage delivers returns in excess
of the base cost of investments together with an agreed hurdle rate, scheme participants receive a share of excess returns. Of the
Group’s total equity and debt investments, 69.0% are included in LTICS arrangements (2022: 66.6%).
The calculation of the liability in respect of the Group’s LTICS is derived from the fair value estimates for the relevant portfolio
investments and does not involve significant additional judgement (although the fair value of the portfolio is a significant accounting
estimate). The actual amounts of carried interest paid will depend on the cash realisations of individual vintages, and valuations
may change significantly in the next financial year. Movements in the liability are recognised in the consolidated statement of
2023 | 2022 | |
£m | £m | |
At 1 January | 44.1 | 33.1 |
Charge for the year | (4.7) | 12.0 |
Payments made in the year | (1.3) | (1.0) |
Foreign exchange rate movement | (0.1) | – |
At 31 December | 38.0 | 44.1 |
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The Group has various related parties arising from its key management, subsidiaries and equity stakes in portfolio companies.
(i) Key management personnel transactions
The following key management held shares in the following spin–out companies as at 31 December 2023:
Number | |||||
Number | of shares | Number | |||
of shares | acquired/ | of shares | |||
held at | (disposed | held at | |||
1 January | of) in the | 31 December | |||
Director/PDMR | Company name | 2023 | period | 2023 % | |
Greg Smith | Alesi Surgical Limited | 2 | – | 2 | <0.1% |
Crysalin Limited 1 | 149 | – | 149 | <0.1% | |
Emdot Limited 1 | 4 | – | 4 | 0.23% | |
Istesso Limited | 313,425 | – | 313,425 | 0.37% | |
Itaconix plc | 4,500 | – | 4,500 | <0.1% | |
Mirriad Advertising plc | 16,667 | – | 16,667 | <0.1% | |
Oxa Autonomy Limited 2 | 8 | – | 8 | <0.1% | |
Oxford Nanopore Technologies plc | 27,008 | – | 27,008 | <0.1% | |
Rio AI Limited | 144,246 | – | 144,246 | <0.1% | |
Surrey Nanosystems Limited | 88 | – | 88 | <0.1% | |
Tissue Regenix Group plc 3 | 5,000 | – | 5,000 | <0.1% | |
Xeros Technology plc | 13 | – | 13 | <0.1% | |
David Baynes | Alesi Surgical Limited | 4 | – | 4 | <0.1% |
Arkivum Limited | 377 | – | 377 | <0.1% | |
Creavo Medical Technologies Limited 1 | 46 | – | 46 | <0.1% | |
Mirriad Advertising plc | 16,667 | – | 16,667 | <0.1% | |
Oxford Nanopore Technologies plc | 2,784 | – | 2,784 | <0.1% | |
Ultraleap Holdings Limited | 2,600 | – | 2,600 | <0.1% | |
Zeetta Networks Limited | 424 | – | 424 | 0.11% |
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Number | |||||
Number | of shares | Number | |||
of shares | acquired/ | of shares | |||
held at | (disposed | held at | |||
1 January | of) in the | 31 December | |||
Director/PDMR | Company name | 2023 | period | 2023 % | |
Mark Reilly | Actual Experience plc 1 | 28,000 | - | 28,000 | <0.1% |
AudioScenic Limited | 53 | - | 53 | <0.1% | |
Bramble Energy Limited | 16 | - | 16 | <0.1% | |
Diffblue Limited | 8,038 | - | 8,038 | <0.1% | |
Itaconix plc | 377,358 | - | 377,358 | <0.1% | |
Mirriad Advertising plc | 66,666 | - | 66,666 | <0.1% | |
Mixergy Limited | - | 126 | 126 | <0.1% | |
Oxa Autonomy Ltd 2 | 8 | - | 8 | <0.1% | |
Ultraleap Holdings Limited | 1,700 | - | 1,700 | <0.1% | |
Sam Williams | Accelercomm Limited | 127 | - | 127 | <0.1% |
Alesi Surgical Limited | 1 | - | 1 | <0.1% | |
Centessa Pharmaceuticals plc | 3,247 | - | 3,247 | <0.1% | |
Creavo Medical Technologies Limited1 | 23 | - | 23 | <0.1% | |
Genomics plc | 333 | - | 333 | <0.1% | |
Ibex Innovations Limited | 1,701 | - | 1,701 | <0.1% | |
Istesso Limited | 7,048,368 | - | 7,048,368 | 8.29% | |
Microbiotica Limited | 7,000 | - | 7,000 | <0.1% | |
Mirriad Advertising plc | 3,333 | - | 3,333 | <0.1% | |
Oxa Autonomy Ltd 2 | 3 | - | 3 | <0.1% | |
Oxehealth Limited | 33 | 32 | 65 | <0.1% | |
Oxford Nanopore Technologies plc | 25,609 | - | 25,609 | <0.1% | |
Topivert Limited 1 | 1,000 | - | 1,000 | <0.1% | |
Ultraleap Holdings Limited | 558 | - | 558 | <0.1% |
1
Company being closed down.
2
Previously called Oxbotica Limited.
3
Opening position restated to reflect 100:1 share consolidation during the period.
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Policy for Executive Director holdings in Portfolio Companies
The policy for Executive Director shareholdings in portfolio companies specifies:
•
New direct investments in portfolio companies by executive directors are prohibited, with the exception of the take-up of pre-emption
rights which relate to existing portfolio company shareholdings. Both Mr Smith and Mr Baynes are covered by
this policy.
•
Mr Smith and Mr Baynes have voluntarily submitted to an additional binding condition such that any net proceeds received
as a result of realisations from direct holdings in portfolio companies that exceed £250,000 will be used to purchase shares in
IP Group, until such time as they meet the Minimum Shareholding Requirement set for their role (currently 350% of annual salary for
Mr Smith, 250% for Mr Baynes).
(ii) Key management personnel compensation
Key management personnel compensation comprised the following:
2023 | 2022 | |
£000 | £000 | |
Short–term employee benefits 1 | 3,091 | 3,918 |
Post–employment benefits 2 | 108 | 99 |
Other long–term benefits | – | – |
Termination benefits | – | – |
Share–based payments 3 | 1,161 | 1,374 |
Total | 4,360 | 5,391 |
1
Represents key management personnel’s base salaries, benefits including cash in lieu of pension where relevant, and the cash–settled element of the Annual Incentive
Scheme.
2
Represents employer contributions to defined contribution pension and life assurance plans.
3
Represents the accounting charge for share-based payments, reflecting LTIP and DBSP options currently in issue as part of these schemes. See note 22 for a detailed
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B) Portfolio companies
(i) Services
The Group earns fees from the provision of business support services and corporate finance advisory services to portfolio companies
in which the Group has an equity stake. Through the lack of control over portfolio companies these fees are considered arm’s length
transactions. The following amounts have been included in respect of these fees:
2023 | 2022 | |
Statement of comprehensive income | £m | £m |
Revenue from services | – | 0.2 |
2023 | 2022 | |
Statement of financial position | £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:
2023 | 2022 | |
Statement of comprehensive income | £m | £m |
Net portfolio gains | 31.7 | 75.0 |
2023 | 2022 | |
Statement of financial position | £m | £m |
Equity and debt investments | 566.4 | 651.6 |
C) Subsidiary companies
Subsidiary companies that are not 100% owned either directly or indirectly by the parent company have intercompany balances (which
are eliminated at a consolidated level) with other Group companies which are disclosed as follows:
2023 | 2022 | |
£m | £m | |
Intercompany balances with other Group companies | 2.1 | 2.1 |
These intercompany balances represent funding loans provided by Group companies that are interest free, repayable on demand and
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The Group’s key objective when managing capital is to safeguard the Group’s ability to continue as a going concern so that it can
continue to provide returns for shareholders and employees for other stakeholders. The Group sets the amount of capital in proportion
to risk. The Group manages the capital structure, and makes adjustments to it, in light of changes in economic conditions and the risk
characteristics of its underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of issued
share capital, issue or repay debt and dispose of interests in portfolio companies.
During 2023, the Group’s strategy, which was unchanged from 2022, was to maintain an appropriate level of cash and short-term deposit
balances in line with the Group’s capital allocation plans, whilst having sufficient cash reserves to meet working capital requirements in
the foreseeable future.
The Group has external borrowings with associated covenants that are described in note 19. These include covenants around the Group’s
minimum equity and maximum debt/equity ratio. Consideration is given to the level of headroom against these covenants as part of the
Group’s capital allocation process where planning corporate actions such as dividends and share buybacks, which have an impact on
Commitments to Limited Partnerships
Pursuant to the terms of their Limited Partnership agreements, the Group has committed to invest the following amounts into Limited
Partnerships as at 31 December 2023:
Year of | Invested to | Remaining | ||
commencement | Commitment | date | commitment | |
Year ended 31 December 2023 | of commitment | £m | £m | £m |
IP Venture Fund II LP | 2013 | 10.0 | 9.9 | 0.1 |
UCL Technology Fund LP | 2016 | 24.8 | 23.2 | 1.6 |
Total at 31 December 2023 | 34.8 | 33.1 | 1.7 | |
Year of | Invested to | Remaining | ||
commencement | Commitment | date | commitment | |
Year ended 31 December 2022 | of commitment | £m | £m | £m |
IP Venture Fund II LP | 2013 | 10.0 | 9.8 | 0.2 |
UCL Technology Fund LP | 2016 | 24.8 | 22.4 | 2.4 |
IP Cayman LP | 2021 | 8.3 | 8.3 | – |
Total at 31 December 2022 | 43.1 | 40.5 | 2.6 |
In December 2023, the Group signed a Subscription Share Agreement to invest US$15m in Hysata Pty Ltd. In May 2023, the Group signed
a Convertible Loan Agreement whose terms included a commitment to invest £10m in Istesso Limited in 2024 following the issue of a
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2023 pence | 2022 pence | |||
per share | £m | per share | £m | |
Ordinary shares: | ||||
Interim dividend | 0.51 | 5.3 | 0.50 | 5.3 |
Final dividend | 0.76 | 7.7 | 0.72 | 7.4 |
Dividends paid to equity owners in the financial year | 1.27 | 13.0 | 1.22 | 12.7 |
Proposed final dividend at financial year end | – | – | 0.76 | 7.9 |
Of the £13.0m dividends paid in 2023, £13.0m was settled in cash (2022: £12.7m dividends, £12.3m settled in cash, £0.4m settled via the issue
of equity). Due to the limited take up of scrip dividends the scheme has been discontinued.
On 18th December 2023 the Group announced that, in light of the prevailing discount between the Company’s share price and its NAV per
share, it had initiated a share buyback of up to £20 million. The Board remains committed to making regular cash returns to shareholders
from realisations. In future these regular cash returns will normally be made in the form of share buybacks when the share price discount
to NAV exceeds 20%. Regular dividend payments will be suspended under such conditions, including consideration of any final dividend
28. 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.
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28. Alternative performance measures (“APM”)
continued
Calculation | |||||
Reference for | 2023 | 2022 | |||
APM | reconciliation | Definition and purpose | £m | £m | |
NAV per | Primary | NAV per share is defined as Net Assets divided by the number of | NAV | £1,190.3m | £1,376.1m |
share 1 | statements, | outstanding shares. | Shares in issue | 1,036,694,485 | 1,035,077,632 |
note 21 | |||||
The measure shows net assets managed on behalf of shareholders | NAV per share | 114.8p | 132.9p | ||
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. | |||||
Return on | Primary | Return on NAV is defined as the total comprehensive income or loss | Total | (174.8) | (344.0) |
NAV | statements | for the year excluding charges which do not impact on net assets, | comprehensive | ||
note 4 | specifically share–based payment charges. | income | |||
The measure shows a summary of the income statement gains | Excluding: | ||||
and losses which directly impact NAV. | Share-based | 2.6 | 2.9 | ||
payment charge | |||||
Return on NAV | (172.2) | (341.1) | |||
Net portfolio | note 13, 15, 22 | Net portfolio gains are defined as the movement in the value of | Change in | (110.9) | (303.4) |
gains/ | holdings in the portfolio due as a result of realised and unrealised | fair value of | |||
(losses) | gains and losses. | equity and debt | |||
investments | |||||
The measure shows a summary of the income statement gains | |||||
and losses which are directly attributable to the Total Portfolio | Gain on disposal | (10.8) | (7.8) | ||
(see definition above), which is a headline measure for the Group’s | of equity | ||||
portfolio performance. | investments | ||||
Change in fair | (38.8) | 2.1 | |||
This is a key driver of the Return on NAV which is a performance | |||||
value of LP | |||||
metric for directors’ and employees’ incentives. | |||||
interests 2 | |||||
Net portfolio | (160.5) | (309.1) | |||
gains/(losses) | |||||
Total | Consolidated | Total portfolio is defined as the total of equity investments, debt | Equity | 1,011.5 | 1,120.8 |
portfolio | statement | investments and investments in LPs. | investments | ||
of financial | This measure represents the aggregate balance sheet amounts | Debt investments | 83.7 | 38.1 | |
position, | |||||
which the Group considers to be its investment portfolio, and which | LP interests | 69.7 | 99.6 | ||
note 13, 14 | |||||
is described in further detail within the portfolio review section of | Total portfolio | 1,164.9 | 1,258.5 | ||
the strategic report. |
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Calculation | |||||
Reference for | 2023 | 2022 | |||
APM | reconciliation | Definition and purpose | £m | £m | |
Portfolio | Primary | Portfolio investment is defined as the purchase of equity and debt | Purchase of | (63.4) | (88.9) |
investment | statements | investments plus investments into limited partnership interests. | equity and debt | ||
investments | |||||
This gives a combined measure of investment into the Group’s | |||||
portfolio. | Investment in | (9.8) | (4.6) | ||
limited and | |||||
limited liability | |||||
partnerships | |||||
Portfolio | (73.2) | (93.5) | |||
investment | |||||
Cash | Primary | Cash proceeds is defined as the proceeds from the disposal of | Proceeds from | 37.7 | 28.1 |
proceeds 1 | statements | equity and debt investments plus distributions received from limited | the sale of equity | ||
partnership interests. | investments | ||||
Distributions | 0.9 | – | |||
from limited | |||||
partnership funds | |||||
Cash proceeds | 38.6 | 28.1 | |||
Net | Financial | Net overheads are defined as the Group’s core overheads less | Other income | 5.9 | 7.1 |
overheads 2 | review, | operating income. The measure reflects the Group’s controllable net | Other | (28.0) | (27.4) |
note 8 | operating “cash–equivalent” central cost base. | administrative | |||
Net overheads exclude items such as share–based payments and | expenses | ||||
consolidated portfolio company costs. | Excluding: | ||||
Non-portfolio | (0.4) | 0.1 | |||
foreign exchange | |||||
movements | |||||
Administrative | – | 0.1 | |||
expenses: | |||||
consolidated | |||||
portfolio | |||||
companies | |||||
Net overheads | (22.5) | (20.1) | |||
Gross cash | Primary | Cash and deposits is defined as cash and cash equivalents plus | Cash and cash | 100.9 | 88.7 |
and deposits | statements | deposits. | equivalents | ||
The measures give a view of the Group’s liquid resources on a short– | Deposit | 126.0 | 152.8 | ||
term timeframe. The Group’s Treasury Policy has a maximum maturity | Gross cash | 226.9 | 241.5 | ||
limit of 13 months for deposits. | and deposits |
28. Alternative performance measures (“APM”)
continued
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203
Calculation | |||||
Reference for | 2023 | 2022 | |||
APM | reconciliation | Definition and purpose | £m | £m | |
Loss | Primary | (Loss)/profit excluding ONT is defined as the Groups (loss)/profit | (Loss) for the | (174.4) | (344.5) |
excluding | statements | for the year (after tax) excluding the (loss)/profit on the investment | year | ||
ONT | held in Oxford Nanopore publicly quoted shares both realised | Excluding: | |||
and unrealised. | |||||
Change in fair | 31.9 | 369.7 | |||
This measure gives a view of the results of this business excluding | value of equity | ||||
this single investment which, given its size and recent share price | investment in | ||||
volatility, may be helpful to users of the accounts as a view of the | Oxford Nanopore | ||||
underlying business. | (Loss)/profit | (142.5) | 25.2 | ||
excluding ONT | |||||
Simple return Note 28 | Defined as net portfolio gains/losses divided by the opening total | Net portfolio | (160.5) | (303.4) | |
on capital | portfolio value. | (losses) | |||
(%) 3 | This measure gives a view of the size of portfolio gains or losses | Opening total | 1,258.5 | 1,507.5 | |
relative to the opening portfolio value, giving useful additional context | portfolio value | ||||
for the value of gains or losses. | Simple return on | -13% | -20% | ||
capital (%) | |||||
% Return on | Note 28 | Defined as return on NAV divided by the opening Net Asset Value. | Return on NAV | (172.2) | (341.1) |
NAV (%) 3 | (return on | This measure gives a view of the size of Return on NAV relative to the | Opening Net | 1,376.1 | 1,738.1 |
NAV) | opening Net Asset Value, giving useful additional context for the value | Asset Value | |||
Primary | |||||
of returns. | Return on NAV | -13% | -20% | ||
statements | |||||
(%) | |||||
(Net Asset | |||||
Value) |
1
For consistency with how we report investments as the purchase of equity and debt investments plus investment in limited and limited liability partnerships, the directors
believe that this new measure showing cash proceeds is defined as the proceeds from the disposal of equity and debt investments plus distributions received from limited
liability partnerships interests profit represents a useful additional measure for users of the accounts.
2
For clarity non-portfolio foreign exchange movements have been excluded from net overheads, These exchange movements are on intercompany loans and other balance
sheet items including cash, and which do not represent an ongoing overhead cost for the group. Their exclusion is therefore considered to give a more accurate view of the
underlying net overhead costs of the business.
3
New APMs in the period, showing % Return on Capital and % Return on NAV, which we believe provide useful additional context on the relative size of the income
statement movements.
As of the reporting date, unrealised fair value losses in respect of the Group’s quoted portfolio totalled £45.4m, largely in respect of Oxford
28. Alternative performance measures (“APM”)
continued
.
AS AT 31 DECEMBER 2023
2023 | 2022 | ||
Note | £m | £m | |
ASSETS | |||
Non-current assets | |||
Investment in subsidiary undertakings | 2 | 330.4 | 329.2 |
Equity and debt investments | 3 | 3.5 | 3.5 |
Limited liability partnership interests | 4 | 2.9 | 2.7 |
Loans to subsidiary undertakings: long term | 5 | 640.9 | 599.0 |
Total non-current assets | 977.9 | 934.4 | |
Current assets | |||
Loans to subsidiary undertakings: short term | 5 | 0.9 | – |
Cash & cash equivalent | – | 0.1 | |
Total current assets | 0.9 | 0.1 | |
Total assets | 978.6 | 934.5 | |
EQUITY AND LIABILITIES | |||
Capital and reserves | |||
Called-up share capital | 6 | 21.3 | 21.3 |
Share premium account | 6 | 102.8 | 102.8 |
Retained earnings | 6 | 734.0 | 750.3 |
Total equity attributable to equity holders | 858.1 | 874.4 | |
Current liabilities | |||
Trade and other payables | 0.9 | 0.6 | |
Total current liabilities | 0.9 | 0.6 | |
Non-current liabilities | |||
Borrowings | 119.6 | 59.5 | |
Total non-current liabilities | 119.6 | 59.5 | |
Total liabilities | 120.5 | 60.1 | |
Total equity and liabilities | 978.6 | 934.5 |
Registered number: 04204490
The Company has taken advantage of the exemption
granted by Section 408 of the Companies Act 2006
whereby no individual income statement of the
Company is disclosed. The Company’s loss for the
financial year was £5.9m (loss: 2022: £1.4m).
The accompanying notes form an integral part of
the financial statements. The financial statements
on pages 204 to 220 were approved by the Board of
Directors and authorised for issue on 12 March 2024 and
were signed on its behalf by: signed on its behalf by:
Greg Smith
David Baynes
Chief Executive Officer
Chief Financial Officer
204
IP GROUP PLC ANNUAL REPORT 2023
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AS AT 31 DECEMBER 2023
Share | Share | Retained | ||
capital | premium (i) | earnings (ii) | Total | |
£m | £m | £m | £m | |
At 1 January 2022 | 21.3 | 102.7 | 769.5 | 893.5 |
Comprehensive income | – | – | (1.4) | (1.4) |
Issue of shares (iii) | – | 0.1 | – | 0.1 |
Purchase of treasury shares (iv) | – | – | (8.0) | (8.0) |
Equity-settled share-based payments (v) | – | – | 2.9 | 2.9 |
Ordinary dividends (vi) | – | – | (12.7) | (12.7) |
At 1 January 2023 | 21.3 | 102.8 | 750.3 | 874.4 |
Comprehensive income | – | - | (5.8) | (5.8) |
Issue of shares (iii) | – | – | – | – |
Purchase of treasury shares (iv) | – | – | (0.1) | (0.1) |
Equity-settled share-based payments (v) | – | – | 2.6 | 2.6 |
Ordinary dividends (vi) | – | – | (13.0) | (13.0) |
At 31 December 2023 | 21.3 | 102.8 | 734.0 | 858.1 |
i
Share premium – Amount subscribed for share capital in excess of nominal value, net of directly attributable issue costs.
ii
Retained earnings – Cumulative net gains and losses recognised in the statement of comprehensive income net of associated share-based
payments credits and distributions to shareholders.
iii
Issue of shares – Share premium in connection with the Interim Scrip Dividend, the Group has received valid elections from shareholders resulting in
a requirement to issue new ordinary shares of 2p each (“New Shares”).
iv
Purchase of treasury shares – Reflects the issue of 220,302 ordinary shares, with an aggregate value of £0.1m, these were purchased by the
Company during the year and are held in treasury. Total value including costs was £0.1m. (2022: 7,429,494 shares purchased for total value of £8.0m,
total including costs of £8.0m). These shares were purchased for the £20m share buyback share buyback approved by the Board in December 2023.
v
Equity-settled share-based payments – amounts recognised in respect of the Group’s share-based payments schemes recognised as a subsidiary
investment in the Company accounts with a corresponding entry against equity.
vi
Ordinary dividends – Of the £13.0m dividends paid in 2023, £13.0m was settled in cash (2022: £12.7m total, £12.3m cash, £0.4m Scrip). No new shares
were issued in respect of the scrip dividend (2022: 485,569 shares issued).
OUR GOVERNANCE
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STRATEGIC REPORT
OUR FINANCIALS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
.
1. Accounting policies
These financial statements were prepared in accordance with
Financial Reporting Standard 101 Reduced Disclosure Framework
(“FRS 101”).
In preparing these financial statements, the Company applies the
recognition, measurement and disclosure requirements of UK–
adopted international accounting standards (“UK–adopted IFRS”)
but makes amendments where necessary in order to comply with
Companies Act 2006 and has set out below where advantage of
the FRS 101 disclosure exemptions has been taken.
Under section s408 of the Companies Act 2006 the company is
exempt from the requirement to present its own profit and loss
account.
In these financial statements, the Company has applied the
exemptions available under FRS 101 in respect of the following
disclosures: a cash flow statement and related notes; disclosures
in respect of transactions with wholly owned subsidiaries;
disclosures in respect of capital management; from presenting a
comparative period reconciliation for share capital, the effects of
new but not yet effective IFRSs; and disclosures of compensation of
key management personnel.
As the consolidated financial statements include the equivalent
disclosures, the Company has also taken the exemptions under
FRS 101 available in respect of the following disclosures: IFRS 2
Share-Based Payments in respect of Group-settled share-based
payments; and certain disclosures required by IFRS 13 Fair Value
Measurement and the disclosures required by IFRS 7 Financial
Instrument Disclosures.
The Company proposes to continue to adopt the reduced
disclosure framework of FRS 101 in its next financial statements.
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in these
financial statements.
Subsidiary investments
Investments in subsidiaries are stated at cost less, where appropriate,
provision for impairment. The Company tests the investment
balances for impairment annually or whenever there is an indication
that the value of carrying amount may not be recoverable.
In light of the fact that the majority of the assets in the Company’s
subsidiaries are recorded at fair value, subsidiary net assets are
taken as an approximation of their minimum recoverable amount.
If the carrying value of an investment in a subsidiary is in excess of
the minimum recoverable amount, the value of the investment is
impaired.
Consideration has been given as to whether the fact that IP
Group plc’s shares are trading at a discount to net asset value
constitutes a trigger an impairment assessment for the value of
the Company’s subsidiary investments. Given that the majority of
the assets within the Company’s subsidiaries are held at fair value,
the Directors do not believe that as a result of this assessment an
additional impairment is required.
Equity and debt investments and Limited Liability
Partnership interests
Equity investments, debt investments and investments in limited
partnerships are categorised as financial assets at fair value
through profit or loss. This measurement basis is consistent with
the fact that the Group’s performance in respect of investments
in equity investments, limited partnerships and associated
undertakings is evaluated on a fair value basis in accordance with
an established investment strategy.
Financial assets at fair value through profit or loss are initially
recognised at fair value and any gains or losses arising from
subsequent changes in fair value are presented in profit or loss in the
statement of comprehensive income in the period which they arise.
The valuation methods applied are the same as those at the
Group level; details of which can be found in note 13 to the Group’s
financial accounts on pages 174 to 181.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
.
1. Accounting policies
continued
Intercompany loans
All intercompany loans are initially recognised at fair value and
subsequently measured at amortised cost. Where intercompany
loans are intended for use on a continuing basis in the Company’s
activities, and there is no intention of their settlement in the
foreseeable future, they are presented as non-current assets.
Financial instruments
Currently the Company does not enter into derivative financial
instruments. Financial assets and financial liabilities are recognised
and cease to be recognised on the basis of when the related titles
pass to or from the Company.
Share-based payments
The Group operates a number of equity-settled share-based
compensation schemes under which the employing subsidiary
within the Group receives services from employees as
consideration for equity instruments in IP Group plc. For further
details on these schemes, see note 23 in the Group accounts.
When options are exercised, the company issues new shares.
The proceeds received net of any directly attributable costs are
credited to share capital (nominal value) and the balance to
share premium. In the Company financial statements, the grant of
share options is treated as a capital contribution. Specifically, the
fair value of employee services received (measured at the date
of grant) is recognised over the vesting period as an increase to
investment in subsidiary undertakings, with a corresponding credit
to equity in the parent entity financial statements.
Borrowings
Borrowings are recognised initially at fair value, net of transaction
costs incurred. Borrowings are subsequently carried at amortised
cost; any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the consolidated
statement of comprehensive income over the period of the
borrowing using the effective interest rate method. Costs incurred
in the course of issuing additional debt are recognised on the
balance sheet and charged to the income statement on a straight
line basis over the term of the borrowings.
2. Investments in subsidiary undertakings
2023
£m
2022
£m
At 1 January
329.2
326.7
Investment in respect of share-based
payments
2.6
2.9
Impairment of subsidiary undertakings
in the year
(1.4)
(0.4)
At 31 December
330.4
329.2
Details of the Company’s subsidiary undertakings as at
31 December 2023 are detailed in note 10 to the Company financial
statements.
3. Equity and debt investments
2023
£m
2022
£m
At 1 January
3.5
3.5
Fair value gains in the year
–
–
Disposals in the year
–
–
At 31 December
3.5
3.5
Details of the Company’s associated undertakings and significant
holdings as at 31 December 2023 are disclosed in note 11 to the
Company financial statements.
4. Limited liability partnership interests
2023
£m
2022
£m
At 1 January
2.7
2.7
Fair value gain during the year
0.2
–
At 31 December
2.9
2.7
Other investments relate to the Group’s 17.7% partnership interest in
Technikos LLP, see notes 1 and 23 of the Group accounts for further
details.
OUR GOVERNANCE
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NOTES TO THE COMPANY FINANCIAL STATEMENTS
.
5. Loans to subsidiary undertakings
2023
£m
2022
£m
At 1 January
599.0
573.1
Drawdown/Repayment of loans by subsidiary undertakings during the year
42.8
25.9
At 31 December
641.8
599.0
2023
£m
2022
£m
Current
0.9
–
Non-current
640.9
599.0
At 31 December
641.8
599.0
The directors consider the carrying amount of trade and other receivables at amortised cost to approximate their fair value.
All receivables are interest free, repayable on demand and unsecured.
The amounts due from subsidiary undertakings are interest free, repayable on demand and unsecured. Loans classified as non-current
are not expected to be recalled within one year.
Given the nature of the subsidiary undertakings to which they relate, the Company considers expected credit losses on the Company’s
receivables to be less than £0.1m and therefore not disclosed further (2022: under £0.1m).
6. Share capital and reserves
Share
capital
£m
Share
premium
£m
Profit and
loss reserve
£m
At 1 January 2023
21.3
102.8
750.3
Comprehensive income
–
–
(5.8)
Purchase of treasury shares
–
–
(0.1)
Equity-settled share-based payments
–
–
2.6
Ordinary dividends
–
–
(13.0)
At 31 December 2023
21.3
102.8
734.0
Details of the Company’s authorised share capital and changes in its issued share capital can be found in note 21 to the consolidated financial
statements. Details of the movement in the share premium account can be found in the consolidated statement of changes in equity.
208
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NOTES TO THE COMPANY FINANCIAL STATEMENTS
.
7. Profit and loss account
As permitted by Section 408 of the Companies Act 2006, the Company’s profit and loss account has not been included in these financial
statements. The Company’s loss for the year was £5.9m (2022: loss of £1.4m).
Details of the auditor’s remuneration are disclosed in note 6 to the consolidated financial statements.
8. Directors’ emoluments, employee information and share-based payments
The remuneration of the directors is borne by Group subsidiary undertakings. Full details of their remuneration can be found in the
Directors’ Remuneration Report on pages 111 to 128.
Full details of the share-based payments charge and related disclosures can be found in note 22 to the consolidated financial
statements.
The Company had no employees during 2023 or 2022.
9. Dividends
Of the £13.0m dividends paid in 2023, £13.0m was settled in cash (2022: £12.7m dividends, £12.3m settled in cash, £0.4m settled via the issue
of equity). Due to the limited take up of scrip dividends the scheme has been discontinued.
On 18 December 2023, the Group announced that, in light of the prevailing discount between the Company’s share price and its NAV per
share, it had initiated a share buyback of up to £20 million. The Board remains committed to making regular cash returns to shareholders from
realisations. In future these regular cash returns will normally be made in the form of share buybacks when the share price discount to NAV
exceeds 20%. Regular dividend payments will be suspended under such conditions, including consideration of any final dividend for 2023.
10. Borrowings
2023
£m
2022
£m
Current
-
–
Non-current
119.6
59.5
At 31 December 2023
119.6
59.5
The Group has expanded its debt facilities in the year with the addition of an agreed borrowing primarily from Phoenix group which it has
used to fund our portfolio of businesses. The terms of the facilities are summarised in note 19 of the consolidated financial statements.
OUR GOVERNANCE
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OUR FINANCIALS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
.
11. Details of subsidiary undertakings
Name of subsidiary undertakings
Proportion
of ownership
interest
%(i)
Proportion
of voting
power held
%(i)
Proportion
of nominal
value held
%
Held by
Parent/
Group
IP2IPO Limited
100.0
100.0
100.0
Direct
IP2IPO Carry Partner Limited
100.0
100.0
100.0
Indirect
IP2IPO Americas Limited
100.0
100.0
100.0
Indirect
IP2IPO US Partners Limited
100.0
100.0
100.0
Indirect
Top Technology Ventures Limited
(iii)
100.0
100.0
100.0
Direct
Fusion IP Sheffield Limited
(ii)
100.0
100.0
100.0
Indirect
Fusion IP Cardiff Limited
(ii)
100.0
100.0
100.0
Indirect
IP Venture Fund II (GP) LLP
(iii)
100.0
100.0
100.0
Indirect
IP Ventures (Scotland) Limited
(iii)
100.0
100.0
100.0
Indirect
IP2IPO Portfolio (GP) Limited
(iii)
100.0
100.0
100.0
Indirect
IP2IPO Portfolio LP
100.0
100.0
100.0
Indirect
IP Capital Limited
(ii)
100.0
100.0
100.0
Indirect
IP2IPO Asia-Pacific Limited
100.0
100.0
100.0
Direct
IP Group Greater China Limited
100.0
100.0
100.0
Indirect
IP Group Greater China Services Limited
100.0
100.0
100.0
Indirect
IP Group (Shenzhen) Technology Consulting Co. Ltd
100.0
100.0
100.0
Indirect
IP2IPO ANZ Carry Limited
(ii)
100.0
100.0
100.0
Indirect
Kiko Ventures Limited
(ii)
100.0
100.0
100.0
Indirect
IP2IPO Australia Pty Limited
100.0
100.0
100.0
Indirect
IP2IPO Australia HP Pty Limited
100.0
100.0
100.0
Indirect
IP2IPO Australia Management Pty Limited
100.0
100.0
100.0
Indirect
IP2IPO Australia GP Pty Limited
100.0
100.0
100.0
Indirect
IP2IPO Australia CT Pty Limited
100.0
100.0
100.0
Indirect
IP2IPO Australia VCMP LP
100.0
100.0
100.0
Indirect
IP2IPO Australia VCLP No 1 LP
100.0
100.0
100.0
Indirect
IP2IPO Australia TS Pty Ltd
100.0
100.0
100.0
Indirect
Parkwalk Advisors Limited
100.0
100.0
100.0
Direct
Touchstone Innovations Limited
100.0
100.0
100.0
Indirect
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OUR GOVERNANCE
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR FINANCIALS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
.
Name of subsidiary undertakings
Proportion
of ownership
interest
%(i)
Proportion
of voting
power held
%(i)
Proportion
of nominal
value held
%
Held by
Parent/
Group
IP2IPO Innovations Limited
100.0
100.0
100.0
Indirect
Innovations Limited Partner Limited
100.0
100.0
100.0
Indirect
IP2IPO Company Maker Limited
100.0
100.0
100.0
Indirect
Touchstone Innovations Businesses LLP
100.0
100.0
100.0
Indirect
IPG USA (LP) Limited
100.0
100.0
100.0
Indirect
IPG USA SCO LP
100.0
100.0
100.0
Indirect
IP2IPO Nominees Limited
(ii)
100.0
100.0
100.0
Direct
IP2IPO Services Limited
(ii)
100.0
100.0
100.0
Direct
LifeUK (IP2IPO) Limited
(ii)
100.0
100.0
100.0
Direct
IP Industry Partners Limited
(ii)
100.0
100.0
100.0
Direct
Biofusion Licensing (Sheffield) Limited
(ii),(iv)
100.0
100.0
100.0
Indirect
Fusion IP Nottingham Limited
(ii),(iv)
100.0
100.0
100.0
Indirect
Fusion IP Two Limited
(ii),(iv)
100.0
100.0
100.0
Indirect
Asterion Limited
66.8
66.8
66.5
Indirect
PH Therapeutics Limited
(ii)
60.0
60.0
60.0
Indirect
Extraject Technologies Limited
(ii)
60.0
60.0
60.0
Indirect
IP Venture Fund II LP
(v)
33.3
33.3
33.3
Indirect
i
All holdings are via ordinary shares unless separate classes are specified in the table.
ii
Dormant/non-trading company.
iii
Company/engaged in fund management activity.
iv
Acquired as part of the Fusion IP plc acquisition.
v
As detailed in note 1 to the Group financial statements, though less than 33.3% of beneficial and nominal interest is held by the Group, the Group’s position as fund manager to
IP Venture Fund II LP means the Group fulfils the control criteria set out in IFRS 10 and the fund is thus consolidated.
All companies above have their registered offices at 2nd Floor 3 Pancras Square, Kings Cross, London, England, N1C 4AG, unless separately
listed on the following page.
11. Details of subsidiary undertakings
continued
OUR GOVERNANCE
BUSINESS OVERVIEW
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OUR FINANCIALS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
.
11. Details of subsidiary undertakings
continued
IP Ventures (Scotland) Limited: 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ.
Asterion Limited: Windsor House, Cornwall Road, Harrogate, England, HG1 2PW.
PH Therapeutics Limited: Windsor House, Cornwall Road, Harrogate, England, HG1 2PW.
Extraject Technologies Limited: Windsor House, Cornwall Road, Harrogate, England, HG1 2PW.
IP2IPO Australia Pty Limited: Level 35, 360 Elizabeth Street, Melbourne, VIC 3000, Australia.
IP Group Greater China Limited: 6/F Alexandra House, 18 Chater Road, Central Hong Kong.
IP Group Greater China Services Limited: 6/F Alexandra House, 18 Chater Road, Central Hong Kong.
IP2IPO Australia HP Pty Limited: Level 35, 360 Elizabeth Street, Melbourne, VIC 3000, Australia.
IP2IPO Australia Management Pty Limited: Level 35, 360 Elizabeth Street, Melbourne, VIC 3000, Australia.
IP2IPO Australia GP Pty Limited: Level 35, 360 Elizabeth Street, Melbourne, VIC 3000, Australia.
IP2IPO Australia CT Pty Limited: Level 35, 360 Elizabeth Street, Melbourne, VIC 3000, Australia.
IP2IPO Australia VCMP LP: Level 35, 360 Elizabeth Street, Melbourne, VIC 3000, Australia.
IP2IPO Australia VCLP No 1 LP: Level 35, 360 Elizabeth Street, Melbourne, VIC 3000, Australia.
IP2IPO Australia TS Pty Ltd, 658 856 832, Level 35, 360 Elizabeth Street, Melbourne, VIC, 3000, Australia.
IPG USA SCO LP: 13 Queens Road, Aberdeen, AB15 4YL.
All companies above are incorporated in England and Wales
Scotland, IP Group Inc, IP2IPO Australia Pty Limited, IP2IPO Australia HP Pty Limited, IP2IPO Australia Management Pty Limited, IP2IPO Australia
GP Pty Limited, IP2IPO Australia CT Pty Limited, IP2IPO Australia VCMP LP and IP2IPO Australia VCLP No 1 LP which were incorporated in
Australia and IP Group Greater China Limited and IP Group Greater China Services Limited are both incorporated in Hong Kong.
All companies above undertake the activity of commercialising intellectual property unless stated otherwise. All companies are
consolidated into the Group’s financial performance and position following the acquisition method bar those specified which are omitted
due to being immaterial.
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OUR FINANCIALS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
.
12. Details of significant holdings and associated undertakings
Name of undertaking
Registered address
Proportion
of nominal
value held
%
(i)
Held by
Parent/
Group
(ii)
IPG-CEL China Ventures limited
Level 54, Hopwell Centre, 183 Queen’s Road East, Hong Kong
50%
Group
Accelercomm Limited
5 Benham Road, Chilworth, Southampton, England, SO16 7QJ
26.5%
Group
Ordinary Shares (Accelercomm Limited)
Group
Ordinary A Shares (Accelercomm Limited)
30.9%
Group
B Preference Shares (Accelercomm Limited)
24.5%
Group
Additive Assurance Pty Ltd
382 Huntingdale Rd, Oakleigh South VIC 3167, Australia
32.5%
Group
Seed Extension Preference Shares (Additive Assurance)
32.5%
Group
Alesi Surgical Limited
Cardiff Medicentre, Heath Park, Cardiff, CF14 4UJ
32.0%
Group
Preferred B Shares (Alesi Surgical Limited)
28.1%
Group
Preferred Ordinary Shares (Alesi Surgical Limited)
40.3%
Group
Ordinary Shares (Alesi Surgical Limited)
57.0%
Group
B Shares (Alesi Surgical Limited)
100.0%
Group
A Shares (Alesi Surgical Limited)
100.0%
Group
Preferred C Shares (Alesi Surgical Limited)
42.0%
Group
Alimetry Limited
70 Symonds Street, Grafton, Auckland 1010, New Zealand
22.2%
Group
Series B Preference Shares (Alimetry Limited)
22.2%
Group
AMSL Innovations Pty Ltd
42 Stafford St Stanmore, NEW SOUTH WALES, 2048 Australia
35.0%
Group
Series B Shares (AMSL Innovations Pty Ltd)
35.0%
Group
Ankere Therapeutics Pty Ltd
Level 9, 31 Queen Street Melbourne VIC 3000
32.4%
Group
Seed Shares (Ankere Therapeutics Pty Ltd)
54.5%
Group
AnywhereHPLC Limited
52 Princes Gate, Exhibition Road, London, SW7 2PG
50.0%
Group
Ordinary Shares (AnywhereHPLC Limited)
50.0%
Group
Aqdot Limited
Lab 1 Iconix 2 Iconix Park, London Road, Cambridge, CB22 3EG
28.1%
Group
Preference Shares (Aqdot Limited)
37.4%
Group
Asterion Limited
Windsor House, Cornwall Road, Harrogate, England, HG1 2PW
66.8%
Group
Ordinary Shares (Asterion Limited)
66.8%
Group
Atazoa Limited
Skempton Building, Imperial College Room 205,
Skempton Building, Imperial College, London, SW7 2AZ
24.9%
Group
Ordinary Shares (Atazoa Limited)
49.9%
Group
OUR GOVERNANCE
BUSINESS OVERVIEW
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STRATEGIC REPORT
OUR FINANCIALS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
.
Name of undertaking
Registered address
Proportion
of nominal
value held
%
(i)
Held by
Parent/
Group
(ii)
AudioScenic Limited
Suite A, Epsilon House Enterprise Road,
Southampton Science Park, Southampton, England, SO16 7NS
34.0%
Group
Ordinary Shares (AudioScenic Limited)
38.5%
Group
A Ordinary Shares (AudioScenic Limited)
33.1%
Group
B Ordinary Shares (AudioScenic Limited)
30.4%
Group
Autifony Therapeutics Limited
Stevenage Bioscience Catalyst, Gunnels Wood Road,
Stevenage, Hertfordshire, England, SG1 2FX
26.3%
Group
A3 Preference Shares (Autifony Therapeutics Limited)
35.5%
Group
A Preference Shares (Autifony Therapeutics Limited)
38.4%
Group
Ordinary Shares (Autifony Therapeutics Limited)
1.6%
Group
Azuri Technologies Limited
St. John’s Innovation Centre, Cowley Road, Cambridge,
42.4%
Group
Ordinary shares (Azuri Technologies Limited)
37.4%
Group
A Preference Shares (Azuri Technologies Limited)
50.8%
Group
Barocal Limited
140b Newmarket Road, Cambridge, England, CB5 8HE
32.0%
Group
Ordinary Shares (Barocal Limited)
32.0%
Group
Boxarr Limited
First Floor 25 King Street Bristol BS1 4PB
45.4%
Group
Ordinary Shares (Boxarr Limited)
45.4%
Group
Bramble Energy Limited
Atrium Court Tilgate Business Park Brighton Road Crawley
RH11 9BP
31.6%
Group
Ordinary Shares (Bramble Energy Limited)
32.0%
Group
A Ordinary Shares (Bramble Energy Limited)
32.4%
Group
Cardian Limited
30 Broad Street, Great Cambourne, Cambridge, England,
CB23 6HJ
53.7%
Group
A Preference Shares (Cardian Limited)
100.0%
Group
Ordinary Shares (Cardian Limited)
13.6%
Group
Ordinary Shares 2 – Revenue shares (Cardian Limited)
100.0%
Group
Cardiovascular Imaging Solutions Limited
Suite 19 Maple Court, Grove Park, Maidenhead, Berkshire,
England, SL6 3LW
24.9%
Group
Ordinary Shares (Cardiovascular Imaging Solutions Limited)
24.9%
Group
C-Capture Limited
Windsor House, Cornwall Road, Harrogate, England, HG1 2PW
34.3%
Group
12. Details of significant holdings and associated undertakings
continued
214
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BUSINESS OVERVIEW
STRATEGIC REPORT
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NOTES TO THE COMPANY FINANCIAL STATEMENTS
.
Name of undertaking
Registered address
Proportion
of nominal
value held
%
(i)
Held by
Parent/
Group
(ii)
Ordinary Shares (C-Capture Limited)
29.1%
Group
Series A Preference Shares (C-Capture Limited)
37.0%
Group
A2 Preferred Shares (C-Capture Limited)
17.1%
Group
A1-B Preference Shares (C-Capture Limited)
100.0%
Group
Chromosol Limited
3 Field Court Grays Inn London WC1R 5EF
34.6%
Group
Ordinary Shares (Chromosol Limited)
34.6%
Group
Creavo Medical Technologies Limited
29 East Parade, Leeds, England, LS1 5PS
37.8%
Group
Ordinary Shares (Creavo Medical Technologies Limited)
38.2%
Group
A Shares (Creavo Medical Technologies Limited)
100.0%
Group
Crysalin Limited
C/O James Cowper Kreston The White Building,
1-4 Cumberland Place, Southampton, SO15 2NP
25.3%
Group
Ordinary Shares (Crysalin Limited)
27.0%
Group
Deep Render Ltd
1 St. Katharines Way, London, England, E1W 1UN
45.7%
Group
Series A Preferred Shares (Deep Render Ltd)
60.0%
Group
Defenition Limited
Windsor House, Cornwall Road, Harrogate, England, HG1 2PW
49.5%
Group
B Ordinary Shares (Defenition Limited)
100.0%
Group
Ordinary Shares (Defenition Limited)
48.5%
Group
Diffblue Limited
17c Worcester Place, Oxford, England, OX1 2JW
27.7%
Group
Series A Shares (Diffblue Limited)
52.6%
Group
Non-Voting Preference Shares (Diffblue Limited)
100.0%
Group
Series A1 Shares (Diffblue Limited)
15.8%
Group
Electralith Pty Ltd
Level 35, 360 Elizabeth Street, Melbourne, VIC 3000
30.8%
Group
Ordinary Shares (Electralith Pty Ltd)
30.8%
Group
Emdot Limited
3 Pancras Square, King’s Cross, London, England, N1C 4AG
26.3%
Group
Ordinary Shares (Emdot Limited)
26.3%
Group
Enterprise Therapeutics Holdings Ltd
Sussex Innovation Centre Science Park Square, Falmer,
Brighton, England, BN1 9SB
21.9%
Group
Series B Shares (Enterprise Therapeutics Holdings Ltd)
16.4%
Group
Series A Shares (Enterprise Therapeutics Holdings Ltd)
47.6%
Group
Featurespace Limited
140 Cambridge Science Park, Milton Road, Cambridge,
Cambridgeshire, CB4 0GF
20.1%
Group
E Preference Shares (Featurespace Limited)
8.6%
Group
D Preference Shares (Featurespace Limited)
36.4%
Group
12. Details of significant holdings and associated undertakings
continued
OUR GOVERNANCE
BUSINESS OVERVIEW
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IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR FINANCIALS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
.
Name of undertaking
Registered address
Proportion
of nominal
value held
%
(i)
Held by
Parent/
Group
(ii)
C Preference Shares (Featurespace Limited)
63.6%
Group
B Preference Shares (Featurespace Limited)
64.6%
Group
A Preference Shares (Featurespace Limited)
33.0%
Group
Ordinary Shares (Featurespace Limited)
3.7%
Group
F Preference shares (Featurespace Limited)
11.7%
Group
G Preference Shares (Featurespace Limited)
15.1%
Group
First Light Fusion Limited
Unit 10 Mead Road, Yarnton, Kidlington, Oxfordshire, OX5 1QU
27.5%
Group
Ordinary Shares (First Light Fusion Limited)
28.2%
Group
Fluid Pharma Limited
Windsor House, Cornwall Road, Harrogate, England, HG1 2PW
40.3%
Group
B Ordinary Shares (Fluid Pharma Limited)
87.1%
Group
Ordinary Shares (Fluid Pharma Limited)
39.6%
Group
Garrison Technology Limited
117 Waterloo Road, London, England, SE1 8UL
24.0%
Group
A1 Preference Shares (Garrison Technology Limited)
25.0%
Group
A Preference Shares (Garrison Technology Limited)
94.9%
Group
A2 Preference Shares (Garrison Technology Limited)
32.9%
Group
B Preference shares (Garrison Technology Limited)
14.0%
Group
B1 Preference Shares (Garrison Technology Limited)
25.2%
Group
Gripable Limited
Thornton House, 39 Thornton Road, London, England, SW19 4NQ
31.3%
Group
Ordinary Shares (Gripable Limited)
31.6%
Group
Hysata Pty Ltd
AIIM Building, Innovation Campus,
North Wollongong NSW 2500
37.4%
Group
Ordinary Shares (Hysata Pty Ltd)
35.5%
Group
Series A Preference Shares (Hysata Pty Ltd)
37.6%
Group
Ibex Innovations Limited
Netpark Plexus, Thomas Wright Way, Sedgefield,
Stockton-on-Tees, TS21 3FD
37.8%
Group
Ordinary Shares (Ibex Innovations Limited)
37.8%
Group
Ieso Digital Health Limited
The Jeffreys Building, Cowley Road, Cambridge,
Cambridgeshire, United Kingdom, CB4 0DS
31.6%
Group
A Ordinary Shares (Ieso Digital Health Limited)
85.2%
Group
Ordinary Shares (Ieso Digital Health Limited)
14.8%
Group
12. Details of significant holdings and associated undertakings
continued
216
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR FINANCIALS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
.
Name of undertaking
Registered address
Proportion
of nominal
value held
%
(i)
Held by
Parent/
Group
(ii)
A1 Preference Shares (Ieso Digital Health Limited)
46.7%
Group
B1 Preferred Shares (Ieso Digital Health Limited)
18.4%
Group
Iksuda Therapeutics Limited
The Biosphere, Draymans Way, Newcastle Helix,
Newcastle upon Tyne, NE4 5BX
21.5%
Group
Ordinary Shares (Iksuda Therapeutics Limited)
22.6%
Group
A Ordinary Shares (Iksuda Therapeutics Limited)
50.0%
Group
Series A Shares (Iksuda Therapeutics Limited)
29.2%
Group
Intelligent Ultrasound Group plc
Floor 6A, Hodge House, 114-116 St Mary Street, Cardiff, CF10 1DY
20.8%
Group
Ordinary Shares (Intelligent Ultrasound Group plc)
20.8%
Group
Intrinsic Semiconductor Technologies Limited
Ucl Business Plc, The Network Building, 97 Tottenham Court
Road, London, United Kingdom, W1T 4TP
25.3%
Group
A Ordinary Shares (Intrinsic Semiconductor
Technologies Limited)
43.7%
Group
B Ordinary Shares (Intrinsic Semiconductor
Technologies Limited)
25.0%
Group
Ionix Advanced Technologies Limited
Windsor House, Cornwall Road, Harrogate, England, HG1 2PW
28.7%
Group
Ordinary Shares (Ionix Advanced Technologies Limited)
28.6%
Group
B Ordinary Shares (Ionix Advanced Technologies Limited)
100.0%
Group
E Ordinary Shares (Ionix Advanced Technologies Limited)
27.8%
Group
Ipalk SAS
112 Rye Des Hautes Variennes, 45200, Amilly France
22.0%
Group
Ordinary Shares (Ipalk SAS)
22.0%
Group
Istesso Limited
2nd Floor 3 Pancras Square, Kings Cross, London,
United Kingdom, N1C 4AG
27.0%
Group
Ordinary Shares (Istesso Limited)
40.6%
Group
A Shares (Istesso Limited)
77.8%
Group
Jetra Therapeutics Pty Ltd
St Lucia QLD 4072 Australia
31.7%
Group
Ordinary Shares (Jetra Therapeutics Pty Ltd)
31.7%
Group
Kesios Therapeutics Limited
C/O Cork Gully LLP, 6 Snow Hill, London, EC1A 2AY
100.0%
Group
A Preference Shares (Kesios Therapeutics Limited)
100.0%
Group
Lumai Limited
61 Derwent Avenue, Headington, Oxford, England, OX3 0AS
31.2%
Group
Ordinary Shares (Lumai Limited)
31.2%
Group
12. Details of significant holdings and associated undertakings
continued
OUR GOVERNANCE
BUSINESS OVERVIEW
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IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR FINANCIALS
Name of undertaking
Registered address
Proportion
of nominal
value held
%
(i)
Held by
Parent/
Group
(ii)
Magnomatics Limited
Park House, Bernard Road, Sheffield, S2 5BQ
37.2%
Group
A Shares (Magnomatics Limited)
52.1%
Group
Ordinary Shares (Magnomatics Limited)
15.3%
Group
C Ordinary Shares (Magnomatics Limited)
100.0%
Group
B Shares (Magnomatics Limited)
100.0%
Group
Metabometrix Limited
12 Lodgefield Welwyn Garden City AL7 1SD
23.0%
Group
Ordinary Shares (Metabometrix Limited)
23.0%
Group
Mixergy Limited
30 Upper High Street, Thame, Oxfordshire, OX9 3EZ
26.0%
Group
Ordinary Shares (Mixergy Limited)
27.3%
Group
A Ordinary Shares (Mixergy Limited)
22.0%
Group
B Ordinary Shares (Mixergy Limited)
20.2%
Group
Nascient Limited
3 Field Court, London, WC1R 5EF, United Kingdom
73.2%
Group
Ordinary Shares (Nascient Limited)
50.0%
Group
Preference Shares (Nascient Limited)
100.0%
Group
NGenics Global Limited
School of Physics, Engineering and Technology,
University of York, Heslington, York, YO10 5DD
29.6%
Group
Ordinary Shares (NGenics Global Limited)
29.6%
Group
OxCCU Tech Limited
C/O James Cowper Kreston 2 Chawley Park, Cumnor Hill,
Oxford, Oxfordshire, England, OX2 9GG
24.8%
Group
Ordinary Shares (OxCCU Tech Limited)
26.5%
Group
Series A Preferred Shares (OxCCU Tech Limited)
12.5%
Group
Oxehealth Limited
Magdalen Centre North, Oxford Science Park, Oxford,
United Kingdom, OX4 4GA
27.7%
Group
Ordinary Shares (Oxehealth Limited)
27.8%
Group
Oxford Biotrans Limited
30 Upper High Street, Thame, Oxfordshire, OX9 3EZ
42.3%
Group
Seed Preferred (Oxford Biotrans Limited)
61.3%
Group
Ordinary Shares (Oxford Biotrans Limited)
21.3%
Group
OxSyBio Limited
3 Field Court, London, WC1R 5EF
45.2%
Group
Ordinary Shares (OxSyBio Limited)
45.8%
Group
A Shares (OxSyBio Limited)
100.0%
Group
Preference shares (OxSyBio Limited)
40.0%
Group
12. Details of significant holdings and associated undertakings
continued
NOTES TO THE COMPANY FINANCIAL STATEMENTS
.
218
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR FINANCIALS
Name of undertaking
Registered address
Proportion
of nominal
value held
%
(i)
Held by
Parent/
Group
(ii)
Oxular Limited
Magdalen Centre, Robert Robinson Avenue, Oxford, OX4 4GA
25.4%
Group
A Preference Shares (Oxular Limited)
56.2%
Group
A1 Preference Shares (Oxular Limited)
16.9%
Group
Perlemax Limited
318 Broad Lane, Kroto Innovation Centre, Sheffield,
South Yorkshire, England, S3 7HQ
34.5%
Group
Ordinary Shares (Perlemax Limited)
34.5%
Group
Ph Therapeutics Limited
Windsor House, Cornwall Road, Harrogate, England, HG1 2PW
60.0%
Group
Ordinary Shares (PH Therapeutics Limited)
60.0%
Group
Resseptor Therapeutics Pty Ltd
Suite 201, 697 Burke Road, Camberwell VIC 3124
38.0%
Group
Ordinary Shares (Resseptor Therapeutics)
38.0%
Group
RFC Power Limited
Windsor House, Cornwall Road, Harrogate, England, HG1 2PW
31.9%
Group
T Ordinary Shares (RFC Power Limited)
100.0%
Group
Ordinary Shares (RFC Power Limited)
28.3%
Group
Riotech Pharmaceuticals Limited
49 Arrivato Plaza, Hall Street, St Helens, United Kingdom,
WA10 1GH
24.0%
Group
Ordinary Shares (Riotech Pharmaceuticals Limited)
24.0%
Group
SkyStrata, Inc.
5179 Britten Ln, Ellicott City, MD 21043, United States
28.8%
Group
Common Stock (SkyStrata, Inc.)
28.8%
Group
Spinetic Energy Limited
Office D, Beresford House, Town Quay, Southampton, SO14 2AQ
29.6%
Group
Ordinary Shares (Spinetic Energy Limited)
29.6%
Group
Sunborne Systems Limited
C/O Stfc Innovations Ltd R71, Rutherford, Appleton Lab, Harwell
Campus, Didcot, United Kingdom, OX11 0QX
22.0%
Group
Ordinary Shares (Sunborne Systems Limited)
22.0%
Group
Surrey Nanosystems Limited
East Side Business Park, Beach Road, Newhaven, England,
BN9 0FB
21.1%
Group
A Ordinary Shares (Surrey NanoSystems Limited)
17.4%
Group
Ordinary Shares (Surrey NanoSystems Limited)
32.2%
Group
A2 Shares (Surrey Nanosystems Limited)
9.1%
Group
Sweetgen Limited
3 Field Court, Gray’s Inn, London, WC1R 5EF
50.0%
Group
Ordinary Shares (Sweetgen Limited)
50.0%
Group
Telectica Limited
Milton House, Gatehouse Road, Aylesbury, HP19 8EA
26.4%
Group
Seed Preferred Shares (Telectica Limited)
90.5%
Group
12. Details of significant holdings and associated undertakings
continued
NOTES TO THE COMPANY FINANCIAL STATEMENTS
.
OUR GOVERNANCE
BUSINESS OVERVIEW
219
IP GROUP PLC ANNUAL REPORT 2023
STRATEGIC REPORT
OUR FINANCIALS
Name of undertaking
Registered address
Proportion
of nominal
value held
%
(i)
Held by
Parent/
Group
(ii)
Topivert Limited
1 More London Place, London, SE1 2AF, United Kingdom
28.7%
Group
Ordinary Shares (Topivert Limited)
1.8%
Group
A Ordinary Shares (Topivert Limited)
37.8%
Group
Series B1 Preferred Shares (Topivert Limited)
34.0%
Group
Series B2 Preferred Shares (Topivert Limited)
37.1%
Group
TriboSim Limited
49 Station Road, Tribosim Ltd, Polegate, East Sussex, England,
BN26 6EA
22.5%
Group
Ordinary Shares (TriboSim Limited)
22.5%
Group
Ubiquigent Limited
Dundee University Incubator Dundee Technopole,
James Lindsay Place, Dundee, DD1 5JJ
37.6%
Group
Ordinary Shares (Ubiquigent Limited)
37.6%
Group
Uniphy Limited
Nexus, Discovery Way, Leeds, United Kingdom, LS2 3AA
39.0%
Group
Ordinary Shares (Uniphy Limited)
39.1%
Group
A Shares (Uniphy Limited)
16.0%
Group
B Shares (Uniphy Limited)
4.0%
Group
Zeetta Networks Limited
First Floor Templeback, 10 Temple Back, Bristol,
United Kingdom, BS1 6FL
21.8%
Group
Ordinary Shares (Zeetta Networks Limited)
12.3%
Group
Preference Shares (Zeetta Networks Limited)
25.4%
Group
Zoompast Limited
Office 7, 35-37 Ludgate Hill, London, EC4M 7JN
31.3%
Group
Ordinary Shares (Zoompast Limited)
31.3%
Group
i
All holdings are via ordinary shares unless separate classes are specified in the table.
ii
Voting % less than 50%.
The significant influence noted above has been determined in line with IAS 28 and Schedule 4 of The Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008.
12. Details of significant holdings and associated undertakings
continued
NOTES TO THE COMPANY FINANCIAL STATEMENTS
.
220
IP GROUP PLC ANNUAL REPORT 2023
OUR GOVERNANCE
BUSINESS OVERVIEW
STRATEGIC REPORT
OUR FINANCIALS
The production of this report supports the work of the
Woodland Trust, the UK’s leading woodland conservation
charity. Each tree planted will grow into a vital carbon store,
helping to reduce environmental impact as well as creating
natural havens for wildlife and people.
COMPANY INFORMATION
.
Company registration number
04204490
Registered office
3 Pancras Square
Kings Cross
London
Directors
Sir Douglas Jardine Flint
(Non-executive Chair)
Gregory Simon Smith
(Chief Executive Officer)
David Graham Baynes
(Chief Financial and Operating Officer)
Aedhmar Hynes
(Non-executive Director and
Senior Independent Director)
Dr Caroline Anne Brown
(Non-executive Director)
Heejae Richard Chae
(Non-executive Director)
Dr Elaine Sullivan
(Non-executive Director)
Anita Kidgell
(Non-executive Director)
Company Secretary
Angela Leach
Brokers
Bank of America Merrill Lynch
Financial Centre
2 King Edward Street
London
EC1A 1HQ
Deutsche Numis
London Office
45 Gresham Street
London
EC2V 7BF
Joh. Berenberg, Gossler & Co. KG
60 Threadneedle Street
London
EC2R 8HP
Registrars
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Bankers
Royal Bank of Scotland
PO Box 333
Silbury House
300 Silbury Boulevard
Milton Keynes
MK9 2ZF
Solicitors
Baker & McKenzie LLP
100 New Bridge Street
London
EC4V 6JA
Independent auditor
KPMG LLP
15 Canada Square
London
E14 5GL
IP GROUP PLC
2ND FLOOR, 3 PANCRAS SQUARE,
KINGS CROSS, LONDON, N1C 4AG
T +44 (0)20 7444 0050
WWW.IPGROUPPLC.COM
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