Good morning, ladies and gentlemen. The AGM will commence momentarily. Thank you.
11:00. Okay. Okay, it's now 11:00. Therefore, I now declare the 2025 Annual General Meeting of IP Group plc open. I'm Douglas Flint, the Non-Executive Chair of IP Group, and I extend a warm welcome to all of our shareholders, those in the room, and those joining us online. With me are Greg Smith, the Chief Executive Officer; David Baynes, the Chief Financial and Operating Officer; and our four Non-Executive Directors, Dr. Caroline Brown. You can see her. You can stand up, and there you go. Heejae Chae ; Aedhmar Hynes ; and Anita Kidgell. Okay. Finally, Angela Leach, who is our Company Secretary. The Company Secretary has advised me that we have a quorum present. Therefore, I can now declare the meeting formally open.
Let me make a few remarks, and then I'll invite Greg to make a few remarks, and then we'll get on with the business of the meeting. First of all, a note on succession planning. In the AGM notice we drew attention to the fact that the Nomination Committee continues to be mindful that a number of directors, including myself, were approaching the nine-year maximum term over the next couple of years. Therefore, the committee was therefore planning succession to ensure that there was a suitable sequencing of transition that combined the appropriate continuity and handover periods with finding the appropriate candidates. In this regard, we agreed it was appropriate that the chair succession was considered early so that an incoming chair had the opportunity to play a meaningful role in the subsequent board refresh that would take place.
Accordingly, the process for my own succession is now well underway under the direction of the Senior Independent Director. I am not involved in that quite properly, so that process is ongoing, and therefore we can't comment further on an ongoing process, but we will update the market at the appropriate time as soon as we have anything that is required to be said under our regulatory obligations. Having got that out of the way, just a few comments in relation to last year.
As I noted in my statement on the Annual Report, we recognized that the appetite for higher-risk early-stage assets across the U.K. remained cautious and was going to remain cautious, and we adjusted our investment plans accordingly to make sure that we harvested the cash capital that we had, and we concentrated on our most important high-potential portfolio companies, particularly those that had a good prospect to deliver a cash return in the near to medium term. In terms of priorities, recognizing the stubborn gap between the reported net asset value, our NAV per share, and our share price, we, the board, set management a number of priorities in 2024 to address or attempt to address this disparity.
This included what I just said, prioritizing portfolio companies that had high prospect of early or medium-term realization to demonstrate the value creation from the investment activity, pursuing third-party co-investment transactions to validate the valuation discipline and by bringing in co-investors, demonstrate that the model is attractive not just to people who work in the company, and attracting that way third-party funds to add capacity to our investing activity. Alongside this, we sought fresh investors to the public company and improved the operational gearing of the company through better cost performance. We took cost sight during last year. There were good things and bad things. In terms of successes, we had the highest cash value realization in our history from the sale of our stake in Features pace, which generated disposal proceeds of GBP 134 million, of which GBP 119 million was received in cash before the end of last year.
Total proceeds in the year from Features pace and others were GBP 183.4 million, and that was five times what we realized in cash in the previous year, 2023. As a consequence of that, our gross cash at the 31st of December stood at GBP 285 million, which is an interesting number against a market capitalization at that date of GBP 525 million. We structured and executed a partial secondary sale of shareholdings in six of our portfolio companies, which realized GBP 50 million of cash at an aggregate value modestly ahead of book carrying value, and part of that was also to evidence the integrity of our valuation processes.
We secured a further AUD 125 million co-investment commitment from Hostplus, who's one of our key partners, our principal partner through the Australian business, and we completed a restructuring, as I said, a reorganization of our business that will reduce ongoing costs by GBP 5 million annually or some 23% of our cost base. There were disappointments. Our largest portfolio investment, Oxford Nanopore, fluctuated in value significantly during the year, losing over half its value in the first half and then recovering a decent portion of that in the second half, but it was still down 38% over the year as a whole.
Management, with the board's strong endorsement and encouragement, and given our position as one of its largest shareholders, has spent considerable time supporting Oxford Nanopore on ways to address the volatility in their share price and to derive actions that could lead to recovery in its value for all of their shareholders. Although widely anticipated, we were frustrated throughout last year that Exscientia, which is our second largest portfolio holding, was not in a position to release any data from its phase II-B rheumatoid arthritis study with its drug Lemarostat during 2024. However, on the 11th of February this year, Exscientia was able to provide an update, which was both disappointing and at the same time encouraging. We spent considerable time in 2024 seeking to attract private capital for a scale-up fund, and these things take longer, always the new thing, but we were trying to build up commitments.
That responded to the fact that many pension funds and others have made commitment to pursuing the so-called Mansion House Compact and now the updated Mansion House Accord and other government-sponsored initiatives to support growing innovative U.K. businesses. Again, in the statement yesterday from the Chancellor, the support and money to go into U.K. science and innovation businesses was encouraging in terms of what was committed. While we did not finalize a scale-up fund in 2024, we are optimistic that the work done and the progress made and the discussions that continue to be in train are hopefully going to lead to a creation of such a fund in 2025. Obviously, we are dependent on our counterparts in terms of their processes.
I think, I have to say personally, I think the commitment to the Mansion House Accord and what the government said yesterday gave us a bit of a following wind. Public capital markets in 2024 were not helpful to IP Group nor to most of our peer group. That does not matter to us as much because investor appetite for small-cap companies was muted. Indeed, many of the funds that were devoted to small-cap companies, because of lack of interest, then wound up during the year, and that led to selling pressure as people basically closed those funds and sold their shares, including IP Group. As we enter 2025, undoubtedly, and again, stressed yesterday in the Chancellor's remark, the need remains for scientific innovation to address many of society's urgent challenges.
The government in the U.K., as I said, is embracing this ambition to place U.K. science technological excellence at the heart of its growth agenda. Public markets at the moment, however, are a bit slow to support this ambition in terms of providing long-term venture and scale-up capital needed. We do remain confident that there is momentum towards this ambition, and as a consequence, the substantial unrecognized value within the portfolio that we can see will begin to become more evident to others. The principal objective for the coming year is to harness what we believe is a strong desire among U.K. institutions to support this segment of the U.K. growth story. It's in their interest. It's in our interest. It's in the government's interest and configure our business in whatever way is needed to capture that trend and be successful.
Let me hand over to Greg for his comments.
Thank you, Douglas, and thanks everyone in the room for coming. Very good to see a number of our shareholders here, many that I recognized from last year and the years before. Very good to see you, and thanks to everyone online for giving your time this morning. Very much appreciated. I'm not going to make loads and loads of comments because I've covered a lot of the material in the full year results presentation, again, that we did via the Investor Meet Company platform. There is a full hour and a half of Dave and I talking if you're that way inclined. I won't repeat a lot of that. I thought for those who didn't get a chance to listen, I'd just summarize the key messages. I think Douglas has talked about something of a challenging environment for venture continuing in 2024.
In the remarks that we made in the full year results, we talked a bit about the continuing trend for realizations being very difficult to come by. We were particularly pleased that one of the big priorities for us during 2024 as a management team and as a board, when we sat down at the beginning of 2024, what would be the most important thing to our shareholders to demonstrate progress would be to generate cash realizations from the portfolio, not at discounted prices because the share price is already well below the NAV, but at prices that were either at or above where we had the assets in the books.
Because I think this is a, I've said before about the sort of the weighing machine of the markets and the sentiment, the thing that we have to focus on as an organization is putting cash into businesses, proactively growing those businesses, and exiting cash. There are journeys along the way, but exiting cash profitably is the number one sort of most important measure for us. Having done that successfully last year, we really bucked the trend in the market and delivered GBP 180 million or just over GBP 183 million, I think it was, just over for the year, which was about five times the level that we achieved in 2023. We were pleased. It was focused on that, and we delivered on that. Douglas has already said that put us in a strong cash position at the end of the year.
I hope a theme that you as shareholders have seen from this board in the last two, three years, one of the things that we are very committed to is doing what we can to address the discount in the share price and supplement our capital returns with cash. That strong performance in realizations allowed us to both reinvest in the portfolio, which is absolutely essential in our business. We absolutely have to do that in the early-stage venture space, but also it allowed us to increase our commitment to our buyback program. We did that in a very material way. As I think we'll cover as part of our authorities in the AGM, we actually ran out of authority taken at the last meeting. We topped it up with a short general meeting a couple of months ago.
We will have retired more than 10% of the shares in issue. By the time we complete the current buyback program, it will be somewhere between 15%-20% of our shares in issue. We take this matter very seriously, but the realizations allowed us to be able to do that. Our NAV per share declined, and a lot of that, Douglas has mentioned, some of the disappointments. It was down by about 15%, just below GBP 1. During the course of the year, we took some quite decisive action, I think, to both adjust the delivery strategy for pursuing our vision and delivering value to shareholders. That meant we could reduce the operating costs, as Douglas has said.
I think it's just important that whenever you do those sorts of things, you set the business up for the right structure and the right success for the next one, two, three, four, five years. I think we're now in a good position where we can build and we can attract the scale-up capital, I think, is needed by both the group, by the portfolio, and also to support sort of economic growth here in the U.K. In terms of priorities for the year, cash and the other big one was accessing further capital under management. I would say the appetite is quite audible in the U.K., and we're just seeing signs of the first moves being made. I think a number of sort of pension funds that we talk to talk about the plumbing being put in place.
Once the plumbing is in place, hopefully the capital can start to flow. As you will all be aware as long-standing shareholders, we started a business in Australia back in 2017, and the logic for that was not just to access world-leading science and innovation. It was because the pension fund industry in Australia with high mandatory contributions and a consolidating pool of value-for-money-based pension funds wanted to allocate to the venture space. It has taken us a few years, but we have built from a very early AUD 50 million mandate with one of the biggest pension funds in Australia, Hostplus, to an AUD 435 million commitment now, sort of five, six, seven years later.
I think that's a path that could be followed here in the U.K. as all of the pension funds wrestle with how do we overcome the fee burden and how do we make sure that trustees are looking at value for money, how do we access an asset class where you really don't want to pile billions into the space in one year. You want to make sure that you're sort of steadily building champagne problems, but I think it's very important. Our experience with the Australian superannuation funds is good. If I had to guess where I think we'll get more mandates, I think probably there will come more in Australia first. I'd have a higher likelihood on us adding an additional mandate in Australia before we get to the U.K. The opportunity in the U.K. is very significant.
We are the second or third largest pool of long-term capital here in the U.K. and the world. I think if you pooled all the pension funds together, it would be the second or third largest fund in the world in sort of GBP 3 trillion-5 trillion. There is a big prize there, and it is why we are making efforts to be able to access that on behalf of shareholders. I hope we can demonstrate progress on that over the course of the coming year. They were the main themes. They were our sort of priorities for the year. Looking forward, I think we have got a very compelling balance sheet portfolio.
The vast majority of the value for our shareholders, myself included, is in the value of the companies on the balance sheet, and the two fund management operations at either end supplement our operating costs and reduce the net overheads, but the main value is in the portfolio. We were encouraged last year, I would say, that there were some increasing signs of M&A in addition to the exit for Feature space. Definitely the appetite towards IPOs has ebbed and flowed even in the first half of this year. We were very pleased to see Hinge Health's successful IPO on the New York Stock Exchange only a couple of weeks ago. That was one that had been mooted in the press as possibly occurring earlier in the year.
Of course, we then had a bit of, shall we say, some market headwinds in the form of U.S. policies and things impacting. It was encouraging that it priced at the top end of the range at $32 a share and has traded up to pretty close, actually, to where we had it in the books at the year end. As a reminder for shareholders, we invested about $1 million in that business way back when we realized about $15 million as part of the secondary rounds when they were raising money in the run-up sort of in 2020 and 2021. We realized a small amount of our holding at IPO, the maximum amount that we could, but a relatively small amount. I think we're on about a 40-45 times return on invested capital.
That's been a successful investment for the group and hopefully a good sign of some return to IPO activity. That has meant during the course of this year, I'm stating as at the annual results date, we'd returned about $25 million of further exits, which meant we could add another $10 million to the buyback program. We also made the statement in our annual report that we think there's opportunity and we have confidence that we can deliver $250 million to the end of 2027. We're looking forward with confidence. I very much echo what Douglas said about the Chancellor's statement yesterday. There is huge support need for investment in science and technology. It represents a very compelling opportunity.
I hope over the next one, two, three, four, five years, difficult to predict the timing, that there will be significantly more capital in the space. If those conditions come to pass, as we think they may, then we are very well positioned as the most active investor in university spinouts in the country. We do about 20% of the volume of university spinouts, largely focused on Oxford, Cambridge, Imperial. We are in a very strong position to capitalize on that. We look forward with confidence to be able to deliver further shareholder returns. As Douglas said, hopefully we can do something about the stubborn discount because it's frustrating for all of us and particularly for me in my capacity as CEO and as a shareholder. I will hand back to Douglas on that note for the formal parts of the AGM.
Greg, thanks very much. Before we move on to the formal business of considering the AGM resolutions, I'd like to invite shareholders both in the room and online to ask any questions of your board that you have that are on matters relevant to the business of the meeting. We've also received in advance questions from shareholders, and we will seek to answer these as well. Hopefully, we'll have enough time. I'm sure we'll have enough time to answer the questions that you have. For those in the room, if you can give your name and whether you're speaking as a shareholder, as a proxy, and if it's a proxy, who you're representing. For those who are submitting questions online, if you could indicate the same, that would be helpful.
We've got a bunch of questions already submitted, but are there any questions in the room? I'd like to start with the room if there are questions from the room. That hand went up faster than anybody else's. I'll come to you in the.
Thank you. Harun Ahron-Adam, proxy for Imperial College. The question I've got is, what do you think is the expected return on the portfolio NAV looking forward? Granted, it's not the share price return, it's the NAV return. How does it compare to historic returns? Also, how does that compare to the returns that you are seeing in your scale-up capital? I understand that you can't discuss returns of a specific LP, but if you can give guidance, that would be helpful. Thank you.
I'm sure Greg's going to do that brilliantly without giving a profit forecast.
I think that's the challenge, isn't it? Maybe I can give you some indications of maybe where I would be. Very careful, I'm not giving you sort of profit forecasts here and making forward-looking statements. I mean, I would say over our history, depending on whether you look at the entire NAV per share, because that's very easy to calculate, you can see the GBP 0.22 per share roughly of hard NAV that we had when we came to the market and the roughly GBP 1 a share now. You can work out an annualized all-in NAV per share return, which is in the sort of single digits. You can look at the performance of U.K. venture over the last 20 years, which ranges from, I think, the sort of the median's about 4% or something, and the mean is about 11%, and upper quartile is, I think, 16%, 17%.
I haven't got the numbers in front of me, but ballpark from the BBCA data. We are clearly targeting being in certainly the upper half, if not the upper quartile. I would say there are plenty of opportunities in the portfolio to be able to contribute to making that a reality. I guess that's sort of hopefully maybe a wide enough way of saying we're targeting compelling market-leading sort of top half of the market from our portfolio. This venture is very much, I'm sure people have, if you're interested in the venture space, have read the power law or have read all the books on the space. It's a game of outliers. We need to make sure that we have more than our fair share of the unicorns that have been created in the space. We've had four to date.
There are definitely candidates in the portfolio that we are very excited about. For those who are online, we are doing a Capital Markets Event at our few numerous faces in the room. Thank you, they are hosting us in the city, but we will do that at those online. There are a number of we've got three of our high potential companies that will be presenting and giving their business cases. We've got a few others in the room. Again, I'm not promising that those are all going to be unicorns, but they are candidates with very big market opportunities and clearly differentiated business models. We are definitely aiming to be towards the top half of the market.
Please. Can you get the microphone down here?
If people online, can't you?
I think for the benefit of people online, thank you.
How are you finding demand for your funds where you've got ideas and people coming to you, which is going to feed to the future?
It's interesting. I mean, the demand in Australia is more real in as much as people have written commitments. In the U.K., the main third-party funds that we have are tax-advantaged funds. We manage sort of GBP 450 million- 500 million of EIS capital. The EIS market has been sort of, again, reasonably difficult over the last couple of years. We've been very pleased that we've maintained our market-leading position in that. We consistently raise somewhere between GBP 25 million and GBP 50 million per annum through that platform. I think that will continue to be a good source of early-stage capital. On the scale-up funding side, the industry, I think, in the U.K. is somewhat wrestling with a whole variety of both strategic and tactical issues.
I think the pensions bill that was released in the last week went quite a long way, actually, to addressing both the challenges that have been cited by pension funds, certainly that we've spoken to and that I know others in the market have spoken to, things like focusing on value for money, i.e., net returns rather than just cost, making sure that pension funds are of sufficient scale, that allocating an appropriate proportion of the total capital to privates makes sense. I think this is very important in the context of the overall asset allocation. Long-term venture, private equity, and property should be taken as an appropriate proportion of the overall total assets. I think a lot of those issues were heard and addressed in the pensions bill.
It's going to take a while for the pensions bill to flow through, consolidating funds and getting towards these sort of GBP 25 billion super funds that are being talked about. Again, that's going to take some time. That change can disrupt the ability of existing funds to allocate at all. I think we're having encouraging conversations. I would say the tone of those in the last six months has moved a bit more towards action than conceptual.
I was actually asking, are there still plenty of people coming to you with ideas, and are they still demand asking for money from you? I do not know if ideas are drying up or it is just carrying on as it always did, but what is the state of the supply out there?
Supply is very good. Yeah, I think it's not an opportunity supply issue. I think the U.K. and IP Group as part of the U.K. punches above its weight in terms of our ability to create companies, seed companies, get to sort of Series A. I think the opportunity set remains very compelling.
Why don't we ask Mark to speak?
Absolutely.
I mean, we should allow a few words from a person who looks after our investments.
Reilly, Managing Partner. Yeah, look, I think there will always be lots of ideas coming through the pipeline. I think, as Greg says, the U.K. generates a lot of really cutting-edge innovation. The thing that is challenging and scarce is finding talent to marry with those ideas and build a commercial proposition over them. That is the thing that we spend a lot of time on, is getting the right talent involved in the portfolio to exploit those ideas.
Yeah, I mean, I think we're third in the world behind America and China in terms of new ideas. We are brilliant as a country until we get to Series C, where the scale-up money that comes out of America and China is much, much larger. That is because there's a larger pool of capital that is directed towards a higher-risk venture. One of the things the government is trying to coordinate through Mansion House reforms and other things is to create that pool of capital that's pointed towards longer-term risk investing. I think risk is the wrong word because particularly now, in the good old days, in my day, of course, in good old days, you had defined benefit pension schemes managed professionally, and people could allocate money to all types of activity. They did so professionally.
Now you've got defined contribution arrangements, which you're asking individuals to say, "How do you want your money invested?" It tends to be done by risk. You want low risk, medium risk, and high risk. If you say to an individual, "Would you like your pension in high-risk assets?" they say, "No." If you say, "Would you like your pension in high-growth assets?" they say, "Yeah." Therefore, the language is wrong because we need to, and that's one of the things they want to change. In fact, we know that youngsters, and that's a broad group for me now, but we know that youngsters do embrace risk too because the number of young people who invest in crypto, and don't get me started on that, suggests that they have some tolerance for volatility.
I think we've got to change the narrative on the way people are invited to invest, what their defined contribution arrangements are through their corporate sponsors, and to sort of say, "Take the box between low, medium, and risk." Guess what happens when you give people those three choices? They take medium. You're 28 years old, and you're putting 40% of your funds into bonds. It's insane. He said carefully. Anything else in the room, and then we'll go online. Anything else in the room? DB.
Okay. We've had quite a lot of prior questions just to pay us. I'll say you're comfortable. There are 17 of them. I'll go through them. Obviously, I'll let people know who I'm going to point them to. I think probably the first one's coming to me.
Is it an easy one?
Yeah, exactly. All the easy ones come to me. Half ones to Greg. Share buybacks have been very steady. And overall numbers of shares dropped by about GBP 140 million, which is exactly right, including translations and treasury shares, which we're doing with all shares. Please, can you give some sense of who the vendors have been? Puzzled by the fact that there have been no notifications of reductions for major shareholders. There's a bit more, but effectively, that is the question. And it's quite a good question, actually, because there isn't obvious sellers. So during the course of the last year and a half, there have been a couple of big institutions that have probably nothing to do with us, actually, have actually reduced their positions. Fidelity, for example, closed the funds. I'd say 3% or 4% went in one go.
Liont rust also made a reallocation of capital. There have been a couple of quite big movements. Other than that, actually, we're buying back pretty much normal market numbers. We get the shareholder register every month. You can imagine we pounce on it and look at it every month. Actually, the big ones, the big shareholders, thank you very much, aren't reducing. There's not an obvious, we haven't got an obvious seller. That's a hidden question. It is actually just coming out of a normal kind of market flows, actually, most of those numbers, which, to be fair, sometimes puzzles us that we're being able to keep buying and the price remains low. Of course, ultimately, that's ultimately very good for NAV per share because we're managed by a lot of shares at what I would see as ridiculously low price. Next question.
I'll take that one as well and the one after. Then I'm back to Greg, if you'd be glad to hear. Will new shares be issued to satisfy the LTIP awards? The LTIPs are actually now RSUs. I won't go into it. They're broadly similar long-term incentive involving issuing shares. We also issue shares related to half of all the bonus payments, actually, because half of that is deferred over two years and paid in shares. The board does have the choice. It can actually issue new shares, or it can get the Employee Benefit Trust to actually buy shares back in the market. At the moment, that is what we have actually been doing. As I've already mentioned, we've actually been canceling all the shares that were in treasury. The ones we've been buying back, we've been canceling. We can't use them. We've been canceling.
In the last instance when we needed shares for staff, we actually bought them back in the market. The question now presumably is about, is it dilutive? The answer is no, it's not dilutive because we're buying it back, which seems clearly at these prices a very sensible thing to do. One, and then the fourth will go to Greg. What lockup agreements are there in relation to the group's six largest shareholdings by value? Could be a big question. Not a big question. There's actually only one company that's currently locked up. We normally only get lockups, obviously, for public companies. Private companies, the lockup in private companies is liquidity. Can you sell them? In public companies, you get formal lockup. Often when a company is first listed for a period, normally about six months, current shareholders are locked in.
That's just on Hinge at the moment. On Hinge, we're in a period. We listed about a month ago. We've got about another five months in a lockup. Other than that, we're not in any lockups. Nanopore, any of the other smaller public holdings we have. Fourth question coming your way, Greg. Regarding Exscientia, what are the areas where the RA drug fell short in the phase II- B study? And since the readouts, have there been any discussions with other drug companies about a way forward?
Yeah, so we covered this a bit in the full year results presentation that we did. The data were given to us in February. Where it fell short was the trial did not meet its primary endpoint. If anyone is interested, it is a composite measure of inflammation, effectively called ACR20. It did not produce a significant enough difference versus the placebo. That was the primary endpoint. It did indicate various specifically significant benefits in things like bone erosions and levels of disability and things like fatigue, which are obviously very important to patients. That supported the novelty of the mechanism of action. I said at the time that Exscientia would be publishing further information.
We anticipate in the next month that there will be some further information published by the company, which will give a sort of more clarity on, A, what they saw that was unique and, B, what the path forward is. Just one other thing to note, we added a very successful former co-founder of a business called Kymab that was sold to Sanofi for about $1 billion upfront, a guy called Dr. Mike Owen. He's joined the board of Exscientia as a non-exec in the last week or so, which is great endorsement and very good to have him as an additional non-exec on the board there. He made a good statement about his excitement about the novelty of the approach and the commercial opportunity. There will be a bit more to follow in coming weeks. That is the update on Exscientia.
Thank you. The next one. The group has bought back over 52 million shares to date. I think that refers to the latest buyback program. We did 30 million last year. We did about 22.
Pounds.
Pounds? What did I say?
Shares.
Pounds, I apologize. Pounds. We did GBP 30 million about last year, and then we've done about GBP 22 million so far this year. That is about right. What is the current outstanding authority capacity to buy back further shares? If you've been listening closely, that has been briefly mentioned earlier today. We are renewing the authority today. That is another 15%. For those that are really interested, I can tell you that will be 141,415,000 shares. We've got plenty of capacity to buy back more shares. Certainly on the numbers we've committed to date, there's plenty of authority. We will not hit the headline, the top. That is why you would have noticed a couple of months ago, we did actually issue a small increase because actually the price was so low, we were buying back so many.
We were slightly in danger of doing that, but not anymore with the new authority in place from today.
Assuming you all will.
Yeah, exactly. It should be okay. I've seen some of the numbers. Next one to Greg. Does HyStarter have potential orders in place, or will it produce a product and then hope to sell it? Will sales solely be to domestic Australian market? Any indications of timeline? Thank you there.
I'll do a high-level answer to this. HyStarter doesn't have a product yet that is commercially available to sell. The milestone they're hoping to achieve this year is a sort of a commercial scale product, which is a 100-kW stack. We're hoping that that will be online. The company's planning for that to be online, i.e., producing hydrogen by the end of this year. That's a pretty big commercial milestone for the company because it shows that you can go from a single cell or a stack of 10, 15 cells to being able to produce a whole system producing hydrogen. That's sort of the most important commercial milestone. In terms of indications of interest from potential customers, I would say one, the company announced earlier this year a partnership with ACWA Power, which is a Saudi-based provider.
That was encouraging in terms of sort of commercial interest. Secondly, when they did their funding round back in the beginning of 2024, the company at that point had a number of strategic or corporate investors. Each of those investors gave a sort of a letter of commercial intent, shall we say, not something you could factor, not something that would count as an order, but broadly along the lines of, "If the commercial product meets the specifications that you claim it can, we would like to purchase that, and this is the reason that we would like to purchase it and use it." Those indications were in the orders of a few billion AUD, so significant. The other bit of the question about, "Will it be solely domestic Australian market?" They have potential customers in Australia.
Some of those strategic corporates were non-domestic. There was a big Korean steel manufacturer, for example, who was an investor and could be a potential customer. Globally relevant product.
Thank you very much. Next question, number seven for those who aren't counting. The group managed over GBP 600 million of third-party funds at the end of 2024. What's roughly the difference in the relationship between IP Group and Parkw alk and IP Group and Hostplus? Parkw alk, most of you will probably know, is actually a wholly owned subsidiary of IP Group. We own that business. It's a very successful EIS investor. It's also become our sourcing engine. We're getting all our really interesting new companies through its relationship with universities. Hostplus, we're managing funds on their behalf on the other end of the business model where we're using that capital to help scale up the businesses in their later stage. That's really the difference between those two relationships. Next, I would go to you, Greg.
What step-in rights does IP Group have in taking stakes in Parkw alk and Hostplus deals, and who determines the timing?
I think this is about sort of pipeline and pipeline flow. Generally speaking, very simplification, the preemption rights of each of the pools of capital we manage, whether it's the balance sheet or the Parkw alk funds or the Hostplus mandate, are transferable within the same group. There is a bit of a natural transition. In the EIS funds, companies can only receive up to GBP 20 million in EIS capital. That reaches a point where that capacity diminishes. As Dave said, most of our new deals are done through that, particularly in the U.K., obviously, are done through those Park Walk funds, which have got more appropriate cost of capital. I don't think there have been any instances where we've initiated a new deal by Hostplus.
Hostplus is a co-invest mandate for existing companies, either from Parkw alk or from the balance sheet. To give you an idea of scale, in Parkw alk, we do something like 10 new companies a year and about 40 transactions. Sort of 10 new and 30 by way of follow-on. There is a very rich pipeline for when hopefully the pipes I was talking about, if that capital does flow, we are in a good position.
Thank you. Next question. You've got a bit of a run of sort of financially ones coming my way. What portfolio companies are most likely to require the largest investment by IP Group over the next 30 months? I won't give you a comprehensive review, but I mean, there are companies like OX CCU that are very exciting companies. We anticipate some investment this year and probably in 2027. Oxa, the autonomous vehicle software company, that again, we will anticipate both now and possibly in 2027. HyStarter, when that comes for funding, will be very keen to be involved in that, I'm sure. Intrinsics and other ones. There's a number of companies across the portfolio. You'd imagine a lot of them in that kind of top 20 companies that we often talk about. Next question.
A large part of the group's growth debt is scheduled for repayment dates, which it is. Is this likely to be refinanced with other borrowings or repaid from gross cash? We actually obviously have the option to do both. We can clearly have quite considerable cash resources at the moment. We also have quite a lot of liquid assets in terms of holdings of things like Oxa and Nanopore and now Hinge as well. We clearly have the option of doing both. We will probably look to maintain about 10% of our NAV in debt. Seems like fairly sensible gearing. It's not too risky given the lack of liquidity in the portfolio. On the other hand, it makes economic sense to have some gearing. We will have the choice to repay it.
We may roll it over and push it out and renew it and maintain the same sort of level of debt. I would anticipate that might be what we do. Next one is around REM. I'll probably do it rather than handing the baton around. Have the non-executive directors discussed board costs? Base salaries look relatively high compared to share price performance and relative to other executive and non-executive directors. I think on that, what we say is we do look at costs all the time. We did a comprehensive cost review last year, as you may be aware. We reduced overall costs by about 25% in the year. We are very conscious on that.
At the REM level, we are looking consistently at comps and we're having external advice and we're ensuring that the level of cost at the board level is appropriate for both our market cap and the size of the business that we are. I don't know if anyone wants to add to that, but that probably answers all of it. Next question is another one around debt that comes my way again. Once the final GBP 9.4 million debt facility, which is on the old European Investment Fund, is paid back in January 2026, does it have any other? Do we have any other debt obligations to pay back before we start paying back the bigger debt facility at the end of 2027, 2028, 2029? The answer to that is no. That's a quick question. No, we don't. Those are the only debt facilities we have. Next one.
Me again, I'm afraid. Sorry, but we're getting there. Post, what is the group's current shareholding in Hinge Health? We actually post the IPO in a small amount of selling we did at the time of the actual IPO itself. We were only able to sell a relatively small amount of one class of share. We have 1.28%. Or if you want share numbers, 1,034,000. That was worth its movable time. On Monday, when we wrote this, it was $39 million. Today, it's about $26 million. But it's roughly.
36.
Yeah, what did I say?
36.
I'm sorry. $36 million and $39 million. I apologize. It would have been about GBP 26 million, actually. All right. This is for you, Greg, which is probably good news. I think you've sort of answered this maybe when you were answering another question, but I'll do it anyway. What was the answer you had from seeing third-party co-investment transactions over the last 12 months? You may feel you've talked on that a bit. I don't know if you had to answer that.
I've already covered that one.
Yeah, I think we have.
Just in the interest of time, yeah.
You again. Will the group commit to continue to use 50% of the proceeds from asset disposals beyond 2025? People may be aware, but we've committed to 50% of proceeds this year to be used on the buyback. Probably hand that over to you.
I think the answer is we always review what the appropriate level of capital allocation is between returns to shareholders, reinvestment in the business, servicing debt, and we'll look at it again and update shareholders, as we said we would do towards the end of the year.
Yeah, very sensible. Second to last on these, and then I've got a few more coming in from outside. You can't go for your tea quite yet. How do Oxa licensing agreements typically work? What's the approximate value of licensing income? That's tricky to answer, to be honest. That's an independent company, and I don't think really it's appropriate for me to start putting out in public domain sort of confidential information about their licensing arrangements. Hopefully, we will see significant growth in revenue at that business, at those licensing arrangements too where allowed. The last pre-asked question, I'll hand this to you, Greg. Please can you explain the change in the business model for First Light Fusion? What are the initial results from this change? What are the implications for its cost base?
Ooh, good question. The main change was, so First Light Fusion is an Oxford spin-out company. We own about a quarter of it. It was based around some very novel modeling of wavefronts of all things, which was used to then determine what could you do to create the conditions required for fusion, so pressure and temperature to require fusion. They built a facility in Oxford and got progressively larger machines to fire projectiles at a target to create those conditions. The magic of the company, if you like, is the ability to do lots and lots and lots of iterative modeling and to quite quickly put that into empirical evidence, to create targets that you can then test against your models and iterate. There is a lot of AI and machine learning to rapidly iterate. That is sort of the core of the business.
A lot of the company's capital need came from creating or designing what's called the driver technology, the thing that fires the projectile. There are lots of places around the world that are also doing development of different driver technologies. We, as an IP Group and certainly as the company, don't know what the winning driver technology is going to be. The idea is, and this is a strategy that we help the company to develop, is not to try and build our own driver technology, significantly reducing the capital need, but to focus very much on the targets. The idea is that the targets will then become consumable in the fusion industry when that comes on stream, which could be a while away.
In the meantime, one of the things that First Light, like many other fusion companies, is doing is saying, what are the other use cases, commercial use cases for both that modeling capability and these high-gain targets, as they're called? We've actually got initial revenues in sort of less than $1 million, but a few hundred thousand in materials research from supplying these targets to allow people to create very high temperatures and pressures. That will give the company the ability to generate some initial revenues even before the very, very big potential revenues of fusion. It significantly reduces the cost base and it focuses, no pun intended, on the company's sort of core capability.
Good. Right, so that's the pre-asked questions. Worry not. There are more coming in live as we go. There aren't actually too many. There's about four or five to go. I'll take the first one because it just happens to interest me, I must admit. This has come from Eugene B, who is an individual shareholder. And Eugene has asked, would you consider getting into military technology startups? Reason it interests me, it's highly pertinent. We have an ethical investment committee and we also have an ethical investment framework. We kind of have guidelines of what we do and don't invest. Now, up until relatively recently, we actually had, well, go back a second. We have two classes. Effectively, we have excluded items, things you will not do. And then we have what we call red flags.
Items that probably we need to have a chat about and consider on a case-by-case basis at the individual investment committees. Before, we did have military, almost any military application actually was excluded. It was in the inner thing. Deployment, any kind of military application pretty much was included in that definition. We have recently met and talked about it. It's definitely been a change both in the general community. We've looked around all the other communities, other investing groups, other VC groups, other public investors. We've noticed there's definitely a change. What we've done is rather than saying, no, it's okay, we've actually just taken it out of automatically excluded and moved it into red flag, which seemed to find a sensible solution. Now, if an investment might have some military applications, it's likely to be referred by the individual investment committee.
Mark's one of Mark's team will probably refer that up. The ethics committee will then have a consideration about against this framework and decide whether, as a red flag, is this going to be acceptable or not. There are, of course, still some automatically excluded weapons of mass destruction. There are clearly some instances where they're excluded, but we will now consider military applications, which I think is appropriate in the world we live. Okay, the next question, I'll pass this to you, Greg, or possibly Mark. How are you finding the valuation expectations of potential investee companies?
How are we finding them?
Are we realistic?
In some cases, we are obviously helping to set them as a material investor. In some cases, we're party to them as a participant in the round, but not setting them. I think in general, in the market, there has been a general reduction in overall funding around valuations, particularly since 2021. We're seeing that play through. We spoke at the full year about effectively trying to preempt that in our valuations at any given point in time. I think, Dave, you used the stat that although there were X number of down rounds, they were actually at or around the level that we had them already marked on the balance sheet. I would not say we've seen a significant increase in valuations yet for companies in general at this stage.
I say the market still remains sort of a lot less buoyant than it was in 2021. As with all these things, it's very company specific. If a company has made very good progress, then generally there'll be an up round. If it's sort of general market, I'd say things are a bit lower. That reflects the industry. We see that across Park walk and across the balance sheet.
Thank you. I'm sorry, I didn't mention that was from Alex C. Sorry, Alex didn't mention her name. A second one from Alex. Again, I go to you, Greg. How does the board ensure it has sufficient sector expertise, especially in deep tech, life sciences, and AI, to properly assess emerging opportunities and risks?
The board obviously oversees the process and the governance. As a business, a lot rests in the executive management team and the people who are assessing the deals day to day. We have a number of specialist investment partners in each of those areas. For example, Dr. Rob Trezona has been a clean tech investor for the last 20 years and is an energy transitions commissioner, etc. We tend to have our sector specialism at the executive level, at the board level. Maybe that is a Douglas question to answer, but we try to have a mix of skills around the board table. In some instances, we have people who come from a particular background that we think is important.
For example, Anita, although serves as a general non-exec, happens to also have a full-time job at GSK, so has some life science experience, which we find very relevant for assessing life science opportunities. Most of it is done at the exec and the team level. There is a balance of skills on the board.
The other thing I'd say is that there are very, there's only a very few companies where we are the dominant shareholder. Most of what we are investing in, we are one of many. Therefore, we take comfort from the evidence that we invest GBP 70 million- 80 million a year in the portfolio, but that's usually 10% of what's invested in the portfolio in aggregate. There's a lot of other people investing on the same terms as we are. Therefore, there is the comfort that other people have similar views on the valuation, and we get independent valuations done by subject matter experts. We review the evidence. It would be almost impossible to have on a board of five independent directors covering every conceivable area from quantum computing to bioscience. Obviously, DB has all that covered up. We gather evidence.
We assess the credibility of the information that's put to us to assess the confidence we have in management. We have a high degree of confidence in management because of that track record. I mean, Hinge Health is a good example. I mean, Hinge Health, as he said, we invested $1 million a hundred years ago, whatever it was, a long time ago. It went through all sorts of iterations. I think the company at one time was worth, what, $6 billion? Now it's worth $3 billion.
$3 billion. Yeah.
At the beginning of the year, we were very excited. It was going to do an IPO. People said, there's no chance of getting it done this year because the market's so terrible. We had the kind of liberation day and all these kind of things. People said it's going to be really impossible. They did it in May. It has been up and down. People said it was going to be in the third or fourth quarter, and it's not going to happen at all, and you'll never get the valuation. They pretty much went at the top of the range.
Yeah, it did.
Yeah, it can change on a daily basis. Therefore, we've got to be realistic that we are looking over a medium to long term because you could get very excited on a day-to-day basis because suddenly it's flavor du jour, and the next day, no one's interested in that particular sector. Again, military is a good example. I mean, one of the most successful IPOs in the last month or so was the battery maker CATL in Hong Kong, which the Americans described 30% of the takeout was from American investors. The American government put it on a list that said, you have to be aware that some of the equipment from the company is used by the military. I mean, it makes batteries. Batteries are in everything. The same with deep tech science.
I mean, quantum computing will be used for everything from healthcare to military. The definition of what is military nowadays, particularly as we see that small drones you can buy in the shops. Indeed, if you talk to people who are involved in some of the crazy things that are happening in the world today, they say that some of these drones are being driven by young people using their Xboxes. Is an Xbox a piece of military equipment?
It is now, isn't it?
It is now. I digress.
Perfect timing, Gabe. We have a little bit of time left. I think it is Petra L. Last question I have online. I will go to you, Greg. You have now returned a considerable amount of capital through buybacks, which is a very good thing. Could you, however, remind me of the aspects that affect IP's decision regarding buybacks versus dividends, something we have discussed before? From the perspective of a shareholder waiting for a possible re-rating of the shares, a dividend come while waiting would also be quite a nice alternative. Go past it to you.
Yeah, I mean, no, I'm not saying about the question. The question is a very good one. It's something we debate all the time at the board. I mean, we're always talking about what's the most efficient way. You can certainly, there is a school of thought that a buyback isn't return of capital because it's retiring some shares, sorry, not equivalent to a dividend, not paying cash to shareholders because it's retiring capital. I think the model where dividends, which are a pound in a pound to all shareholders, is a good way of supplementing capital growth, for sure. The call that we made a year or two back now was the amount of discount was so great that it was in the benefit of all shareholders on balance to use buybacks rather than dividends.
We did say at the time that we expect that to persist while we have a discount of more than 20% to our NAV per share. Much like the proportion of our realizations that we use to invest in the business and return to shareholders, we also look at the correct or the most appropriate mechanism to do that. We continue to do that. It was a relative value-based judgment.
With perfect timing for those that wanted to run 11 till 12, that's the last question we have online.
Okay. Is there anything else in the room? I see no hands. Okay. Thanks for questions. Thanks for the engagement. The formal proceedings of the interim meeting is now the next thing we will consider. The notice of meeting with all the expansion notes was published on the 16th of April. The requisite notice of meeting has been given. Therefore, if there is no objection, I will propose taking the notice of meeting as read. I see no objection. Excellent. The voting will be conducted by way of a poll. Vote on each resolution. MUFG Corporate Markets is the company's registrar. They have been appointed to act as scrutineers. A summary of each resolution will be shown on the screen behind me. Resolutions 1 to 13 and 16 are proposed as ordinary resolutions. Resolutions 14, 15, 17, and 18 are special resolutions.
For shareholders attending online, as advised in the notice of AGM, you're not able to vote online. I hope you will have submitted your votes by proxy. For those attending physically, if you can complete the poll card given to you at registration by ticking the appropriate box as to how you wish to vote. If you've already voted and you don't want to change your vote, you don't need to fill in the poll card. If you haven't already voted, if you could fill in the poll card, that would be great. If anyone needs any further guidance or assistance, our registrars will leap to help you. We'll keep the poll vote open for 10 or 15 minutes until everyone has completed the poll cards. We will conclude the formal business of the meeting.
If those who are wishing to fill in the poll cards could do so. I'll ask you if anyone hasn't finished, and then we can close the meeting. Poll card completion now.
Scott's at the back if anyone wants help, waving his hand.
He's an expert. Anyone needs to complete poll cards, right? Okay. Is anyone in train completing the poll card? No point in all sitting around if no one's got a poll card to complete. You've completed it. You've done it. You've done it. Excellent. Hand in your homework at the end.
Thank you.
Thank you very much. Anyone else still completing? Okay. If you could hand in the completed poll cards, that would be great. That now concludes the formal business of the interim meeting. Can I thank you again, those online and those in the room, for taking the time to be with us. We do appreciate it. This is a very interesting company, and your interest in the company is something that we are very grateful for. The final results of the poll, the meeting will be announced through the regulatory information service and posted on the company's website as soon as it is practical. Are we putting up the proxy results? My goodness me, it is just like magic. The results we have already received, the proxy votes already cast, are behind us. You will see that everything has been passed comfortably.
The final figures will obviously be updated for those poll cards that are going to be handed in after the meeting. I doubt they will change the shape of the poll. We are very pleased to have such support from our shareholders. Thank you. I declare the meeting over.
Thank you to the board of IP Group. We will now redirect those online to provide the company with their feedback. Thank you for joining us today.