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IP Group plc (LSE: IPO), the developer of intellectual property-based businesses, today announces its half-yearly results for the six months ended 30 June 2016.

HALF YEAR HIGHLIGHTS

Financial and operational update

• Net assets excluding intangibles of £683.5m (HY15: £700.6m; FY15: £714.3m)
• Adjusted loss before tax of £31.1m (HY15: profit of £70.1m; FY15: profit of £82.4m), excluding amortisation of intangible assets
• Portfolio realisations: £14.5m (HY15: £0.4m; FY15: £0.6m)
• Net cash and deposits at 30 June 2016: £174.7m (HY15: £219.6m; FY15: £178.8m).

Portfolio update

• Fair value of portfolio: £525.7m (HY15: £478.2m; FY15: £552.2m)
• Capital provided to portfolio companies and projects: £12.8m (HY15: £15.1m; FY15: £75.9m)
• Group’s portfolio companies raised approximately £38m of new capital during the half year
• Oxford Nanopore Technologies Limited announces significant technical and commercial progress, including the launch of a number of new products and services, and delivers its first PromethION instrument

Post-period end update

• Diurnal reports positive headline data from European Infacort® Phase III pivotal study.

Commenting on the Group’s half-yearly results, Alan Aubrey, Chief Executive Officer of IP Group, said:

"It is pleasing to report that a number of our portfolio companies have made excellent commercial progress during the period across all four of our sectors – Healthcare, Technology, Cleantech and Biotech – although broader economic conditions have had an impact on the value of some of our AIM-quoted holdings. The Group’s US business continues to develop, with the Group having signed agreements with the University of Washington and The Johns Hopkins University to explore opportunities to commercialise the universities’ intellectual property.

It is clear that the UK is facing a period of uncertainty following the EU referendum and ahead of the conclusion of subsequent negotiations. While in the shorter term there may be some impact on specific portfolio company financing rounds, the Board believes that the fundamentals of the business are strong and that the case for the commercialisation of science remains compelling. IP Group has partnerships with 14 of the UK’s and 5 of the US’s leading research universities, a portfolio worth £525.7m, a strong cash balance of £174.7m, an experienced management team and a healthy pipeline of new opportunities. This leaves the Group well positioned to respond effectively to, and capitalise on, opportunities in the second half of the year."

For more information, please contact:

IP Group plc – www.ipgroupplc.com

Alan Aubrey, Chief Executive Officer Greg Smith, Chief Financial Officer Liz Vaughan-Adams, Communications

+44 (0) 20 7444 0050

Charlotte Street Partners

Andrew Wilson

+44 (0) 7810 636995

Further information on IP Group is available on our website: www.ipgroupplc.com

This half-yearly results release may contain forward-looking statements. These statements reflect the Board’s current view, are subject to a number of material risks and uncertainties and could change in the future. Factors that could cause or contribute to such changes include, but are not limited to, the general economic climate and market conditions, as well as specific factors relating to the financial or commercial prospects or performance of individual portfolio companies within the Group’s portfolio of investments. Throughout this half-yearly results release the Group’s holdings in portfolio companies reflect the undiluted beneficial equity interest excluding debt, unless otherwise explicitly stated.

Interim management report

Summary

IP Group’s aim is to evolve great ideas into world-changing businesses to provide attractive returns over the long term for all of our stakeholders. While market conditions have had an impact on the value of some of our AIM-quoted holdings, it is pleasing to report that the commercial performance of many of our portfolio companies has been outstanding in the period.

Further, total realisations in the first half of the year were £14.5m (HY15: £0.4m; FY15: £0.6m). The most significant contribution came from the sale of the Group’s holding in Tracsis plc, which generated £13.1m of cash proceeds. Including dividends, the Group’s total proceeds from Tracsis were £14.3m, representing a multiple of approximately 38 times the Group’s total cost of £0.4m.

At 30 June 2016, the fair value of the Group’s portfolio was £525.7m (HY15: £478.2m; FY15: £552.2m). This reflects a net fair value decrease of £24.5m during the period largely as a result of a reduction in the value of the Group’s holdings in three AIM-listed portfolio companies – Avacta Group plc (£7.1m), Xeros Technology Group plc (£7.1m) and hVIVO plc (£4.4m). These were partly offset by positive contributions from other companies in the portfolio including, notably, Ceres Power Holdings plc (£4.2m).

In the first six months of the year, the Group provided incubation, seed and further capital totalling £12.8m to 29 distinct portfolio companies and opportunities (HY15: £15.1m, 31 opportunities; FY15: £75.9m, 53 opportunities) and had gross cash and deposits of £174.7m (HY15: £219.6m; FY15: £178.8m).

The Group's portfolio now comprises holdings in 83 companies in addition to strategic stakes in three multi-sector platform businesses and 16 de minimis holdings (HY15: 77, 3, 17; FY15: 82, 3, 15).

The first half of the year has been characterised by major commercial developments in our key assets with strong progress across all four of our sectors – Healthcare, Technology, Cleantech and Biotech. Notable highlights are as follows:

In Healthcare, Oxford Nanopore Technologies Limited hosted its flagship ‘London Calling’ conference in May and made a number of key announcements including announcing a new pipeline product, SmidgION, the smallest ever sequencing device that can be plugged into a smartphone and is expected in 2017, project Zumbador, a project to create a disposable device that includes both sample prep and library prep and noting that VolTRAX, the automated, programmable library prep device, will go into early access in the second half of the year. Oxford Nanopore also introduced a new nanopore, R9, into all its products which is superior to the now obsolete R7 nanopore and announced it had delivered its first PromethION instrument to a customer.

hVIVO plc announced favourable results from PrEP Biopharm’s PrEP-001 Phase IIa influenza disease prevention study. PrEP Biopharm is a UK biotech company for respiratory infectious disease products in which hVIVO acquired a significant equity stake in November 2015.

In Technology, the division’s most valuable company holding, Actual Experience plc, announced a five-year framework agreement with Vodafone, adding to the contract wins announced during 2015 which included a major three-year partnership with Verizon. Mirriad Advertising Limited, which has developed an innovative, patented computer vision technology that can retrospectively insert advertising and branded products into existing video content, announced that its most recent $15m financing round, led by IP Group had included participation from Unilever Ventures, the venture capital and private equity arm of Unilever, one of the world’s largest spenders on advertising.

In Cleantech, Ceres Power Holdings plc had an exceptional start to the year announcing a two-year joint development agreement with Honda for power equipment applications in January. This was followed in June by the announcement of a project with Nissan aimed at developing a compact, on-board solid oxide fuel cell stack for range extension of electric vehicles. These new programmes in power equipment and automotive complement its existing work on prime power and domestic combined heat and power with Cummins and KD Navien respectively. The Nissan development is particularly encouraging, as it will be the first significant work for the company in automotive applications.

In Biotech, our drug discovery subsidiary, Modern Biosciences plc, continued to make good progress in its development of MBS2320, a novel agent for the treatment of rheumatoid arthritis. MBS2320 is partnered with Janssen Biotech Inc. and is currently in Phase 1 clinical studies. Elsewhere, in July the division’s most valuable holding, Diurnal Group plc, announced positive headline data from its European Phase 3 study for Infacort^® in the treatment of paediatric Adrenal Insufficiency (AI), several months ahead of schedule. Since floating on AIM in December 2015, Diurnal has continued to hit all developmental milestones, with the European Phase 3 study for its largest potential product, Chronocort, initiated in January.

More detail on the performance of the sectors is contained in the portfolio review below.

US

During the period, the Group continued to deepen its foundational partnerships with the University of Pennsylvania (two new opportunities), Princeton University (one new opportunity) and Columbia University (one new opportunity). Two recent opportunities from this group of partners, Uniformity Labs, Inc. (Princeton University) and Lumiode, Inc. (Columbia University) were presented at the Group’s recent capital markets day in London. In addition, the Group signed agreements with the University of Washington and The Johns Hopkins University. Both universities have consistently ranked in the top ten of all US universities with regards to the quantum of their annual R&D budgets (2016: $2.1bn and $1.1bn respectively) and are known for the quality and breadth of their technical output.

Outlook

While it is clear that the UK and its economy are facing a period of uncertainty following the outcome of the UK’s referendum on its membership of the EU, which may impact on specific funding rounds for companies, it is important to stress that IP Group is seeing excellent progress across the portfolio, has a strong balance sheet and operations in both the UK and the US.

IP Group was founded on the belief that modern economies need to support innovation in science and technology and to commercially leverage such innovation, and we believe that this remains the case. Further, the Board believes that the fundamentals of our business are strong and that the need for the commercialisation of science remains key.

IP Group has partnerships with 14 of the UK’s and 5 of the US’s leading research universities, a portfolio valued at £525.7m, gross cash and deposits of £174.7m, an experienced management team and a healthy pipeline of new opportunities. This leaves the Group well positioned to respond effectively to, and capitalise on, opportunities in the second half of the year.

Half-yearly results can be viewed in the PDF file format