IP Group news 0

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 2017.

HALF YEAR HIGHLIGHTS

Corporate update

• £207m (gross) capital raise announced, including significant new shareholders from Australia, China, Singapore and the UK
• Launch of IP Group Australasia; nine new university partnership agreements signed with leading universities in Australia and New Zealand
• Completion of the acquisition of Parkwalk Advisors
• Firm intention to make an all-share offer for Touchstone Innovations plc announced, with formal offer-related documents expected to be published today

Portfolio update

• Fair value of portfolio: £663.0m (HY16: £525.7m; FY16: £614.0m)
• Net change in fair value of portfolio: £28.5m increase (HY16: £24.5m decrease; FY16: £7.0m increase)
• Capital provided to portfolio companies and projects: £20.1m (HY16: £12.8m; FY16: £69.7m)
• Significant funding rounds completed by Ultrahaptics Holdings Ltd (£17.9m), Actual Experience plc (£17.5m) and Creavo Medical Technologies Limited (£13.4m)

Financial and operational update

• Net assets of £968.1m (HY16: £748.5m; FY16: £768.7m)
• Hard NAV of £890.5m (HY16: £683.5m; FY16: £706.5m)
• Return on Hard NAV of £21.3m (HY16: loss of £30.6m; FY16: loss of £7.6m)
• Gross cash and deposits at 30 June 2017: £263.1m (HY16: £174.7m; FY16: £112.3m) including net proceeds from capital raise of £180.3m settled during period

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

“The underlying performance of the Group and its portfolio companies in the first half of 2017 has been strong with a net portfolio fair value increase of £28.5m. It has been particularly encouraging that a number of our private companies including Ultrahaptics and, more recently, Creavo, have successfully completed large fundraisings following significant commercial progress, attracting new investors to their registers.

In the first half, we were also delighted to announce a £207m capital raising, the expansion of our business into Australasia, a firm intention to make an all-share offer for a combination with Touchstone Innovations plc and the completion of our acquisition of Parkwalk Advisors Ltd. The formal documents in connection with our offer for Touchstone Innovations plc are expected to be posted today.

IP Group has a strong balance sheet, with net assets now approaching £1bn, a diverse portfolio comprising a broad range of early to mature businesses across four sectors and we believe the fundamentals of the business are strong. I would like to take this opportunity to thank all of our shareholders for their support as we continue to grow the business and expand internationally.”

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
Martha Walsh	+44 (0) 7876 245962

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

The first half of 2017 has seen a number of significant corporate developments coupled with a strong underlying performance in the portfolio. On the corporate front, we announced a £207m (gross) capital raising, expansion into Australasia, a firm intention to make an all-share offer for Touchstone Innovations plc and the completion of our acquisition of Parkwalk Advisors Ltd.

Portfolio performance

At 30 June 2017, the fair value of the Group’s portfolio was £663.0m (HY16: £525.7m; FY16: £614.0m). This reflects a net fair value increase of £28.5m during the period with significant net fair value increases in three sectors: Technology (£12.7m increase), Cleantech (£19.1m increase) and Biotech (£8.2m increase), more than compensating for a net fair value reduction in the Healthcare sector (£10.9m decrease). This fair value excludes consolidated portfolio companies, including Modern Biosciences Limited, whose lead programme for the treatment of rheumatoid arthritis is partnered with Janssen Biotech Inc.

The single largest portfolio company fair value increase during the period was Ultrahaptics Holdings Ltd in the Technology sector. Ultrahaptics, whose products allow users to touch virtual objects in mid-air, completed a £17.9m fundraising, resulting in a gross fair value increase for the Group of £12.0m. Other key positive contributions to the increase in fair value were largely due to rising share prices in many of our AIM-quoted assets including Ceres Power Holdings plc (£9.7m), Xeros Technology Group plc (£8.9m), Diurnal Group plc (£5.9m) and Avacta Group plc (£2.4m).

The largest unrealised fair value decreases were primarily as a result of reductions in the share prices of AIM-quoted hVIVO plc (£10.7m) and Tissue Regenix Group plc (£8.3m). Further information on the performance of the Group’s portfolio businesses, including hVIVO and Tissue Regenix, is provided in the portfolio review below.

In the first six months of the year, the Group provided incubation, seed and further capital totalling £20.1m to its portfolio companies (HY16: £12.8m; FY16: £69.7m). The Group's portfolio now comprises holdings in 96 companies in addition to strategic stakes in three multi-sector platform businesses and 18 de minimis holdings (HY16: 83, 3, 16; FY16: 90, 3, 20).

Capital raising

The £207m (gross) capital raise announced during the period saw the Group welcome new shareholders from Australia, China, Singapore and the UK. The funding will enable the Group to accelerate growth by investing in new and existing portfolio companies, build on its pool of valued scientific and commercial talent, and attract further investors and co-investment partners. It also furthers the transformation underway by expanding the Group’s share register and by further extending its model into Australasia alongside our nine new university partners there. The subscription for shares by one participant, Beijing Galaxy World Group, is subject to certain Chinese foreign exchange and regulatory approvals, which it currently anticipates being received by mid-August. Therefore, net capital raising proceeds during the period were £180.3m and the Group held gross cash and deposits of £263.1m at 30 June 2017 (HY16: £174.7m; FY16: £112.3m).

New Australasian operations

Turning to Australasia, the Group was excited to launch a landmark agreement with Australasia’s leading universities, under which it anticipates seeing at least A$200 million invested in finding and developing companies involved in disruptive innovation. The commercialisation agreements – the first of their type in Australasia – have been signed between IP Group and nine universities which comprise the University of Adelaide, Australian National University, the University of Melbourne, Monash University, UNSW Sydney, the University of Queensland, the University of Sydney and the University of Western Australia in Australia, and the University of Auckland in New Zealand. IP Group has committed to invest at least A$200m over a 10-year period to fund investments in spin-out companies based on the intellectual property developed by academics at the nine universities, generated from research in areas such as digital medicine, new medical therapies and quantum computing.

Mergers and acquisitions

It has also been a busy period in terms of M&A, with the Group announcing of its firm intention to make an all-share offer for Touchstone Innovations plc in June and the completion of its acquisition of Parkwalk Advisors Ltd in January. Founded in 2009, Parkwalk is the UK's leading university spin-out focused EIS fund manager and we are delighted to welcome the team to the Group. Parkwalk recorded a net profit of £0.8m for the five-month period since acquisition.

The Group’s announcement earlier today set out the revised terms of its intended offer for Touchstone Innovations plc. Assuming acceptance of the Group’s offer in full, IP Group shareholders would own approximately 66% of the combined group and Touchstone’s shareholders would own approximately 34%. Full documentation in connection with the offer is expected to be issued today.

Touchstone, founded in 1986 and listed on AIM since 2006, creates, builds and invests in technology companies and licensing opportunities developed from scientific research from the 'Golden Triangle', the geographical region broadly bounded by London, Cambridge and Oxford.

The Group believes that the combination with Touchstone will create an international leader in IP commercialisation and a business that is greater than the sum of the two parts. With a larger and more diversified portfolio, IP Group believes the combined business would be even more attractive to current and potential new investors and also to other stakeholders including university partners and entrepreneurial talent. IP Group has received irrevocable undertakings and letters of intent in support of the offer from Touchstone Shareholders representing, in aggregate, 89.7 per cent of Touchstone’s issued share capital.

Outlook

One of the central beliefs on which IP Group was founded was that modern economies need to support scientific innovation and then seek to commercially leverage such innovation. We believe that this remains very much the case today. The Group’s portfolio remains well diversified with a broad range of early to mature businesses across our four sectors and, following the Group’s recent capital raise, holds in excess of £260m in cash and deposits. Our operation in the US continues to produce exciting opportunities with two companies now having completed their first ‘series A’ financings supported by US-based shareholders and we look forward to emulating the Group’s successful business model in Australasia.

While it remains important to consider IP Group as a long-term business where results can fluctuate from year to year, we remain excited about the prospects for IP Group and believe the fundamentals of the business are strong and appeal to an increasingly broad set of international investors.

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