IP Group boss: There have never been more stakeholders calling for Mansion House reforms
Reforms to boost investment in the UK’s high-growth companies have support from across the sector, the boss of a FTSE 250 IP Group told City A.M.
“There have never been more stakeholders across the sector – be it regulators, capital providers, the stock exchange and companies – saying that this is something which is important,” Greg Smith, chief executive of IP Group said. IP Group invests in high-growth tech and life sciences firms.
In response to concerns that the UK’s high growth companies are leaving the UK, the government has taken steps to unleash a £75bn wave of investment into Britain’s private companies through the Mansion House Compact.
Aviva, L&G, Phoenix and Scottish Widows are among the names to back the new measure that will see them divert a minimum of five per cent of defined contribution (DC) pension cash into unlisted British companies by 2030.
The Treasury are also consulting on a series of rule changes to streamline the listings regime to try and ensure domestic firms stay in the UK.
“We need to deliver growth in the UK. And one way to do that is to ensure that we are making the most of backing our science base and are using our long-term capital to do so in an appropriate way,” Smith said.
“There’s a lot of common alignment around this being a jolly good idea,” Smith continued.
Smith was speaking after the company’s half-year results, in which IP Group narrowed its half-year loss to £54.5m from £309.8m in the same period last year. The loss was partly driven by a fall in the value of Oxford Nanopore as well as negative foreign exchange movements of £11.2m.
The fund generated £32.2m in cash proceeds compared to £2.1m the year before, helping gross cash and deposits climb to £250m.
Looking forward, only 16 per cent of the portfolio by value needs to raise financing before the second half of 2024. Analysts at Berenberg said, it puts IP Group in “a strong position to invest in attractively valued companies in periods of weak venture funding”.
Smith said the excess cash will go towards getting IP Group’s “biggest, most exciting and potentially impactful and valuable companies through to their key milestones”.
Despite the positive results, the fund still trades at a significant discount to NAV. At the end of June this year IP Group’s NAV per share was 126.7p while its shares were trading at 58.45p.
The fund suffered from the wider sell-off of high-growth stocks last year amid rising interest rates and geopolitical volatility. However, Smith noted that activity in the sector – although lower than the post-pandemic period – had plateaued.
“The last kind of four quarters globally, have remained pretty much the same sort of level. So there is perhaps some evidence of bottoming out in the private markets. And I should say they’re bottoming out at levels that we saw in 2018/19.”
A number of IP Group’s portfolio firms have important milestones coming up, including results from Istesso’s lead drug to treat rheumatoid arthritis in the first half of next year. “That’s clearly a huge value inflection point,” Smith said.
Istesso also received approval to start an additional Phase 2 trial in idiopathic pulmonary fibrosis. IP Group invested £15m in order to bring Istesso through both trials.
Across the board its portfolio companies raised £300m in the first half. While this was 17 per cent lower than last year, it was a smaller decline than the wider market trends.
“That’s good evidence of progress and evidence of good companies being able to raise capital,” Smith said.