IP GROUP PLCAnnual Report and Accounts for the year ended 31 December 2020IP Group plc Annual Report and Accounts for the year ended 31 December 202020 YEARS OF EVOLVING GREAT IDEAS INTO WORLD-CHANGING BUSINESSESRegistration Number: 04204490 Stock Code: IPO Evolving great ideas into world-changing businesses.IP Group’s purpose is to evolve great ideas into world-changing businesses that achieve a positive impact on the environment and society as well as a financial return.Sustainability has always been at the heart of IP Group. Through the businesses that we back and build, we aim to address some of the world’s most pressing challenges in areas such as disease prevention and mitigation, the transition to a less carbon intense energy world and productivity improvement. Our approach therefore considers environmental, social and governance (“ESG”) factors and their impact.Our team is passionate about this endeavour and has spent many years finessing its approach to identifying attractive intellectual property (“IP”), nurturing and building businesses around that IP and then providing capital and support along the journey from ‘cradle to maturity’. Through collaborations and established partner relationships with leading research institutions in the UK, the US, Australia and New Zealand, the Group seeks to access and commercialise a wealth of scientific research.Our portfolio, which is currently valued at £1.2bn, comprises holdings in 43 focus companies covering a broad range of commercial innovations across life sciences and technology. We have a 20-year track record and are proud to have helped create and build a number of exciting businesses that are making a real difference. We are pioneering in our approach, passionate about what we do, principled in how we work and committed to delivering results for all of our stakeholders.Investment case01050206040307Balanced and maturing portfolio of exciting companies based on ‘deep science’Deep technical and business-building expertise, including board representation and support, capital sourcing, IP strategy, executive search. Permanent capital structure, enabling the provision of funding from ‘cradle to maturity’ unconstrained by traditional fixed-life VC fund approach.An impactful purpose, with strong alignment of our portfolio to the UN Sustainable Development Goals and focus on ESG.International Group with operations in the UK, US, Australia and Asia, and an international shareholder and co-investor network.Track record built over 20 years.Established partner relationships with leading research institutions, giving access to potentially disruptive IP around the world.Disclaimer: This Annual Report and Accounts 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 companies within the Group’s portfolio. Further details can be found in the Risk management section on pages 46 to 57.Throughout this Annual Report and Accounts, IP Group plc and its subsidiaries are referred to as “IP Group”, the “Group” or the “Company”, as appropriate. The Group’s holdings in portfolio companies reflect the undiluted beneficial equity interest excluding debt, unless otherwise explicitly stated.IP Group plc Annual Report and Accounts for the year ended 31 December 2020Stock Code: IPO Evolving great ideas into world-changing businesses.IP Group’s purpose is to evolve great ideas into world-changing businesses that achieve a positive impact on the environment and society as well as a financial return.Sustainability has always been at the heart of IP Group. Through the businesses that we back and build, we aim to address some of the world’s most pressing challenges in areas such as disease prevention and mitigation, the transition to a less carbon intense energy world and productivity improvement. Our approach therefore considers environmental, social and governance (“ESG”) factors and their impact.Our team is passionate about this endeavour and has spent many years finessing its approach to identifying attractive intellectual property (“IP”), nurturing and building businesses around that IP and then providing capital and support along the journey from ‘cradle to maturity’. Through collaborations and established partner relationships with leading research institutions in the UK, the US, Australia and New Zealand, the Group seeks to access and commercialise a wealth of scientific research.Our portfolio, which is currently valued at £1.2bn, comprises holdings in 43 focus companies covering a broad range of commercial innovations across life sciences and technology. We have a 20-year track record and are proud to have helped create and build a number of exciting businesses that are making a real difference. We are pioneering in our approach, passionate about what we do, principled in how we work and committed to delivering results for all of our stakeholders.Investment case01050206040307Balanced and maturing portfolio of exciting companies based on ‘deep science’Deep technical and business-building expertise, including board representation and support, capital sourcing, IP strategy, executive search. Permanent capital structure, enabling the provision of funding from ‘cradle to maturity’ unconstrained by traditional fixed-life VC fund approach.An impactful purpose, with strong alignment of our portfolio to the UN Sustainable Development Goals and focus on ESG.International Group with operations in the UK, US, Australia and Asia, and an international shareholder and co-investor network.Track record built over 20 years.Established partner relationships with leading research institutions, giving access to potentially disruptive IP around the world.Disclaimer: This Annual Report and Accounts 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 companies within the Group’s portfolio. Further details can be found in the Risk management section on pages 46 to 57.Throughout this Annual Report and Accounts, IP Group plc and its subsidiaries are referred to as “IP Group”, the “Group” or the “Company”, as appropriate. The Group’s holdings in portfolio companies reflect the undiluted beneficial equity interest excluding debt, unless otherwise explicitly stated.IP Group plc Annual Report and Accounts for the year ended 31 December 2020Stock Code: IPO190191.079.529.56.614.7202020160.62015201720182019Cash realisations189.5(73.7)(75.6)64.1(7.6)2020201684.02015201720182019Return on Hard NAV1331.51141.51217.51295.8706.520202016714.32015201720182019125.3pps107.8pps115.0pps122.5pps125.0pps126.5ppsHard NAV(£m)115.969.771.2100.964.72020201667.52015201720182019Investment into portfolioTotal purchase of equity and debt investmentsContentsBusiness Overview Highlights 01Group at a glance 02Strategic ReportChairman’s summary 06Market 08Business model 10Business model in action 12ESG in focus 14Our strategy 16Our strategy in action 18Key performance indicators 20Chief Executive’s operational review 22Portfolio review 26• Portfolio review: Strategic opportunities 32• Portfolio review: Life sciences 34• Portfolio review: Technology 36• Portfolio review: North America 38• Portfolio review: Australia and New Zealand 39• Third party fund management: Parkwalk Advisor 40• Portfolio review: Additional portfolio analysis 41Financial review 42Risk management 46ESG and Responsible Investment 58Culture 70Working with the Group’s stakeholders 74Our Governance Board of Directors 82Corporate governance framework 85Corporate governance statement 86Nomination committee report 100Directors’ remuneration report 107Report of the audit and risk committee 128Directors’ report 132Statement of directors’ responsibilities 135Our Financials Independent auditor’s report 140Consolidated statement of comprehensive income 148Consolidated statement of financial position 149Consolidated statement of cash flows 150Consolidated statement of changes in equity 151Notes to the consolidated financial statements 152Company balance sheet 186Company statement of changes in equity 187Notes to the Company financial statements 188Company information 199Portfolio highlightsStrong growth, realisations and ongoing investment• Fair value of portfolio: £1,162.7m (2019: £1,045.6m)• Net portfolio gains of £231.4m or approximately +22%1 (2019: reduction of £43.9m)• 140% increase in cash realisations2 to £191.0m (2019: £79.5m)• Sustained investment into portfolio: £67.5m (2019: £64.7m)Proving the model – from investment to exit• Total funds raised by portfolio companies £1.1bn (2019: £430m) including Oxford Nanopore (£162.1m), Hinge Health ($392m), Oxbotica (£27m), MOBILion (£40m), Featurespace (£30m), Inivata ($25m)• Exited Ceres Power for £128m at seven times cost20 years of impact investing – supporting world-changing businesses• Portfolio has created three “unicorns”: Oxford Nanopore, Ceres Power, Hinge Health• A number of our portfolio companies, most notably Oxford Nanopore, are actively involved in the response to COVID-19• Appointment of Prof. Gordon Clark as Chair of ESG & Ethics CommitteeFinancial and operational highlights• Hard NAV3 £1,331.5m or 125.3 pps (2019: £1,141.5m or 107.8 pps)• Net assets £1,331.9m (2019: £1,141.9m)• Profit of £185.4m (2019: loss of £78.9m)• Record positive Return on Hard NAV3 of £189.5m or 17% (2019: -73.7m or -6%)• Strong liquidity with gross cash and deposits at 31 December 2020 of £270.3m (2019: £194.9m) and net cash (gross cash and deposits less EIB debt) of £203.0m (2019: £112.4m)• Recommended maiden dividend of 1pps, including scrip alternativePost period-end update• North American platform, IP Group, Inc., secured an additional $50.0m (£36.5m) of funding, including $40.0m from a new US blue-chip institutional investor alongside $10m from IP Group Read about our portfolio on pages 26 to 41Read about our business model on pages 10 and 111. 22% return on opening portfolio value of £1,045.6m 2. Proceeds from sale of equity and debt investments per Group Cash Flow Statement3. Alternative performance measure, see note 29 for definition and reconciliation to IFRS primary statementsBusiness OverviewStrategic ReportOur GovernanceOur Financials01 ~26% Other Portfolio~13% Cash, Loan and Other Net Assets16p32p3p8p4p2p3p32p25pOther Top 20Hard NAV125pps£5bn+RAISED BY PORTFOLIO COMPANIES300+COMPANIES FORMED AND SUPPORTED£900m+INVESTED IN SCIENCE-BASED BUSINESSES£1.3bnNET ASSET VALUE 125 PENCE PER SHARE5,000+JOBS CREATEDALIGNED WITHSDGsLife SciencesDeeptechCleantechStrategicIP Group’s purpose is to evolve great ideas into world-changing businesses. We achieve this by systematically helping to create, build and support outstanding intellectual property-based companies.We partner with leading research institutions in countries where leading research is produced. IP Group’s vision is to create an international leader in IP commercialisation. Through our key sectors, Life Sciences, Deeptech and Cleantech, we evolve great ideas into world-changing businesses. The Group has three areas of geographic focus: the UK, the US, Australia and New ZealandGroup at a glanceWhat’s in a share?Impact and engagement IP Group plc Annual Report and Accounts for the year ended 31 December 202002Stock Code: IPO Business Overview
Strategic Report
Our Governance
Our Financials
0 3
Portfolio by geography1
Portfolio by focus
US Australia
94% of
portfolio
in UK
Other
16%
Focus
10%
74% of
portfolio in
Top 20
Holdings
See information below
UK
74%
Top 20
holdings
Portfolio analysis – UK breakdown
By Stage
Sector
Value of
companies:
No. of portfolio
companies2
Top 20
Focus
Other
Life Sciences £392.5m
Deeptech £212.5m
Cleantech £58.8m
Strategic £370.6m
Organic & de minimis
£11.9m
Total UK Portfolio £1,046.3m
40
36
12
4
n/a
92
£250.4m
£45.1m
£97.4m
£139.0m
£36.8m
£36.7m
£35.6m
£21.7m
£1.5m
£363.2m
–
–
–
£7.4m
£11.9m
£788.2m
£103.6m
£154.5m
Portfolio performance summary3
2020 portfolio fair value movements/return on opening portfolio
24%
£227m
23%
£231m
27%3
£85m
Life
Sciences
3%
£7m
44%
£54m
29%
£83m
Deeptech
Cleantech
Strategic
1 Location of business unit
2 Excluding organic and de minimis (77 companies)
3 Percentages reflect simple return on opening portfolio value
(13%)
(£2m)
Organic &
De minimis
Total UK
6%
£5m
US
8%
£0m
Australia
Total
Portfolio
~26% Other Portfolio~13% Cash, Loan and Other Net Assets16p32p3p8p4p2p3p32p25pOther Top 20Hard NAV125pps£5bn+RAISED BY PORTFOLIO COMPANIES300+COMPANIES FORMED AND SUPPORTED£900m+INVESTED IN SCIENCE-BASED BUSINESSES£1.3bnNET ASSET VALUE 125 PENCE PER SHARE5,000+JOBS CREATEDALIGNED WITHSDGsLife SciencesDeeptechCleantechStrategicIP Group’s purpose is to evolve great ideas into world-changing businesses. We achieve this by systematically helping to create, build and support outstanding intellectual property-based companies.We partner with leading research institutions in countries where leading research is produced. IP Group’s vision is to create an international leader in IP commercialisation. Through our key sectors, Life Sciences, Deeptech and Cleantech, we evolve great ideas into world-changing businesses. The Group has three areas of geographic focus: the UK, the US, Australia and New ZealandGroup at a glanceWhat’s in a share?Impact and engagement IP Group plc Annual Report and Accounts for the year ended 31 December 202002Stock Code: IPO STRATEGIC REPORTIP Group plc Annual Report and Accounts for the year ended 31 December 202004Stock Code: IPO Chairman’s summary 06Market 08Business model 10Business model in action 12ESG in focus 14Our strategy 16Our strategy in action 18Key performance indicators 20Chief Executive’s operational review 22Portfolio review 26• Portfolio review: Strategic opportunities 32• Portfolio review: Life sciences 34• Portfolio review: Technology 36• Portfolio review: North America 38• Portfolio review: Australia and New Zealand 39• Third party fund management: Parkwalk Advisors 40• Portfolio review: Additional portfolio analysis 41Financial review 42Risk management 46ESG and Responsible Investment 58Culture 70Working with the Group’s stakeholders 74Business OverviewStrategic ReportOur GovernanceOur Financials05STRATEGIC REPORTIP Group plc Annual Report and Accounts for the year ended 31 December 202004Stock Code: IPO Chairman’s summaryDuring 2020, focus and the maturity of the Group’s portfolio drove record realisations and further valuation uplifts, substantially reducing the gap between our share price and net asset value per share.Let me start, on behalf of all shareholders, by recognising and thanking the executive leadership team for their excellent stewardship of the Group in what was an unprecedented year of challenges. Consistent with the experience of most companies, 2020 was, for IP Group, a year in which the operating model was severely tested by the impact of the coronavirus pandemic. We came through that test well, largely due to the effective execution of detailed planning, designed to keep our staff both safe and fully equipped to continue to support our portfolio companies and engage with all our stakeholders. Our offices remained substantially closed from the first lockdown and continue to be so today. Our working practices were adapted to enable remote working, with the health and wellbeing of our staff our first priority. Their response was exceptional, demonstrating the flexibility and commitment needed to overcome the many restrictions facing them in order to support portfolio companies who were dealing with their own challenges.Sir Douglas Flint ChairmanIn financial terms, 2020 was a highly successful year. For the second year in a row, cash realisations were at a record level, amounting to £191.0m (2019: £79.5m), driven principally by the disposal in stages of our investment in Ceres Power (Ceres) at an overall exit multiple of seven times the cash that we invested over the eight years we were shareholders. Ceres is, after Oxford Nanopore Technologies (ONT), the second so-called “unicorn” (valuation in excess of US$1bn) to emerge from our portfolio. Equally important, we generated a record net return on Hard NAV of £189.5m, or 17%, which we believe is a key metric in assessing our performance. It is hugely encouraging, after two years of net fair value losses, to see this position reverse. Notable within this performance is portfolio company Hinge Health which, in December, completed a US$300m capital raise. This valued the company at US$3bn, the third “unicorn”, generating a fair value uplift of £39.5m on our 2.4% shareholding.As a consequence of all of the above, in 2020 we delivered a record pre-tax profit of £185.4m and ended the year with gross cash and deposit balances amounting to £270.3m. We raised no further capital during the year and invested £67.5m in our portfolio companies out of the £1.1bn that they raised from all sources. Our cash resources at year end were well in excess of our expectations going into 2020 and, mindful of the continued maturation of a number of companies in our portfolio and the potential opportunities for future cash realisations, I am pleased to report that the Board is recommending a maiden dividend of 1p per share.The success evidenced in 2020 goes well beyond financial success. The pandemic demonstrated convincingly the challenges facing the world that require science-based solutions. These most notably include current health priorities, but also encompass addressing the threats from climate change and challenges from society’s expanding interface with a data driven world. We are encouraged by the Government’s commitment to build UK competitiveness on the back of its science base, to support the “green industrial revolution” and to review UK Listing Rules to enhance market opportunities for young growing companies. All of this plays well for our portfolio. The Group’s purpose of “evolving great ideas into world changing businesses” and concentrating our investment towards companies aligned with the UN’s Sustainable Development Goals (SDGs) was a key factor in the value uplifts achieved in 2020. The maturity of our portfolio companies as they now begin to achieve meaningful commercial success on top of scientific recognition will, we believe, drive the financial success of the Group in the coming years. Nowhere is this more evident than with respect to our largest portfolio holding, Oxford Nanopore, which is working with public health laboratories around the world on the COVID-19 pandemic. Oxford Nanopore broadened its appeal during 2020 by expanding its contribution IP Group plc Annual Report and Accounts for the year ended 31 December 202006Stock Code: IPO Business Overview
Strategic Report
Our Governance
Our Financials
0 7
within the COVID-19 diagnostic testing arena through its
LamPORE platform. This testing approach benefits from
being highly scalable and capable of being deployed in
local environments as well as high throughput traditional
laboratory settings, and so addresses the need for rapid
routine testing of large numbers of people. LamPORE is
currently being rolled out globally with initial use in the UK,
Germany, Switzerland and the United Arab Emirates.
This combination of our focus on impactful, science-based
businesses that can contribute to meeting the SDGs, the
stock market’s shift in emphasis towards ESG investing,
together with the maturity and evident commercial success
emerging from within our portfolio were key factors in the
39% rise in IP Group’s share price during the year, from 71p
to 98.9p, narrowing the discount to Hard NAV from 34%
to 16%, a trend that I am pleased to say has continued into
2021. This year has seen further broadening of the Group’s
share register and I would like to welcome new shareholders
as well as express our thanks to all shareholders who have
supported the business over the long term.
There were, however, some disappointments in the year. We
disposed of our investment in Avacta in April after many
years of disappointing performance, shortly ahead of an
unforeseen deal to use Avacta’s technology to develop
a COVID-19 test, which drove its share price materially
higher. Parkwalk Advisors (Parkwalk), the market leader in
university-focussed EIS funds, which the Group acquired
in 2017 to reinforce the funding available to early-stage
university spin-outs, saw its fundraising somewhat
constrained compared to its expectations due to the impact
of COVID-19. This notwithstanding, Parkwalk, with £350m
of assets under management, remains the largest fund
manager of its type in terms of money raised and in 2020
was recognised by the EIS Association as Best EIS Fund
Manager of the year for the fourth consecutive year.
In spite of the constraints imposed by COVID-19 restrictions,
the Board pursued a full agenda throughout the year
with all meetings post March successfully held virtually.
In addition to reviewing performance and business
opportunities, the Board and its committees evaluated
detailed proposals regarding enhancements to the Group’s
capital allocation policies, its organisational design, talent
management including diversity and inclusion, employee
engagement and succession planning for key roles. More
details on these areas are covered later in the report.
There were no changes in Board composition during the
year beyond the departure of Jonathan Brooks in March,
which was reported in last year’s Report and Accounts.
After nearly nine years on the Board, including his time
served on the Board of Touchstone Innovations plc,
Professor David Begg, our senior independent director,
will retire at this year’s AGM. Aedhmar Hynes has been
nominated to succeed David as senior independent director
and I look forward to working with her in that role.
The year ahead looks challenging, with the economic
environment likely to be highly dependent upon the
successful rollout of vaccination programmes across the
world, thus facilitating a gradual easing of travel and work
restrictions. Our focus on the development of science-
based solutions to global challenges is, however, relatively
advantaged, even protected, in this environment and we
see continuing value to be built within and realised from the
portfolio in the coming years.
One fresh area of possible future constraint relates to
the recently announced proposals for a revised national
security-based review of investments in the UK as well as
similar “foreign investment” regimes in the countries in
which we operate. Given that the challenges our portfolio
companies address are global, their potential markets
and shareholder bases are similarly global. Legal analysis
suggests the new UK regime could be more expansive than
the current arrangements in terms of approvals required for
equity interests above certain thresholds and thus we shall
be monitoring the progress of the legislation through UK
Parliament and making representations and submissions as
necessary.
Let me close by extending on behalf of shareholders my
sincere appreciation to our colleagues who have proven
yet again their agility and commitment in support of our
portfolio companies and to all our stakeholders who have
found fresh ways to support and engage with us in order
for us to deliver against our purpose.
Sir Douglas Flint
Chairman
9 March 2021
Oxford Nanopore: Scientist inserting a flow cell into MinION Mk1C
Chairman’s summaryDuring 2020, focus and the maturity of the Group’s portfolio drove record realisations and further valuation uplifts, substantially reducing the gap between our share price and net asset value per share.Let me start, on behalf of all shareholders, by recognising and thanking the executive leadership team for their excellent stewardship of the Group in what was an unprecedented year of challenges. Consistent with the experience of most companies, 2020 was, for IP Group, a year in which the operating model was severely tested by the impact of the coronavirus pandemic. We came through that test well, largely due to the effective execution of detailed planning, designed to keep our staff both safe and fully equipped to continue to support our portfolio companies and engage with all our stakeholders. Our offices remained substantially closed from the first lockdown and continue to be so today. Our working practices were adapted to enable remote working, with the health and wellbeing of our staff our first priority. Their response was exceptional, demonstrating the flexibility and commitment needed to overcome the many restrictions facing them in order to support portfolio companies who were dealing with their own challenges.Sir Douglas Flint ChairmanIn financial terms, 2020 was a highly successful year. For the second year in a row, cash realisations were at a record level, amounting to £191.0m (2019: £79.5m), driven principally by the disposal in stages of our investment in Ceres Power (Ceres) at an overall exit multiple of seven times the cash that we invested over the eight years we were shareholders. Ceres is, after Oxford Nanopore Technologies (ONT), the second so-called “unicorn” (valuation in excess of US$1bn) to emerge from our portfolio. Equally important, we generated a record net return on Hard NAV of £189.5m, or 17%, which we believe is a key metric in assessing our performance. It is hugely encouraging, after two years of net fair value losses, to see this position reverse. Notable within this performance is portfolio company Hinge Health which, in December, completed a US$300m capital raise. This valued the company at US$3bn, the third “unicorn”, generating a fair value uplift of £39.5m on our 2.4% shareholding.As a consequence of all of the above, in 2020 we delivered a record pre-tax profit of £185.4m and ended the year with gross cash and deposit balances amounting to £270.3m. We raised no further capital during the year and invested £67.5m in our portfolio companies out of the £1.1bn that they raised from all sources. Our cash resources at year end were well in excess of our expectations going into 2020 and, mindful of the continued maturation of a number of companies in our portfolio and the potential opportunities for future cash realisations, I am pleased to report that the Board is recommending a maiden dividend of 1p per share.The success evidenced in 2020 goes well beyond financial success. The pandemic demonstrated convincingly the challenges facing the world that require science-based solutions. These most notably include current health priorities, but also encompass addressing the threats from climate change and challenges from society’s expanding interface with a data driven world. We are encouraged by the Government’s commitment to build UK competitiveness on the back of its science base, to support the “green industrial revolution” and to review UK Listing Rules to enhance market opportunities for young growing companies. All of this plays well for our portfolio. The Group’s purpose of “evolving great ideas into world changing businesses” and concentrating our investment towards companies aligned with the UN’s Sustainable Development Goals (SDGs) was a key factor in the value uplifts achieved in 2020. The maturity of our portfolio companies as they now begin to achieve meaningful commercial success on top of scientific recognition will, we believe, drive the financial success of the Group in the coming years. Nowhere is this more evident than with respect to our largest portfolio holding, Oxford Nanopore, which is working with public health laboratories around the world on the COVID-19 pandemic. Oxford Nanopore broadened its appeal during 2020 by expanding its contribution IP Group plc Annual Report and Accounts for the year ended 31 December 202006Stock Code: IPO 0 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Market
The purpose of IP Group is to evolve great ideas into world changing businesses.
Competition
The Group faces two main sources of competition –
competition for ideas and competition for capital. Firstly,
we compete for access to great ideas with significant
commercial potential. We source these ideas primarily
from our network of world-leading academic research
institutions, many of which we have long-term relationships
with. Here we compete with a variety of investors to
access these ideas, ranging from local angel investors
or seed funds, sector-specific venture funds and special
purpose permanent capital vehicles focused on specific
universities. Often, we will choose to collaborate on specific
opportunities rather than compete. A key competitive
advantage is being able to invest from balance sheet rather
than through a fixed-life fund.
Secondly, the Group and our portfolio companies
compete in the capital markets against other investment
opportunities for the funds required to develop these great
ideas into viable businesses. While the market for capital is
very broad and deep, the Group’s companies are typically
seeking earlier stage and development risk capital, which
is a much narrower sub-set of the broader capital markets.
The key determining factors that impact on our ability to
compete for capital are our long-term track record and the
strength of our idea sourcing capability. As our portfolio
matures, our ability to successfully recycle capital will
become increasingly important.
Each portfolio company also faces competition in its
chosen markets. Often our companies are seeking to either
create a new or emerging market (for example, software
for autonomous vehicles) or disrupt an existing market
with a paradigm shift in technology (for example in DNA
sequencing).
Market environment
The year was dominated by the COVID-19 pandemic
and the consequent humanitarian crisis and increased
political and economic uncertainty. In addition, significant
geopolitical developments including the US/China trade war
and the Brexit Agreement in the UK, increased the level of
political and economic uncertainty.
The combination of these factors has led to a fast-changing
environment with emerging, difficult-to-read and sometimes
competing trends. The level of political and economic
uncertainty has encouraged investors to be cautious and
to retain strong liquidity, which is important to ensure that
they are not disadvantaged by portfolio companies seeking
to raise more capital earlier than might otherwise be the
case. During 2020 IP Group also acted to ensure that we
maintained a strong level of liquidity.
However, investors have also been looking toward sectors
and companies likely to emerge stronger in a post-
pandemic world. This trend has generated strong interest
in companies involved in several areas, for example, the
transition to net zero, the accelerated digitisation of
economies and building resilience into health systems,
particularly around protection against future pathogens.
The pandemic also sparked a bounce-back in the relative
strength of public markets compared to private markets
with companies using the markets to access capital. IP
Group’s quoted portfolio also benefitted from this trend
with several portfolio companies carrying out placings in
the year.
About our business
Purpose: evolving great ideas into
world-changing businesses
The purpose of IP Group is to evolve innovation in scientific
research (or ideas) into world-changing businesses –
businesses that make a positive impact on the environment
and society alongside an attractive financial return. We do
this by providing the access to capital and support that
scientific innovators and entrepreneurs need to navigate
the tricky journey from idea to scale-up and impact. The
problem we address is the difficulty that these businesses
experience in accessing the capital they need to make
this journey. The risks are substantial and the timelines
often long, and these factors combined make it difficult
for many investors to back these ideas. By funding these
opportunities through an “evergreen” structure, such as
a plc balance sheet, that can “follow its money” through
to scale-up, we can mitigate these risks and help create
impactful companies that, over the medium-to-long run,
can generate attractive financial returns.
Vision
Our vision is an ever-growing alumnus of self-sustaining,
successful impact companies that IP Group helped create
and sustain. Companies which are achieving a positive and
measurable impact on society alongside a financial return.
Our performance will be measured by financial returns and
non-financial impact measures.
Business model
Our business model is to acquire equity holdings in these
companies, grow the value of those holdings over time,
before selling down in whole or over a period of time
in order to generate the funds to ensure the ongoing
sustainability of the company.
0 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Market
The purpose of IP Group is to evolve great ideas into world changing businesses.
Competition
The Group faces two main sources of competition –
competition for ideas and competition for capital. Firstly,
we compete for access to great ideas with significant
commercial potential. We source these ideas primarily
from our network of world-leading academic research
institutions, many of which we have long-term relationships
with. Here we compete with a variety of investors to
access these ideas, ranging from local angel investors
or seed funds, sector-specific venture funds and special
purpose permanent capital vehicles focused on specific
However, investors have also been looking toward sectors
and companies likely to emerge stronger in a post-
pandemic world. This trend has generated strong interest
in companies involved in several areas, for example, the
transition to net zero, the accelerated digitisation of
economies and building resilience into health systems,
particularly around protection against future pathogens.
The pandemic also sparked a bounce-back in the relative
strength of public markets compared to private markets
with companies using the markets to access capital. IP
Group’s quoted portfolio also benefitted from this trend
with several portfolio companies carrying out placings in
universities. Often, we will choose to collaborate on specific
opportunities rather than compete. A key competitive
advantage is being able to invest from balance sheet rather
the year.
than through a fixed-life fund.
About our business
Secondly, the Group and our portfolio companies
compete in the capital markets against other investment
opportunities for the funds required to develop these great
ideas into viable businesses. While the market for capital is
very broad and deep, the Group’s companies are typically
seeking earlier stage and development risk capital, which
is a much narrower sub-set of the broader capital markets.
The key determining factors that impact on our ability to
compete for capital are our long-term track record and the
strength of our idea sourcing capability. As our portfolio
matures, our ability to successfully recycle capital will
become increasingly important.
Each portfolio company also faces competition in its
chosen markets. Often our companies are seeking to either
create a new or emerging market (for example, software
for autonomous vehicles) or disrupt an existing market
with a paradigm shift in technology (for example in DNA
sequencing).
Market environment
The year was dominated by the COVID-19 pandemic
and the consequent humanitarian crisis and increased
political and economic uncertainty. In addition, significant
geopolitical developments including the US/China trade war
and the Brexit Agreement in the UK, increased the level of
political and economic uncertainty.
The combination of these factors has led to a fast-changing
environment with emerging, difficult-to-read and sometimes
competing trends. The level of political and economic
uncertainty has encouraged investors to be cautious and
to retain strong liquidity, which is important to ensure that
they are not disadvantaged by portfolio companies seeking
to raise more capital earlier than might otherwise be the
case. During 2020 IP Group also acted to ensure that we
maintained a strong level of liquidity.
Purpose: evolving great ideas into
world-changing businesses
The purpose of IP Group is to evolve innovation in scientific
research (or ideas) into world-changing businesses –
businesses that make a positive impact on the environment
and society alongside an attractive financial return. We do
this by providing the access to capital and support that
scientific innovators and entrepreneurs need to navigate
the tricky journey from idea to scale-up and impact. The
problem we address is the difficulty that these businesses
experience in accessing the capital they need to make
this journey. The risks are substantial and the timelines
often long, and these factors combined make it difficult
for many investors to back these ideas. By funding these
opportunities through an “evergreen” structure, such as
a plc balance sheet, that can “follow its money” through
to scale-up, we can mitigate these risks and help create
impactful companies that, over the medium-to-long run,
can generate attractive financial returns.
Vision
Our vision is an ever-growing alumnus of self-sustaining,
successful impact companies that IP Group helped create
and sustain. Companies which are achieving a positive and
measurable impact on society alongside a financial return.
Our performance will be measured by financial returns and
non-financial impact measures.
Business model
Our business model is to acquire equity holdings in these
companies, grow the value of those holdings over time,
before selling down in whole or over a period of time
in order to generate the funds to ensure the ongoing
sustainability of the company.
IP Group’s key differentiatorsInternational, balanced portfolio: Our combination of geographies and sectors achieves balance between diversity and focus. It diversifies the geopolitical risk that would arise from focusing on one country whilst ensuring that we have exposure to major thematic trends arising from innovation in scientific research. This balance also helps us build and maintain an international shareholder and co-investor network.Access to intellectual capital: We have deep and broad relationships with scientific innovators in all the countries and sectors we operate in. These networks provide us with significant opportunities to access disruptive innovative ideas.Business building: The Group actively supports the development of its portfolio companies through access to early-stage business-building expertise, interim executive support, technical and commercial networks and board-level recruitment and development in addition to the provision of capital. The Group also provides operational, legal, and business support to its companies. Access to financial capital: Investing from our balance sheet capital is a significant advantage compared to fixed life funds as it means that we are not obliged to sell assets by a specific date to liquidate the fund. This is important because our companies tend to progress in a non-linear manner and it is very difficult to judge the timing of rapid value accretion. In the UK, the Group also considers tax-advantaged Enterprise Investment Scheme (“EIS”) funds to be an important source of financing for early-stage technology companies and has seen strong operating performance from its subsidiary, Parkwalk, the UK’s largest EIS growth fund manager focused on university spin-outs, which links leading institutional wealth managers and university partners. An impactful purpose: There is a strong natural alignment between scientific research, the commercialisation of such research and impact. In recent years we have articulated this through the strength of alignment between our portfolio with the UN’s SDGs. We have focused on improving our performance on broader ESG issues including establishing an independently chaired ethics committee, adhering to responsible investor principles and developing an approach to identify and measure the most important ESG factors for our business.StrategyOur strategy is to operate separate business units that focus either on a key sector or geography. Our key sectors are Life Sciences, Deeptech and Cleantech. Our key geographies are the UK, the US and Australia and New Zealand. The objective of the sector-focused business units is to leverage their sector expertise to find, invest in and support a focused portfolio of start-up companies that address critical challenges in their sectors. The objective of our country-focused business units in the UK, the US and Australia and New Zealand is to create and support university spin-out companies in their respective countries. We have a nascent China business unit whose objective is to provide market access expertise to Group portfolio companies and to access third-party capital where this is additive to our portfolio companies. We also operate a cross-country and sector fund, which is called Strategic Opportunities. The principal asset in this fund is our holding in Oxford Nanopore. Due to its size and significance to the Group, this asset is managed directly by the Chief Executive with assistance from the leadership team. In this fund we also have some smaller holdings in companies that operate in a similar way to IP Group but focus on a specific university, such as Oxford, Cambridge or UCL. These assets give us the opportunity to invest alongside these companies in spin-outs from those universities. We also operate support functions in capital markets, legal and executive search that provide cross-fund or sector expertise in a particular aspect of business building.Business Overview09Strategic ReportOur GovernanceOur Financials REINVESTMENTPOTENTIAL OPPORTUNITY3-15+ YEARS0-3 YEARSMATURE BUSINESSEXITING Business modelUK-based sector fundsSTRATEGIC OPPORTUNITIESLife SciencesDeeptechCleantechMulti-sector country-focused fundsWe invest as well as apply our expertise and local knowledge to support and develop the companies we back. USAustraliaParkwalkCross-fund resources:Specialist corporate advisory, finance, and fund managementExecutive search and recruitmentIntellectual property appraisal and strategy development010204Capital and Resources Most Relevant to the GroupIP Group Comprises Seven Core Units Split by Sector & GeographyInvestment Life CycleStart-upIntellectual capitalWe work with the world’s best scientists in our chosen territories, the UK, the US, Australia and New Zealand, and our chosen sectors, life sciences, deeptech and cleantech.Financial capitalWe combine our balance sheet capital with third party capital to back, build and develop promising companies.Human capitalWe aim to attract and retain the best talent whether in IP Group or in our portfolio companies.The Group focuses on evolving great ideas, based on scientific research mainly from universities, into world-changing businesses. We aim to address some of the world’s most pressing challenges through the companies we back, allowing us to achieve a positive impact on the environment and society as well as a financial return. Over the years, we have developed a unique approach to creating, building and supporting outstanding businesses along the journey from ‘cradle to maturity’ to provide attractive returns for all of our stakeholders.IP Group’s specialists work with partners to identify promising research and to create and develop businesses around this research. Time and a limited level of capital are then deployed by IP Group, often alongside ‘soft’ grant funding, to develop the ideas to early commercial and technical validation using stringent milestones. As incubation opportunities show signs of traction, an investment case is made for seed funding to accelerate technical and commercial developments.IP Group plc Annual Report and Accounts for the year ended 31 December 202010Stock Code: IPO Exit mature opportunities and deploy capital in line with capital allocations policyCapital allocation policy• Organic growth• Managing gearing• Returns to shareholders03Impact: Value Created for StakeholdersScale-upAs companies mature, IP Group pro-actively sources co-investment, often through our IP Capital corporate finance function or alongside our EIS-specialist fund manager, Parkwalk Advisors. We continue to take an active role in company development, commonly through continued Board presence, to help grow the value of the company over time. Resources and capital are focused on those opportunities that are considered to represent the most attractive opportunities from a risk/reward perspective. The Group continues to offer support and can help inform discussions around strategic direction, including licensing, industrial partnering and M&A, as well as exit strategies, whether trade sale or IPO.The Group applies its ESG policy and ethical framework to its investment decisions and ongoing portfolio management to ensure the Group focuses only on companies which create a positive impact.Read about our Stakeholders on pages 74 to 79Financial / returnsHARD NAV OF£1.3bn(2019: £1.2bn)DIVERSE PORTFOLIO OF 131 COMPANIES BY SECTOR AND MATURITY WORTH£1.2bn(2019: £1.0bn)New company and job creation300+COMPANIES FORMED AND SUPPORTED(2019: 300+)5,000+JOBS CREATED(2019: 5,000+)Purposeful and impactful workALIGNED WITHSDGsWORKING TO ADDRESS SOME OF THE WORLD’S BIGGEST ISSUESRead about ESG & Responsible Investment on pages 58 to 70Read about Ceres Power on pages 12 to 13Business Overview11Strategic ReportOur GovernanceOur FinancialsREINVESTMENTPOTENTIAL OPPORTUNITY3-15+ YEARS0-3 YEARSMATURE BUSINESSEXITING Business modelUK-based sector fundsSTRATEGIC OPPORTUNITIESLife SciencesDeeptechCleantechMulti-sector country-focused fundsWe invest as well as apply our expertise and local knowledge to support and develop the companies we back. USAustraliaParkwalkCross-fund resources:Specialist corporate advisory, finance, and fund managementExecutive search and recruitmentIntellectual property appraisal and strategy development010204Capital and Resources Most Relevant to the GroupIP Group Comprises Seven Core Units Split by Sector & GeographyInvestment Life CycleStart-upIntellectual capitalWe work with the world’s best scientists in our chosen territories, the UK, the US, Australia and New Zealand, and our chosen sectors, life sciences, deeptech and cleantech.Financial capitalWe combine our balance sheet capital with third party capital to back, build and develop promising companies.Human capitalWe aim to attract and retain the best talent whether in IP Group or in our portfolio companies.The Group focuses on evolving great ideas, based on scientific research mainly from universities, into world-changing businesses. We aim to address some of the world’s most pressing challenges through the companies we back, allowing us to achieve a positive impact on the environment and society as well as a financial return. Over the years, we have developed a unique approach to creating, building and supporting outstanding businesses along the journey from ‘cradle to maturity’ to provide attractive returns for all of our stakeholders.IP Group’s specialists work with partners to identify promising research and to create and develop businesses around this research. Time and a limited level of capital are then deployed by IP Group, often alongside ‘soft’ grant funding, to develop the ideas to early commercial and technical validation using stringent milestones. As incubation opportunities show signs of traction, an investment case is made for seed funding to accelerate technical and commercial developments.IP Group plc Annual Report and Accounts for the year ended 31 December 202010Stock Code: IPO 1 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business model in action
Case study:
Ceres Power Holdings plc
£1m to £1bn
MARKET CAPITALISATION IN
LESS THAN EIGHT YEARS
Leading the energy
transition.
The Company
Ceres Power Holdings plc (Ceres Power) is a-world leading
alternative energy company based in the UK, developing
fuel cell technology for use by original equipment
manufacturers and partner organisations committed to
developing combined heat and power products and other
distributed energy generation applications. It is committed
to providing alternative energy solutions to address the
global challenges of reducing emissions, increasing fuel
efficiency and improving energy security.
2020 was a highlight year for Ceres Power and IP Group’s
role in backing the company. At the beginning of the year,
its market-leading fuel cell technology attracted further
investment from Robert Bosch GmbH (Bosch) which
increased its equity shareholding in Ceres Power to c.18%
from c.4% - a significant strategic step forward in the
partnership established in August 2018. This followed a
successful collaboration on technology development and
manufacturing in both the UK and Germany.
As the year progressed, further partnerships with, for
example, Weichei Power and Doosan Group further
highlighted its progress. This success is a reflection of the
belief that IP Group had in the company and its technology
based on scientific research carried out in the UK.
This conviction led to the largest cleantech deal in Europe
with seven times multiple of the original investment.
Link to strategy
• Helping develop and support companies into robust
businesses: eight years after providing a rescue funding
and plan, Ceres Power plc recorded c.£20.0m of revenue
for the year to 30 June 2020, an order book of £14.0m
and a strong pipeline of £54.0m
• Delivering attractive returns for stakeholders: IP Group
has exited its position in full in Ceres Power plc, realising
£128m of cash proceeds and delivering a seven times
multiple, providing clear evidence of the IP Group model.
How IP Group has supported Ceres Power
Following a failed field trial, Ceres Power suffered a
significant fall in its share price, reflecting the market’s low
confidence in the company’s future. IP Group’s Head of
Cleantech, Dr Robert Trezona, had previously worked at the
company as a technical team leader and believed that the
field trial result was not reflective of any fundamental issue
with the company’s technology. Based on this knowledge,
IP Group put together a new strategy and a £3.3m rescue
funding package for Ceres Power plc. It also took an active
role in the management of the Company with Alan Aubrey,
IP Group’s CEO and Dr Trezona sitting on the board as
Chairman and Non-executive director respectively. Over
the years, IP Exec has helped recruit directors including
Ceres Power plc’s current CEO and Chair. IP Capital has
supported Ceres Power plc on subsequent funding rounds
with IP Group leading on several investment rounds as well
as introducing new shareholders.
Highlights
• c£128m (total proceeds) = seven times multiple and
gross realised and unrealised IRR of c.48%
• The Group’s proceeds from Ceres Power more than
“repay” all of the investments in the Cleantech portfolio
• Rescued & supported the world’s leading fuel cell
technology company which now employs c.300 people
Read about our alignment with the
SDGs on pages 61 to 64
1 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business model in action
Case study:
Ceres Power Holdings plc
£1m to £1bn
MARKET CAPITALISATION IN
LESS THAN EIGHT YEARS
Leading the energy
transition.
The Company
• Delivering attractive returns for stakeholders: IP Group
has exited its position in full in Ceres Power plc, realising
£128m of cash proceeds and delivering a seven times
multiple, providing clear evidence of the IP Group model.
How IP Group has supported Ceres Power
Following a failed field trial, Ceres Power suffered a
Ceres Power Holdings plc (Ceres Power) is a-world leading
significant fall in its share price, reflecting the market’s low
alternative energy company based in the UK, developing
confidence in the company’s future. IP Group’s Head of
fuel cell technology for use by original equipment
Cleantech, Dr Robert Trezona, had previously worked at the
manufacturers and partner organisations committed to
company as a technical team leader and believed that the
developing combined heat and power products and other
field trial result was not reflective of any fundamental issue
distributed energy generation applications. It is committed
with the company’s technology. Based on this knowledge,
to providing alternative energy solutions to address the
global challenges of reducing emissions, increasing fuel
efficiency and improving energy security.
2020 was a highlight year for Ceres Power and IP Group’s
role in backing the company. At the beginning of the year,
its market-leading fuel cell technology attracted further
investment from Robert Bosch GmbH (Bosch) which
increased its equity shareholding in Ceres Power to c.18%
from c.4% - a significant strategic step forward in the
partnership established in August 2018. This followed a
IP Group put together a new strategy and a £3.3m rescue
funding package for Ceres Power plc. It also took an active
role in the management of the Company with Alan Aubrey,
IP Group’s CEO and Dr Trezona sitting on the board as
Chairman and Non-executive director respectively. Over
the years, IP Exec has helped recruit directors including
Ceres Power plc’s current CEO and Chair. IP Capital has
supported Ceres Power plc on subsequent funding rounds
with IP Group leading on several investment rounds as well
as introducing new shareholders.
successful collaboration on technology development and
Highlights
manufacturing in both the UK and Germany.
As the year progressed, further partnerships with, for
example, Weichei Power and Doosan Group further
highlighted its progress. This success is a reflection of the
• c£128m (total proceeds) = seven times multiple and
gross realised and unrealised IRR of c.48%
• The Group’s proceeds from Ceres Power more than
“repay” all of the investments in the Cleantech portfolio
belief that IP Group had in the company and its technology
• Rescued & supported the world’s leading fuel cell
based on scientific research carried out in the UK.
technology company which now employs c.300 people
This conviction led to the largest cleantech deal in Europe
with seven times multiple of the original investment.
Link to strategy
• Helping develop and support companies into robust
businesses: eight years after providing a rescue funding
and plan, Ceres Power plc recorded c.£20.0m of revenue
for the year to 30 June 2020, an order book of £14.0m
and a strong pipeline of £54.0m
Read about our alignment with the
SDGs on pages 61 to 64
2001Timeline of Ceres Power’s storyThe outline below shows how IP Group supported Ceres from rescue package and funding rounds through to the successful exit in 2020. 2001Co founded on IP from Imperial College London2012IP Group formed a £3.3m rescue funding package.& new strategy2013IP Exec recruits Phil Caldwell as CEO from Intelligent Energy.2020IP Exec recruits new NED, now Chair, Warren Finegold. Sale of £22m of equity in January to facilitate Bosch, with further sales of c£51m and £52m of equity in April and July to broaden share register2012 New board formed with IP Group CEO as Chair and cleantech partner as NED; Steve Callaghan as interim CEOIP Capital supported Ceres on subsequent funding rounds, with IP Group leading several investments.2004Listed on AIM2020Alan Aubrey & Rob Trezona retire from Ceres board.2021Business Overview13Strategic ReportOur GovernanceOur Financials Memberships, ratings and initiatives*In 2020, IP Group’s purpose, of evolving great ideas into world-changing businesses, and the importance of backing innovation and science over the long term has been brought into sharp relief. • ESG at Group level: Identifying and prioritising ESG issues which are most material to stakeholders• Responsible investment and stewardship: Ensuring that our Sustainability and ESG policy and Ethical Investment Framework are implemented across the Group• Impact: Measuring the positive impact of our portfolio in an objective way against the SDGs• The above are underpinned by implementing best practice governance Materiality AssessmentIP Group carried out a materiality assessment in 2020, aimed at gaining a better understanding of the most material ESG issues for stakeholders to help identify and manage both risks and opportunities. This assessment of our material ESG issues combined qualitative and quantitative inputs from internal and external stakeholders. Understanding these issues supports our strategic ESG and responsible investment focus. A key outcome of the materiality assessment was the identification of a non-financial KPI which underscores our commitment to ESG across the business.Read more on pages 59 to 60Taskforce on Climate-related Financial Disclosures (TCFD).It has become clear that meeting the goals of the COP 21 Paris Agreement will require a transition of economies to net zero carbon emissions. At IP Group, we are committed to supporting the energy transition both through our operations and our portfolio. Our cleantech portfolio, in particular, contains many companies with technology solutions which may assist with the transition. In line with this approach, we have chosen to start the process of disclosing climate-related risks and opportunities in line with TCFD recommendations. A summary of our initial disclosure and other details of our environmental reporting including work towards targets can be found on page 67.Scientific innovation has proved to be a vital weapon in the world’s response to COVID-19 and some of the companies that IP Group has backed and supported over the last twenty years have played critical roles in this response. The response to COVID-19 has highlighted not only companies that can help the health sector but also those which serve the response to the climate crisis and the resulting green transition as well as those increasing the efficiency of the digital economy. Sustainability is at the heart of IP Group and our approach considers Environmental, Social and Governance (ESG) factors, in how it operates, makes investment decisions and in the way it works collaboratively with portfolio companies to drive these considerations forward.From this perspective, we placed great importance on the ‘S’ from ESG in 2020, focusing on the health and wellbeing of our staff and on supporting our portfolio companies while maintaining business as close to usual as possible.In 2020 we worked towards putting frameworks in place to measure our three focus areas – ESG at plc level, responsible investment and stewardship and impact as follows; ESG in focus* The use by IP Group plc of any MSCI ESG research llc or its affiliates (“MSCi”) data, and the use of MSCI logos, trademarks, service marks or index names herein, do not constitute a sponsorship, endorsement, recommendation, or promotion of IP Group plc by MSCI. MSCI services and data are the property of MSCI or its information providers, and are provided ‘as-is’ and without warranty. MSCI names and logos are trademarks or service marks of MSCI.Oxford Nanpore: GridIONIP Group plc Annual Report and Accounts for the year ended 31 December 202014Stock Code: IPO ESG highlightsCOVID-19 and Our Culture+25IMPROVEMENT IN eNPS DURING 2020SHARP FOCUS ON HEALTH AND WELLBEING DURING THE PANDEMICRead about our culture on pages 70 to 74Supporting DiversityEthicsRead about the Ethics Committee on pages 58 to 60ESG KPI• Identified a non-financial KPI covering employee, engagement and diversityread about our non-financial KPI on pages 20 to 21Environment• Initial response to TCFD recommendations• Look at the impact of our portfolio as we move towards measuring against TCFD recommendationsRead about our approach on page 67ImpactPORTFOLIO COMPANIES CONTRIBUTED TO THE RESPONSE TO COVID-19 Azuri PayGo solar is connecting and energising off-grid Africa• Appointed Professor Gordon Clark, Chair of the Ethics CommitteeBusiness Overview15Strategic ReportOur GovernanceOur FinancialsMemberships, ratings and initiatives*In 2020, IP Group’s purpose, of evolving great ideas into world-changing businesses, and the importance of backing innovation and science over the long term has been brought into sharp relief. • ESG at Group level: Identifying and prioritising ESG issues which are most material to stakeholders• Responsible investment and stewardship: Ensuring that our Sustainability and ESG policy and Ethical Investment Framework are implemented across the Group• Impact: Measuring the positive impact of our portfolio in an objective way against the SDGs• The above are underpinned by implementing best practice governance Materiality AssessmentIP Group carried out a materiality assessment in 2020, aimed at gaining a better understanding of the most material ESG issues for stakeholders to help identify and manage both risks and opportunities. This assessment of our material ESG issues combined qualitative and quantitative inputs from internal and external stakeholders. Understanding these issues supports our strategic ESG and responsible investment focus. A key outcome of the materiality assessment was the identification of a non-financial KPI which underscores our commitment to ESG across the business.Read more on pages 59 to 60Taskforce on Climate-related Financial Disclosures (TCFD).It has become clear that meeting the goals of the COP 21 Paris Agreement will require a transition of economies to net zero carbon emissions. At IP Group, we are committed to supporting the energy transition both through our operations and our portfolio. Our cleantech portfolio, in particular, contains many companies with technology solutions which may assist with the transition. In line with this approach, we have chosen to start the process of disclosing climate-related risks and opportunities in line with TCFD recommendations. A summary of our initial disclosure and other details of our environmental reporting including work towards targets can be found on page 67.Scientific innovation has proved to be a vital weapon in the world’s response to COVID-19 and some of the companies that IP Group has backed and supported over the last twenty years have played critical roles in this response. The response to COVID-19 has highlighted not only companies that can help the health sector but also those which serve the response to the climate crisis and the resulting green transition as well as those increasing the efficiency of the digital economy. Sustainability is at the heart of IP Group and our approach considers Environmental, Social and Governance (ESG) factors, in how it operates, makes investment decisions and in the way it works collaboratively with portfolio companies to drive these considerations forward.From this perspective, we placed great importance on the ‘S’ from ESG in 2020, focusing on the health and wellbeing of our staff and on supporting our portfolio companies while maintaining business as close to usual as possible.In 2020 we worked towards putting frameworks in place to measure our three focus areas – ESG at plc level, responsible investment and stewardship and impact as follows; ESG in focus* The use by IP Group plc of any MSCI ESG research llc or its affiliates (“MSCi”) data, and the use of MSCI logos, trademarks, service marks or index names herein, do not constitute a sponsorship, endorsement, recommendation, or promotion of IP Group plc by MSCI. MSCI services and data are the property of MSCI or its information providers, and are provided ‘as-is’ and without warranty. MSCI names and logos are trademarks or service marks of MSCI.Oxford Nanpore: GridIONIP Group plc Annual Report and Accounts for the year ended 31 December 202014Stock Code: IPO 1 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Our strategy
Systematically building businesses
We are focused on returning the portfolio to growth. We are doing so by rationalising the portfolio and continuing to
concentrate resources on those companies considered most likely to have a meaningful impact on Group NAV in the short
to medium term. We are also focused on achieving self-sustainability in the portfolio through cash realisations of the mature
companies.
Strategic priorities
What we did in 2020 to address our objectives
Objectives for 2021
Link to KPIs2
• Provided capital for the first time to seven companies or projects: two
UK, one US, four Australia and New Zealand (2019: ten total: two UK, two
US, six Australia and New Zealand)
• Maintain a similar level of new opportunity formation in the
• Number of new portfolio companies
• Purchase of equity and debt investments
To create and maintain
a pipeline of compelling
intellectual property-
based opportunities
To develop and support
these opportunities into
a diversified portfolio of
robust businesses
To deliver attractive
financial returns on our
assets and third-party
funds
• Maintained board representation on almost 90% of our 43 “focus”3
•
Increase value of portfolio company holdings through
• Number of new portfolio companies
companies
•
IP Exec team placed four senior executives with portfolio companies, of
which two were chair appointments and two were non-executive director
appointments
•
IP Exec conducted its first formal “Board Review” mandate for one of our
portfolio companies during the year
• Portfolio fair value increased to £1,162.7m after net portfolio gains of
£231.4m
• Total capital raised by portfolio companies of £1.1bn during 2020
• Generated cash proceeds of £191.0m
• Net portfolio gains of £231.4m
• Provided £67.5m of capital to 65 distinct portfolio investments
• Portfolio of 127 companies and four strategic investments with a
combined total value of approximately £7bn
• Over £40m of EIS funds raised by Parkwalk during 2020, with £30m
invested into companies
• Total funds managed or advised by Group subsidiaries now in excess of
£400m
1 See pages 22 and 24 for detail of our KPIs.
2 Alternative performance measure, see note 29 for definition and reconciliation to IFRS primary statements.
3 See page 28 for definition
UK and US
universities
• Create additional opportunities from Australasian partner
• Maintain exposure to similar level of world-class
commercialisable IP through partner relationships with UK,
US and Australasian academic institutions
hands-on support and development including our IP Exec
• Purchase of equity and debt investments
and IP Capital offerings
• Seek to maintain approach of direct IP Group representation
on spin-out company boards
•
Increase the number of executive search mandates within IP
Exec and assist portfolio companies to increase diversity of
boards
• Complete capital raising mandates for certain portfolio
companies requiring finance from non-Group sources
• Hard NAV
• Return on Hard NAV
• Purchase of equity and debt investments
• Seek to continue net long-term increase in portfolio value
• Return on Hard NAV
and net assets
• Assist, directly or indirectly, portfolio companies to access
public and private markets to raise development capital
• Where appropriate, generate cash realisations from portfolio
• Generate attractive performance in Group’s managed funds
• Net portfolio gains/(losses)
• Proceeds from sale of equity investments
1 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Our strategy
Systematically building businesses
We are focused on returning the portfolio to growth. We are doing so by rationalising the portfolio and continuing to
concentrate resources on those companies considered most likely to have a meaningful impact on Group NAV in the short
to medium term. We are also focused on achieving self-sustainability in the portfolio through cash realisations of the mature
companies.
To create and maintain
a pipeline of compelling
intellectual property-
based opportunities
To develop and support
these opportunities into
a diversified portfolio of
robust businesses
To deliver attractive
financial returns on our
assets and third-party
funds
• Maintained board representation on almost 90% of our 43 “focus”3
•
IP Exec team placed four senior executives with portfolio companies, of
which two were chair appointments and two were non-executive director
•
IP Exec conducted its first formal “Board Review” mandate for one of our
portfolio companies during the year
• Portfolio fair value increased to £1,162.7m after net portfolio gains of
companies
appointments
£231.4m
• Total capital raised by portfolio companies of £1.1bn during 2020
• Generated cash proceeds of £191.0m
• Net portfolio gains of £231.4m
• Provided £67.5m of capital to 65 distinct portfolio investments
• Portfolio of 127 companies and four strategic investments with a
combined total value of approximately £7bn
• Over £40m of EIS funds raised by Parkwalk during 2020, with £30m
• Total funds managed or advised by Group subsidiaries now in excess of
invested into companies
£400m
1 See pages 22 and 24 for detail of our KPIs.
3 See page 28 for definition
2 Alternative performance measure, see note 29 for definition and reconciliation to IFRS primary statements.
Strategic priorities
What we did in 2020 to address our objectives
Objectives for 2021
Link to KPIs2
• Provided capital for the first time to seven companies or projects: two
UK, one US, four Australia and New Zealand (2019: ten total: two UK, two
US, six Australia and New Zealand)
• Maintain a similar level of new opportunity formation in the
• Number of new portfolio companies
UK and US
• Purchase of equity and debt investments
• Create additional opportunities from Australasian partner
universities
• Maintain exposure to similar level of world-class
commercialisable IP through partner relationships with UK,
US and Australasian academic institutions
•
Increase value of portfolio company holdings through
hands-on support and development including our IP Exec
and IP Capital offerings
• Seek to maintain approach of direct IP Group representation
on spin-out company boards
•
Increase the number of executive search mandates within IP
Exec and assist portfolio companies to increase diversity of
boards
• Complete capital raising mandates for certain portfolio
companies requiring finance from non-Group sources
• Number of new portfolio companies
• Purchase of equity and debt investments
• Hard NAV
• Return on Hard NAV
• Purchase of equity and debt investments
• Seek to continue net long-term increase in portfolio value
• Return on Hard NAV
and net assets
• Assist, directly or indirectly, portfolio companies to access
public and private markets to raise development capital
• Where appropriate, generate cash realisations from portfolio
• Generate attractive performance in Group’s managed funds
• Net portfolio gains/(losses)
• Proceeds from sale of equity investments
Strategic prioritiesWhat we did in 2020 to address our objectivesObjectives for 2021Link to KPIs2To create and maintain a pipeline of compelling intellectual property-based opportunities• Provided capital for the first time to seven companies or projects: two UK, one US, four Australia and New Zealand (2019: ten total: two UK, two US, six Australia and New Zealand) • Maintain a similar level of new opportunity formation in the UK and US• Create additional opportunities from Australasian partner universities• Maintain exposure to similar level of world-class commercialisable IP through partner relationships with UK, US and Australasian academic institutions• Number of new portfolio companies• Purchase of equity and debt investmentsTo develop and support these opportunities into a diversified portfolio of robust businesses• Maintained board representation on almost 90% of our 43 “focus”3 companies• IP Exec team placed four senior executives with portfolio companies, of which two were chair appointments and two were non-executive director appointments• IP Exec conducted its first formal “Board Review” mandate for one of our portfolio companies during the year• Portfolio fair value increased to £1,162.7m after net portfolio gains of £231.4m• Total capital raised by portfolio companies of £1.1bn during 2020• Increase value of portfolio company holdings through hands-on support and development including our IP Exec and IP Capital offerings• Seek to maintain approach of direct IP Group representation on spin-out company boards• Increase the number of executive search mandates within IP Exec and assist portfolio companies to increase diversity of boards• Complete capital raising mandates for certain portfolio companies requiring finance from non-Group sources• Number of new portfolio companies• Purchase of equity and debt investments• Hard NAV• Return on Hard NAV• Purchase of equity and debt investmentsTo deliver attractive financial returns on our assets and third-party funds• Generated cash proceeds of £191.0m• Net portfolio gains of £231.4m• Provided £67.5m of capital to 65 distinct portfolio investments• Portfolio of 127 companies and four strategic investments with a combined total value of approximately £7bn• Over £40m of EIS funds raised by Parkwalk during 2020, with £30m invested into companies • Total funds managed or advised by Group subsidiaries now in excess of £400m• Seek to continue net long-term increase in portfolio value and net assets• Assist, directly or indirectly, portfolio companies to access public and private markets to raise development capital • Where appropriate, generate cash realisations from portfolio• Generate attractive performance in Group’s managed funds• Return on Hard NAV• Net portfolio gains/(losses)• Proceeds from sale of equity investments1 See pages 22 and 24 for detail of our KPIs. 2 Alternative performance measure, see note 29 for definition and reconciliation to IFRS primary statements. 3 See page 28 for definitionBusiness OverviewStrategic ReportOur Governance17Our Financials 1 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Our strategy in action
Case study:
Oxford Nanopore
Technologies
Oxford Nanopore: Scientist pipetting
onto a GridION in a Nanopore lab
Helping the fight
against Coronavirus.
Oxford Nanopore Technologies (ONT) is a
prime example of how IP Group backs and
supports innovation from an early stage and
supports it over time as it matures.
2020 was the year in which Oxford Nanopore’s technology
really hit the headlines around the world for its work in the
fight against the pandemic although their core business of
DNA/RNA sequencing remains the foundation for myriad
applications.
The Company
Oxford Nanopore’s goal is to enable the genetic analysis
of anything, by anyone, anywhere. The company has
developed the world’s first and only nanopore DNA
sequencing platform, which is uniquely scalable from
pocket-sized formats through to ultra-high throughput
devices. The technology offers real-time data analysis for
rapid, dynamic insights.
The Oxford-based company, which now has approximately
600 employees, remains well financed, having raised
£162.1m million in 2020 from both existing and new
investors including International Holdings Company (IHC)
and RPMI Railpen.
Link to IP Group strategy
• Helping develop and support companies into robust
businesses: 15 years after providing the original seed
funding, Oxford Nanopore is growing fast, recording
revenues of £52.1m in 2019, a 60% rise on the prior year,
and noted it achieved “strong growth” in 2020. The
company was ranked 20th in the Sunday Times Tech
Track 100 annual league table of the UK’s fastest growing
private technology companies.
• Delivering attractive returns for stakeholders: Oxford
Nanopore is the most valuable holding in IP Group’s
portfolio. Our 15.0% holding is valued at £340.3m, valuing
the entire company at approximately £2.3bn. IP Group
also realised £22.0m of cash from a partial sale of its
holding in Oxford Nanopore in January 2020 as part of a
secondary sale of shares.
Why is backing innovation like Oxford
Nanopore so important?
Oxford Nanopore’s sequencing technology is now being
used in more than 100 countries and by researchers to
explore areas of biological research including human
genetics, cancer, infectious pathogens, plant and animal
genomics and environmental science.
Of particular note, the company is at the forefront
of efforts to tackle the COVID-19 pandemic both in
sequencing the virus and also in its diagnosis. Oxford
Nanopore’s technology has been supporting public health
authorities and researchers around the world since the
start of the outbreak as rapid sequencing of the virus
has helped understand transmission pathways, emerging
variants and the biology of the disease. The company also
rapidly developed and launched its first diagnostic test
(LamPORE) for the detection of the virus. More broadly, in
developing and commercialising the LamPORE test, Oxford
Nanopore has put in place infrastructure across regulatory,
manufacturing and commercial teams that supports its
future growth into more ‘applied’ uses of its technology.
How IP Group has supported Oxford
Nanopore
IP Group provided the original seed funding to Oxford
Nanopore in 2005 and has backed numerous follow-on
funding rounds. The Group has introduced many new
shareholders including RPMI Railpen which invested in the
last funding round in October 2020. In total, ONT raised
£162.1m across three fund raisings in 2020 to support
the rapid acceleration of commercial and manufacturing
operations as well as ongoing innovation. IP Group,
through IP Exec, has also helped recruit directors, including
a number of members of both the executive and non-
executive team, over the years.
For more on Oxford Nanopore, please see page 32.
Read about our SDGs on
pages 61 to 64
1 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 9
Our strategy in action
Case study:
Oxford Nanopore
Technologies
Oxford Nanopore: Scientist pipetting
onto a GridION in a Nanopore lab
Helping the fight
against Coronavirus.
Oxford Nanopore Technologies (ONT) is a
prime example of how IP Group backs and
supports innovation from an early stage and
supports it over time as it matures.
2020 was the year in which Oxford Nanopore’s technology
really hit the headlines around the world for its work in the
fight against the pandemic although their core business of
DNA/RNA sequencing remains the foundation for myriad
applications.
The Company
Why is backing innovation like Oxford
Nanopore so important?
Oxford Nanopore’s sequencing technology is now being
used in more than 100 countries and by researchers to
explore areas of biological research including human
genetics, cancer, infectious pathogens, plant and animal
genomics and environmental science.
Of particular note, the company is at the forefront
of efforts to tackle the COVID-19 pandemic both in
sequencing the virus and also in its diagnosis. Oxford
Nanopore’s technology has been supporting public health
authorities and researchers around the world since the
start of the outbreak as rapid sequencing of the virus
has helped understand transmission pathways, emerging
variants and the biology of the disease. The company also
Oxford Nanopore’s goal is to enable the genetic analysis
rapidly developed and launched its first diagnostic test
of anything, by anyone, anywhere. The company has
(LamPORE) for the detection of the virus. More broadly, in
developed the world’s first and only nanopore DNA
developing and commercialising the LamPORE test, Oxford
sequencing platform, which is uniquely scalable from
Nanopore has put in place infrastructure across regulatory,
pocket-sized formats through to ultra-high throughput
manufacturing and commercial teams that supports its
devices. The technology offers real-time data analysis for
future growth into more ‘applied’ uses of its technology.
rapid, dynamic insights.
How IP Group has supported Oxford
The Oxford-based company, which now has approximately
Nanopore
600 employees, remains well financed, having raised
IP Group provided the original seed funding to Oxford
£162.1m million in 2020 from both existing and new
Nanopore in 2005 and has backed numerous follow-on
investors including International Holdings Company (IHC)
funding rounds. The Group has introduced many new
and RPMI Railpen.
Link to IP Group strategy
• Helping develop and support companies into robust
businesses: 15 years after providing the original seed
funding, Oxford Nanopore is growing fast, recording
revenues of £52.1m in 2019, a 60% rise on the prior year,
and noted it achieved “strong growth” in 2020. The
company was ranked 20th in the Sunday Times Tech
shareholders including RPMI Railpen which invested in the
last funding round in October 2020. In total, ONT raised
£162.1m across three fund raisings in 2020 to support
the rapid acceleration of commercial and manufacturing
operations as well as ongoing innovation. IP Group,
through IP Exec, has also helped recruit directors, including
a number of members of both the executive and non-
executive team, over the years.
Track 100 annual league table of the UK’s fastest growing
For more on Oxford Nanopore, please see page 32.
private technology companies.
• Delivering attractive returns for stakeholders: Oxford
Nanopore is the most valuable holding in IP Group’s
portfolio. Our 15.0% holding is valued at £340.3m, valuing
the entire company at approximately £2.3bn. IP Group
also realised £22.0m of cash from a partial sale of its
holding in Oxford Nanopore in January 2020 as part of a
secondary sale of shares.
Celebrating the work of the Nanopore Community
...who have used nanopore
technology in over
The number of publications has grown and grown...
1,549
PUBLICATIONS
TO DATE1
WITH
104
COVID-19 PUBLICATIONS1
WITH ONE WEEK SEEING
28
PUBLICATIONS1
1600
1400
1200
1000
800
600
400
200
0
2014
2015
2016
2017
2018
2019
2020
Cumulative number of publications
And as throughput has grown, so has the range of applications
No. of publications
(until end of 2016)
76%
6%
4%
6%
0%
6%
2%
Microbiology
Translational
Plant
Environmental
Animal
Cancer
Human
No. of publications
(to date1)
41% Microbiology
(excluding COVID-19)
7%
4%
10%
9%
COVID-19
Translational
Plant
Environmental
13%
4%
12%
Animal
Cancer
Human
Read about our SDGs on
pages 61 to 64
1 At 13th January 2021; includes pre-prints
2 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Key performance indicators
Measuring our performance: focusing on delivery against our strategy
Financial KPIs
Hard NAV1
Return on Hard NAV1
Further description
2020 performance
Strategic element
Risks potentially
impacting KPI
Link to performance-related
director remuneration
The value of the Group’s assets less the value
of its liabilities, including minority interest, less
intangible assets
£1,331.5m
(2019: £1,41.5m)
Total comprehensive income or loss for the
year excluding amortisation of intangible
assets, share-based payment charges and the
charge in respect of deferred and contingent
consideration deemed to represent post
acquisition services under IFRS 3
£189.5m
(2019: negative £73.7m)
To grow the value of our assets (and those we
manage on behalf of third parties) and deliver
attractive financial returns from these assets
1 2 4 5 6
LTIP 2018 – 2020
Portfolio fair value movement has the most
material impact on this figure, which also
reflects corporate expenses. Measures the
development of portfolio companies and return
on our assets
1 2 4 5 6
2020 annual incentive
Purchase of equity and
debt investments
The total level of capital deployed from the
Group’s balance sheet into portfolio companies
during the year
£67.5m
(2019: £64.7m)
Build and maintain a pipeline of IP-based
opportunities and develop these into robust
2 3 5 6
Indirectly impacts both Return on
Hard NAV and Hard NAV
businesses
Movement in the fair value of holdings in
portfolio companies due to share price
movements, other increases/decreases in fair
value
£231.4m
(2019: loss £43.9m)
To develop IP-based businesses and
grow their value
1 2 3 4 6 7
Indirectly impacts both Return on
Hard NAV and Hard NAV
Proceeds from sale of equity
investments
The total amount received from the disposal of
interests in portfolio companies
The Group’s core overheads less operating
income
£21.6m
(2019: £22.6m)
£191.0m
(2019: £79.5m)
To control the Group’s operating
cost base
1 5 6 7
2020 annual incentive
Cash from proceeds can be used for
redeployment into the portfolio or for
new opportunities
1 2 4
2020 annual incentive
Net portfolio
gains/(losses)1
Net overheads1
Non-Financial KPIs
Number of new
portfolio investments
Employee engagement and diversity
The number of portfolio investments that
received initial capital from the Group during
the year
7
(2019: 10)
Build and maintain a pipeline of IP-based
opportunities and develop these into robust
3 4 5 6
Indirectly impacts both Hard NAV and
Return on Hard NAV (see above)
businesses
A hybrid metric measuring the change in
rolling twelve-month average eNPS, % of
actions identified in the annual engagement
survey completed, the Gender Pay Gap trend,
diversity of decision making forums and the
level of regretted employee turnover. The
total score represented as a percentage is
a weighted average for each subjective and
objective element. All elements were weighted
equally in 2020.
70%
(2019: not measured as 2020
is the first year under review)
Attract, develop and incentivise and retain the
best people critical to development of portfolio
3 4 8
Indirectly impacts both Hard NAV and
Return on Hard NAV (see above)
companies and return on our assets
1 Alternative performance measure, see note 29 for definition and reconciliation to IFRS primary statements.
2 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
2 1
Risk Key
Key performance indicators
1
2
Insufficient capital: Group
4 Personnel risk
7 Cyber & IT security
Insufficient capital:
Portfolio companies
5 Macroeconomic conditions
3 Uncertain investment returns
6 Legislation, governance and regulation
8 Group operations including
international operations
Measuring our performance: focusing on delivery against our strategy
Measuring our performance: focusing on delivery against our strategy
Financial KPIs
Financial KPIs
Hard NAV1
Hard NAV1
Return on Hard NAV1
Return on Hard NAV1
The value of the Group’s assets less the value
The value of the Group’s assets less the value
of its liabilities, including minority interest, less
of its liabilities, including minority interest, less
intangible assets
intangible assets
£1,331.5m
£1,331.5m
(2019: £1,41.5m)
(2019: £1,41.5m)
Total comprehensive income or loss for the
Total comprehensive income or loss for the
year excluding amortisation of intangible
year excluding amortisation of intangible
assets, share-based payment charges and the
assets, share-based payment charges and the
charge in respect of deferred and contingent
charge in respect of deferred and contingent
consideration deemed to represent post
consideration deemed to represent post
acquisition services under IFRS 3
acquisition services under IFRS 3
£189.5m
£189.5m
(2019: negative £73.7m)
(2019: negative £73.7m)
Further description
Further description
2020 performance
2020 performance
Strategic element
Strategic element
Risks potentially
Risks potentially
impacting KPI
impacting KPI
Link to performance-related
Link to performance-related
director remuneration
director remuneration
To grow the value of our assets (and those we
To grow the value of our assets (and those we
manage on behalf of third parties) and deliver
manage on behalf of third parties) and deliver
attractive financial returns from these assets
attractive financial returns from these assets
1 2 4 5 6
1 2 4 5 6
LTIP 2018 – 2020
LTIP 2018 – 2020
Portfolio fair value movement has the most
Portfolio fair value movement has the most
material impact on this figure, which also
material impact on this figure, which also
reflects corporate expenses. Measures the
reflects corporate expenses. Measures the
development of portfolio companies and return
development of portfolio companies and return
on our assets
on our assets
1 2 4 5 6
1 2 4 5 6
2020 annual incentive
2020 annual incentive
Purchase of equity and
Purchase of equity and
debt investments
debt investments
The total level of capital deployed from the
The total level of capital deployed from the
Group’s balance sheet into portfolio companies
Group’s balance sheet into portfolio companies
during the year
during the year
£67.5m
£67.5m
(2019: £64.7m)
(2019: £64.7m)
Build and maintain a pipeline of IP-based
Build and maintain a pipeline of IP-based
opportunities and develop these into robust
opportunities and develop these into robust
businesses
businesses
2 3 5 6
2 3 5 6
Indirectly impacts both Return on
Indirectly impacts both Return on
Hard NAV and Hard NAV
Hard NAV and Hard NAV
Net portfolio
Net portfolio
gains/(losses)1
gains/(losses)1
Movement in the fair value of holdings in
Movement in the fair value of holdings in
portfolio companies due to share price
portfolio companies due to share price
movements, other increases/decreases in fair
movements, other increases/decreases in fair
£231.4m
£231.4m
(2019: loss £43.9m)
(2019: loss £43.9m)
To develop IP-based businesses and
To develop IP-based businesses and
grow their value
grow their value
1 2 3 4 6 7
1 2 3 4 6 7
Indirectly impacts both Return on
Indirectly impacts both Return on
Hard NAV and Hard NAV
Hard NAV and Hard NAV
Net overheads1
Net overheads1
The Group’s core overheads less operating
The Group’s core overheads less operating
To control the Group’s operating
To control the Group’s operating
cost base
cost base
1 5 6 7
1 5 6 7
2020 annual incentive
2020 annual incentive
Proceeds from sale of equity
Proceeds from sale of equity
The total amount received from the disposal of
The total amount received from the disposal of
investments
investments
interests in portfolio companies
interests in portfolio companies
Cash from proceeds can be used for
Cash from proceeds can be used for
redeployment into the portfolio or for
redeployment into the portfolio or for
new opportunities
new opportunities
1 2 4
1 2 4
2020 annual incentive
2020 annual incentive
Non-Financial KPIs
Non-Financial KPIs
Number of new
Number of new
portfolio investments
portfolio investments
The number of portfolio investments that
The number of portfolio investments that
received initial capital from the Group during
received initial capital from the Group during
the year
the year
7
7
(2019: 10)
(2019: 10)
Build and maintain a pipeline of IP-based
Build and maintain a pipeline of IP-based
opportunities and develop these into robust
opportunities and develop these into robust
businesses
businesses
3 4 5 6
3 4 5 6
Indirectly impacts both Hard NAV and
Indirectly impacts both Hard NAV and
Return on Hard NAV (see above)
Return on Hard NAV (see above)
value
value
income
income
£21.6m
£21.6m
(2019: £22.6m)
(2019: £22.6m)
£191.0m
£191.0m
(2019: £79.5m)
(2019: £79.5m)
Attract, develop and incentivise and retain the
Attract, develop and incentivise and retain the
best people critical to development of portfolio
best people critical to development of portfolio
companies and return on our assets
companies and return on our assets
3 4 8
3 4 8
Indirectly impacts both Hard NAV and
Indirectly impacts both Hard NAV and
Return on Hard NAV (see above)
Return on Hard NAV (see above)
Employee engagement and diversity
Employee engagement and diversity
A hybrid metric measuring the change in
A hybrid metric measuring the change in
70%
70%
(2019: not measured as 2020
(2019: not measured as 2020
is the first year under review)
is the first year under review)
rolling twelve-month average eNPS, % of
rolling twelve-month average eNPS, % of
actions identified in the annual engagement
actions identified in the annual engagement
survey completed, the Gender Pay Gap trend,
survey completed, the Gender Pay Gap trend,
diversity of decision making forums and the
diversity of decision making forums and the
level of regretted employee turnover. The
level of regretted employee turnover. The
total score represented as a percentage is
total score represented as a percentage is
a weighted average for each subjective and
a weighted average for each subjective and
objective element. All elements were weighted
objective element. All elements were weighted
equally in 2020.
equally in 2020.
1 Alternative performance measure, see note 29 for definition and reconciliation to IFRS primary statements.
1 Alternative performance measure, see note 29 for definition and reconciliation to IFRS primary statements.
Chief Executive’s operational reviewInnovation generation: 20 years of IP GroupContext In 2020 the COVID-19 pandemic caused the biggest global economic contraction since the Great Depression and the sharpest fall in equity markets since 1987. The pandemic enveloped the entire world, changing it permanently and led to terrible loss of life and human suffering, but it has also transformed the way we live, work, learn, access healthcare, and much more.The pandemic has also presented the world with a glimpse of what being unprepared for an existential crisis might look like – a stark reminder of our fragility – and this has driven increased interest in tackling the global threat of climate change.It has also amplified existing inequalities in our society including systemic racism, gender inequality, and poverty, causing all businesses to examine their role in the societies and communities of which they are a part.Against this backdrop, all businesses have scrambled to react to fast-changing events, in the short term, prioritising the health and safety of employees and business continuity, whilst at the same time reflecting on their purpose, positioning and strategy and how to adapt to a post-pandemic world.This year’s report sets out how IP Group responded to this rapidly evolving environment and how we are positioned for this new environment.Response to COVID-19The Group reacted quickly to unfolding events, prioritising the health and wellbeing of colleagues, and ensuring our day-to-day operations were able to continue. Most colleagues continue to operate effectively and remotely, and we have increased our wellbeing offering to support those in need. I would like to take this opportunity to place on record our appreciation for the dedication, professionalism, and resilience of colleagues during this difficult period.The Group also prioritised supporting the efforts taken by our portfolio companies to mitigate the potential impacts of the pandemic on their businesses. Some of these companies have accessed COVID-19-related support, including convertible loans from the Future Fund in the UK and loans under the CARES Act in the US. At IP Group level, we did not furlough any of our team, nor access any of the UK Government support schemes.Scientific innovation has proved to be a vital weapon in the world’s response to COVID-19 and some of the companies that the Group has backed and supported over the last 20 years have played critical roles in this response. This contribution has exemplified the importance of backing innovation in science over the long-term.An example of a company making such a contribution is Oxford Nanopore, which has provided the tools for an unprecedented global epidemiological effort to sequence and monitor the evolution of the virus. We are proud of this contribution and that of other companies backed by IP Group, both past and present, including Abingdon Health, Avacta, Chip Diagnostics, Ieso Digital Health, MOBILion, Navenio, Optimeos, Oxehealth, Synairgen and many more. Purpose, vision, business model and strategy IP Group was established in 2001 – we celebrate our 20th anniversary in 2021 - with a purpose to evolve innovation in scientific research into world-changing businesses – businesses that make a positive impact on the environment and society alongside an attractive financial return. We provide the capital and support that scientific innovators and entrepreneurs need to navigate the tricky journey from idea to scale-up and impact. These businesses find it difficult to access capital because the risks are substantial and the timelines often long. By funding these opportunities through an ‘evergreen’ structure, such as a plc balance sheet, that can ‘follow its money’ through to scale-up, we can mitigate these risks and help create impactful companies that, over the medium-to-long run, can generate attractive financial returns.Our vision is an ever-growing alumnus of self-sustaining, successful impact companies that IP Group helped create and sustain, companies that are achieving a positive and measurable impact on society alongside a financial return. Our business model is to acquire equity stakes in these companies, grow the value of those holdings over time, before selling down in whole or over a period of time in order to generate the funds to ensure the ongoing sustainability of the Group.Our strategy is to operate separate business units that focus either on a key sector or key geography. Our key geographies are the UK, the US, Australia and New Zealand, and China. Our key sectors are Life Sciences, Deeptech and IP Group plc Annual Report and Accounts for the year ended 31 December 202022Stock Code: IPO Business Overview
Strategic Report
Our Governance
Our Financials
2 3
Cleantech. This combination of geographies and sectors
achieves an attractive balance between diversity and
focus. It diversifies the geopolitical risk that would arise
from focusing on one country whilst ensuring that we have
exposure to major thematic trends arising from innovation
in scientific research.
Financial results
Against this context, IP Group has shown exceptional
resilience and agility. The Group has returned to growth
and profit this year with a record net Return on Hard NAV
of £189.5m in 2020 (FY19: negative £73.7m). In addition,
the Group again achieved record cash realisations totalling
£191.0m compared with £79.5m a year earlier and finishes
the year with £203.0m of net cash. IP Group is well-financed
with gross cash and deposits of £270.3m.
Overview of fund and business unit performance
The performance of our funds and business units is summarised below:
Strategic Opportunities
Life Sciences
Deeptech
Cleantech
North America
Australia and New Zealand
Organic and De minimis
Total Portfolio
Attributable to third parties
Gross Portfolio
Invested Realisations
£29.3m
£3.0m
£30.2m
£8.7m
£10.0m
£9.4m
£3.4m
–
£64.7m
£2.8m
£67.5m
£22.7m
£4.9m
£131.4m
–
–
£2.7m
£191.0m
–
£191.0
Net
Portfolio
Gains/
(losses)
£83.2m
£85.1m
£6.6m
£54.2m
£4.7m
£0.3m
(£2.2m)
£231.9m
(£0.5m)
£231.4m
FV as at
31 December
2020
£370.6m
Simple
return on
capital %
29%
£392.5m
£212.5m
£58.8m
£64.5m
£7.3m
£11.9m
£1,118.1m
£44.6m
£1,162.7m
27%
3%
44%
6%
8%
(13%)
23%
(2%)
22%
Strategic Opportunities
The portfolio saw net portfolio gains of £83.2m during
2020, representing a simple return on opening portfolio fair
value of 29%.
Life Sciences
The portfolio saw net portfolio gains of £85.1m during 2020,
representing a simple return on opening portfolio fair value
of 27%.
The principal asset in the Strategic Opportunities fund
is Oxford Nanopore, the Group’s most valuable holding.
Oxford Nanopore has had a very strong year, with
management confirming in October 2020 that overall
revenues to date were in line with their targeted significant
year-on-year growth. In addition, the company developed
a new diagnostics business unit, OND, which launched
LamPORE, a rapid, scalable diagnostic for SARS-CoV-2, the
company’s first regulatory approved diagnostic product.
The company was successful in winning contracts with a
total value in excess of £110m for LamPORE from the UK
Government. During the year, the company raised £162.1m
of new capital from both existing and new investors.
Our valuation of Oxford Nanopore at 31 December 2020
reflects several factors including the company’s strong
performance in 2020, which is described above, and
evidence of strong investor interest in the company. In
terms of financing, we considered recent investment
offers received by the company, and the potential impact
and timing of an IPO. As a result, we have concluded on
a fair value of £340.3m for the Group’s 15.0% undiluted
shareholding, an increase of 29% during the year, resulting
in an unrealised fair value gain of £76.5m.
The Life Science Business Unit benefitted from a number
of positive events in the year, including the evolution of IP
Group’s third “unicorn”, Hinge Health, Inc, a digital clinic for
back and joint pain for employers and health plans. Hinge
Health, which was founded in Oxford in 2012, completed
a $300m (~£225m) Series D investment round valuing the
company at approximately $3bn (~£2.2bn) and IP Group’s
2.4% stake at £42.1 million.
Deeptech
The portfolio saw net portfolio gains of £6.6m during 2020,
representing a simple return on opening portfolio fair value
of 3%.
The Deeptech portfolio saw notable successes including
at its highest value holding, Featurespace, which raised
£30m in a funding round led by Merian Chrysalis Investment
Company in May, and at WaveOptics, which now counts
eight of the world’s top ten tech and social media
companies as customers.
Cleantech
The portfolio saw net portfolio gains of £54.2m during
2020, representing a simple return on opening portfolio fair
value of 44%.
Chief Executive’s operational reviewInnovation generation: 20 years of IP GroupContext In 2020 the COVID-19 pandemic caused the biggest global economic contraction since the Great Depression and the sharpest fall in equity markets since 1987. The pandemic enveloped the entire world, changing it permanently and led to terrible loss of life and human suffering, but it has also transformed the way we live, work, learn, access healthcare, and much more.The pandemic has also presented the world with a glimpse of what being unprepared for an existential crisis might look like – a stark reminder of our fragility – and this has driven increased interest in tackling the global threat of climate change.It has also amplified existing inequalities in our society including systemic racism, gender inequality, and poverty, causing all businesses to examine their role in the societies and communities of which they are a part.Against this backdrop, all businesses have scrambled to react to fast-changing events, in the short term, prioritising the health and safety of employees and business continuity, whilst at the same time reflecting on their purpose, positioning and strategy and how to adapt to a post-pandemic world.This year’s report sets out how IP Group responded to this rapidly evolving environment and how we are positioned for this new environment.Response to COVID-19The Group reacted quickly to unfolding events, prioritising the health and wellbeing of colleagues, and ensuring our day-to-day operations were able to continue. Most colleagues continue to operate effectively and remotely, and we have increased our wellbeing offering to support those in need. I would like to take this opportunity to place on record our appreciation for the dedication, professionalism, and resilience of colleagues during this difficult period.The Group also prioritised supporting the efforts taken by our portfolio companies to mitigate the potential impacts of the pandemic on their businesses. Some of these companies have accessed COVID-19-related support, including convertible loans from the Future Fund in the UK and loans under the CARES Act in the US. At IP Group level, we did not furlough any of our team, nor access any of the UK Government support schemes.Scientific innovation has proved to be a vital weapon in the world’s response to COVID-19 and some of the companies that the Group has backed and supported over the last 20 years have played critical roles in this response. This contribution has exemplified the importance of backing innovation in science over the long-term.An example of a company making such a contribution is Oxford Nanopore, which has provided the tools for an unprecedented global epidemiological effort to sequence and monitor the evolution of the virus. We are proud of this contribution and that of other companies backed by IP Group, both past and present, including Abingdon Health, Avacta, Chip Diagnostics, Ieso Digital Health, MOBILion, Navenio, Optimeos, Oxehealth, Synairgen and many more. Purpose, vision, business model and strategy IP Group was established in 2001 – we celebrate our 20th anniversary in 2021 - with a purpose to evolve innovation in scientific research into world-changing businesses – businesses that make a positive impact on the environment and society alongside an attractive financial return. We provide the capital and support that scientific innovators and entrepreneurs need to navigate the tricky journey from idea to scale-up and impact. These businesses find it difficult to access capital because the risks are substantial and the timelines often long. By funding these opportunities through an ‘evergreen’ structure, such as a plc balance sheet, that can ‘follow its money’ through to scale-up, we can mitigate these risks and help create impactful companies that, over the medium-to-long run, can generate attractive financial returns.Our vision is an ever-growing alumnus of self-sustaining, successful impact companies that IP Group helped create and sustain, companies that are achieving a positive and measurable impact on society alongside a financial return. Our business model is to acquire equity stakes in these companies, grow the value of those holdings over time, before selling down in whole or over a period of time in order to generate the funds to ensure the ongoing sustainability of the Group.Our strategy is to operate separate business units that focus either on a key sector or key geography. Our key geographies are the UK, the US, Australia and New Zealand, and China. Our key sectors are Life Sciences, Deeptech and IP Group plc Annual Report and Accounts for the year ended 31 December 202022Stock Code: IPO 2 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Chief Executive’s operational review
continued
During the year we realised our entire holding in Ceres
Power with the £128.0m proceeds representing a multiple of
seven times cost. This exit, achieved at a company valuation
of approximately £1bn, exemplifies the Group’s long-term
approach, having initially invested in Ceres in 2012 at a
valuation of less than £1m. It has been a privilege to work
with the Ceres team over the years and we are immensely
proud of the company’s achievements.
Looking forward, our Cleantech team has mapped out
the key technologies which it believes represent the best
venture-backed opportunities on the transition to net
zero and during 2021 we will explore the most appropriate
structures to provide the capital needed to progress these
opportunities.
North America (IP Group, Inc.)
The portfolio saw net portfolio gains of £4.7m during 2020,
representing a simple return on opening portfolio fair value
of 6%.
IP Group Inc.’s portfolio continued to make significant
progress with several large portfolio funding rounds closing
including a $35.0m round for MOBILion Systems and a
$47.0m round for Carisma Therapeutics. Following the year
end, IP Group Inc. secured an additional $50.0m of funding,
comprising $40.0m from a new US blue-chip institutional
investor alongside $10.0m from IP Group plc. As a result,
the Group now has a 61.3% interest in the North American
platform.
Australia and New Zealand (IP Group Pty)
The portfolio saw net portfolio gains of £0.3m during 2020,
representing a simple return on opening portfolio fair value
of 8%.
In Australia and New Zealand, the Group continued to
make significant progress on the solid foundation of its
partnerships with the Group of Eight and the University
of Auckland. Investments were completed into four new
companies bringing the portfolio to a total of twelve
companies.
Third Party Fund Management
The Group continues to view the management of third-
party funds as an important element of our business model,
and we now manage or advise over £400m in third party
capital across our Parkwalk, US, UK and Australian business
units.
Parkwalk, the Group’s specialist EIS fund management
subsidiary, now has assets under management of £350m
(FY19: £300m) including alumni funds managed in
conjunction with the universities of Oxford, Cambridge,
Bristol and Imperial College London. Parkwalk has now
managed the largest EIS fund (by monies raised) and won
the EIS Association’s “Best EIS Fund Manager” for each of
the last four years.
While the impact of COVID-19 on global capital markets
resulted in somewhat slower progress in attracting further
third-party managed funds, we continue to progress a
number of potential opportunities to further grow funds
managed or advised during 2021.
Impact and ESG
There is a strong natural alignment between the Group’s
purpose and impact. In recent years we have articulated this
by assessing the impact of our portfolio against the UN’s
SDGs and have also focused on improving our performance
on broader ESG issues, for example:
• We established an Ethics Committee, chaired by
Professor Gordon Clark, Senior Consultant and Emeritus
Professor of the Smith School of Enterprise and the
Environment, Oxford University.
• We completed a materiality assessment. The materiality
assessment highlighted governance, stewardship
practices and responsible investment processes as key
material factors for IP Group. It also enabled the Group
to identify an employee-focused non-financial KPI that
has been included in this year’s Annual Report for the
first time.
• We have started preparing to report against new
frameworks, such as TCFD, the Taskforce on Climate-
related Financial Disclosures.
In addition, a particular focus this year has been how to
achieve greater inclusion and diversity in the Group’s Senior
Leadership Team.
As described in last year’s report, the Group currently
operates a unitary board comprising the four Executive
Directors, two Observers, five Independent Non-Executives
and a Chair.
In line with the commitments given in last year’s Annual
Report, the Group has now established an Executive
Committee (ExCo), with responsibility for the day-to-day
management of the Company. The composition of the ExCo
has been designed to ensure a greater level of diversity of
thought. An important element of this is the creation of
two ‘Employee Executive’ roles on the ExCo. All employees
shall be entitled to apply for these roles and diversity and
inclusion will be key criteria in selecting the successful
candidates. We anticipate making our first Employee
Executive appointments in H1 2021.
Members of ExCo who are not members of the Board will
be invited to attend all or parts of Board meetings on a
regular basis. Following the establishment of the ExCo,
the Board will now review the size and composition of the
Board itself with the objective of reducing its size and cost
whilst ensuring that it continues to comprise a majority of
suitably qualified non-executives. It is anticipated that this
process will commence during 2021.
Further detailed information on Impact, ESG and on
the alignment of our portfolio with the UN’s Sustainable
Development Goals is provided on pages 58 to 70.
2 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
2 5
Chief Executive’s operational review
continued
During the year we realised our entire holding in Ceres
number of potential opportunities to further grow funds
Power with the £128.0m proceeds representing a multiple of
managed or advised during 2021.
seven times cost. This exit, achieved at a company valuation
of approximately £1bn, exemplifies the Group’s long-term
approach, having initially invested in Ceres in 2012 at a
valuation of less than £1m. It has been a privilege to work
with the Ceres team over the years and we are immensely
proud of the company’s achievements.
Looking forward, our Cleantech team has mapped out
the key technologies which it believes represent the best
venture-backed opportunities on the transition to net
zero and during 2021 we will explore the most appropriate
structures to provide the capital needed to progress these
opportunities.
North America (IP Group, Inc.)
The portfolio saw net portfolio gains of £4.7m during 2020,
representing a simple return on opening portfolio fair value
of 6%.
IP Group Inc.’s portfolio continued to make significant
progress with several large portfolio funding rounds closing
including a $35.0m round for MOBILion Systems and a
$47.0m round for Carisma Therapeutics. Following the year
end, IP Group Inc. secured an additional $50.0m of funding,
comprising $40.0m from a new US blue-chip institutional
investor alongside $10.0m from IP Group plc. As a result,
Impact and ESG
There is a strong natural alignment between the Group’s
purpose and impact. In recent years we have articulated this
by assessing the impact of our portfolio against the UN’s
SDGs and have also focused on improving our performance
on broader ESG issues, for example:
• We established an Ethics Committee, chaired by
Professor Gordon Clark, Senior Consultant and Emeritus
Professor of the Smith School of Enterprise and the
Environment, Oxford University.
• We completed a materiality assessment. The materiality
assessment highlighted governance, stewardship
practices and responsible investment processes as key
material factors for IP Group. It also enabled the Group
to identify an employee-focused non-financial KPI that
has been included in this year’s Annual Report for the
first time.
• We have started preparing to report against new
frameworks, such as TCFD, the Taskforce on Climate-
related Financial Disclosures.
In addition, a particular focus this year has been how to
achieve greater inclusion and diversity in the Group’s Senior
the Group now has a 61.3% interest in the North American
Leadership Team.
Australia and New Zealand (IP Group Pty)
The portfolio saw net portfolio gains of £0.3m during 2020,
representing a simple return on opening portfolio fair value
and a Chair.
As described in last year’s report, the Group currently
operates a unitary board comprising the four Executive
Directors, two Observers, five Independent Non-Executives
platform.
of 8%.
In Australia and New Zealand, the Group continued to
make significant progress on the solid foundation of its
partnerships with the Group of Eight and the University
of Auckland. Investments were completed into four new
companies bringing the portfolio to a total of twelve
companies.
Third Party Fund Management
The Group continues to view the management of third-
party funds as an important element of our business model,
and we now manage or advise over £400m in third party
capital across our Parkwalk, US, UK and Australian business
units.
Parkwalk, the Group’s specialist EIS fund management
subsidiary, now has assets under management of £350m
(FY19: £300m) including alumni funds managed in
conjunction with the universities of Oxford, Cambridge,
Bristol and Imperial College London. Parkwalk has now
managed the largest EIS fund (by monies raised) and won
the EIS Association’s “Best EIS Fund Manager” for each of
the last four years.
While the impact of COVID-19 on global capital markets
resulted in somewhat slower progress in attracting further
third-party managed funds, we continue to progress a
In line with the commitments given in last year’s Annual
Report, the Group has now established an Executive
Committee (ExCo), with responsibility for the day-to-day
management of the Company. The composition of the ExCo
has been designed to ensure a greater level of diversity of
thought. An important element of this is the creation of
two ‘Employee Executive’ roles on the ExCo. All employees
shall be entitled to apply for these roles and diversity and
inclusion will be key criteria in selecting the successful
candidates. We anticipate making our first Employee
Executive appointments in H1 2021.
Members of ExCo who are not members of the Board will
be invited to attend all or parts of Board meetings on a
regular basis. Following the establishment of the ExCo,
the Board will now review the size and composition of the
Board itself with the objective of reducing its size and cost
whilst ensuring that it continues to comprise a majority of
suitably qualified non-executives. It is anticipated that this
process will commence during 2021.
Further detailed information on Impact, ESG and on
the alignment of our portfolio with the UN’s Sustainable
Development Goals is provided on pages 58 to 70.
Further, should the Group make realisations that are
very significant, of a one-off nature and/or result in cash
in excess of short-to-medium-term requirements, the
Directors would intend to discuss with major shareholders
an appropriate approach to distributing this excess on a
case-by-case basis as part of its ongoing dialogue with this
important stakeholder group.
Outlook
The pandemic has shone a light on the importance of
innovation in science. It has also turbo-charged existing
key thematic trends – for example advances in biology,
digitisation, and the transition to net zero. Our strategy
of backing scientific innovation across key sectors and
geographies over the long-term means the Group is very
well positioned to benefit from both the increased focus
and these thematic trends.
The current year has started with much activity including
fundraisings from some portfolio companies as well as from
our North American business which has raised significant
funding.
We finished the year in a strong financial position and with a
maturing and high-potential portfolio. This year, as IP Group
celebrates 20 years of generating innovation, we are excited
about the prospects for the portfolio as well as the impact
the Group can have from the renewed focus on innovation
and sustainability.
Alan Aubrey
Chief Executive Officer
9 March 2021
Development of our capital allocation
framework and total shareholder
returns
A continuing trend in the Group’s development, as
exemplified by record portfolio cash realisations during both
2020 and 2019, has been the maturation of a number of
focus assets in our portfolio. As a result, we have discussed
our approach to evolving the IP Group shareholder value
proposition with a wide range of stakeholders during 2020.
The Board recognises that share price volatility and the
discount / premium to Hard NAV per share has been a
major issue to shareholders over the years. As a result, in
considering the application of our Capital Allocation Policy
and the liquidity and maturity of the portfolio, the Board
intends to seek approval from shareholders to undertake
purchases in the Company’s shares, specifically where the
shares are trading below Hard NAV per share. Any decision
to repurchase shares would be undertaken in light of other
potential opportunities to deploy capital for the benefit of
stakeholders and will be subject to regular review.
To give the flexibility to be able to implement this strategy,
the Directors will seek the relevant authorities from
shareholders at the forthcoming Annual General Meeting
(AGM). The Directors will seek shareholders’ approval to
renew the authority to purchase up to 10% of the ordinary
shares in issue from the date of grant of the authority to
the date of the Annual General Meeting in 2022. Such
purchases will only be made at a discount to the prevailing
Hard NAV per share. Any such shares that are bought back
may be held in treasury and may subsequently then either
be sold for cash or cancelled.
Dividend policy
The increasing maturity and level of realisations from
the Group’s portfolio, as described above, alongside a
continued strong liquidity position, has led the Board
to update its dividend policy. I am therefore pleased
to announce that the Board is recommending a final
dividend of 1p per share, to be approved at the Company’s
forthcoming AGM.
The Board continues to consider that shareholder returns
will primarily be driven by long-term capital appreciation
and that regular income through dividends will remain a
very small component of the total return. However, the
Board considers that the business model has reached a
sufficient stage of maturity that a modest but growing
dividend should form part of the overall shareholder value
proposition. Consistent with this approach, and subject
to shareholder approval at the 2021 AGM, the Board
also proposes to introduce an optional scrip dividend
programme, allowing shareholders to choose to receive
dividends in the form of newly issued, fully paid shares in IP
Group plc in lieu of cash.
2 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Portfolio review
Overview
Performance summary
As at 31 December 2020, the value of the Group’s portfolio
was £1,162.7m (2019: £1,045.6m) reflecting net divestment
offset by net portfolio gains of £231.4m (2019: loss £43.9m).
The portfolio consists of interests in 43 “focus” companies,
representing 84% of the portfolio value, and 88 other
companies (2019: 57, 87%, 75). Of these, 92 are based in the
UK, 27 in the US and 12 in Australia and New Zealand (2019:
101, 23, eight). In addition, the Group has 42 de minimis
holdings and 35 organic holdings. (2019: 49, 40).
The Group exited its interest in four companies (2019:
eight) and realised total cash proceeds during the year of
£191.0m (2019: £79.5m). This figure includes £22.0m of cash
from the Group’s partial realisation of its holding in Oxford
Nanopore Technologies Limited in 2019, and £3.5m of
deferred consideration received relating to realisations from
other portfolio companies in previous years. The largest
contributor to cash realisations in the year was the Group’s
realisation of its full stake in Ceres Power Holdings plc for
proceeds of £128.0m. The Group also realised its full holding
in Concirrus Limited (£4.3m) and Avacta Group plc (£5.1m),
and partially realised its holdings in Enterprise Therapeutics
Limited (£15.4m) and Oxford Sciences Innovation plc (“OSI”,
£7.3m). Deferred consideration of £15.0m was outstanding
at year end (2019: £5.3m), predominantly relating to the
Group’s partial realisation of Enterprise Therapeutics
Limited.
During the year to 31 December 2020, the Group provided
pre-seed, seed and post-seed capital totalling £67.5m to its
portfolio companies (2019: £64.7m). The Group deployed
capital into seven new companies and three new pre-
incorporation projects during the year (2019: ten, six). Two
of the companies were sourced from the UK, one from
the US and four from Australia and New Zealand (2019:
two, two, six), and the three pre-incubation projects were
sourced from the US (2019: six, US).
A summary of the Income Statement gains and losses that
are directly attributable to the portfolio is as follows:
Unrealised gains on the
revaluation of investments
Unrealised losses on the
revaluation of investments
Effects of movement in
exchange rates
Change in fair value of equity
and debt investments
Gain on disposals of equity
investments
Gain on deconsolidation of
subsidiary
Net portfolio gains/(losses)
2020
£m
224.8
2019
£m
86.3
(71.3)
(154.6)
(4.6)
(2.3)
148.9
(70.6)
82.5
–
231.4
16.1
10.6
(43.9)
The largest contributors to unrealised gains on the
revaluation of investments were Oxford Nanopore
Technologies Limited (£76.5m), Hinge Health Inc.
(£39.5m), AIM-quoted Diurnal Group plc (£12.3m),
Apcintex Limited (£11.0m), Wave Optics (£10.0m), AIM-
quoted Mirriad Advertising plc (£9.8m), Inivata Limited
(£7.0m), Featurespace Limited (£6.4m) and Artios Pharma
Limited (£6.4m). These unrealised gains were partially
offset by unrealised losses on the revaluation of Autifony
Therapeutics Limited (£8.4m), Yoyo Wallet Limited (£6.7m),
Creavo Medical Technologies Limited (£6.2m), Econic
Technologies Limited (£5.4m) and Garrison Technology
Limited (£5.2m).
The majority of the £82.5m realised gains on the sale of
investments relates to the sale of the Group’s full holding
in AIM-quoted Ceres Power Holdings plc, which generated
a £53.4m gain on disposal, and the sale of a therapeutic
programme by Enterprise Therapeutics Limited, which gave
rise to a £22.9m gain on disposal.
2 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
2 7
Portfolio review
Overview
Performance summary
As at 31 December 2020, the value of the Group’s portfolio
A summary of the Income Statement gains and losses that
was £1,162.7m (2019: £1,045.6m) reflecting net divestment
are directly attributable to the portfolio is as follows:
offset by net portfolio gains of £231.4m (2019: loss £43.9m).
The portfolio consists of interests in 43 “focus” companies,
representing 84% of the portfolio value, and 88 other
companies (2019: 57, 87%, 75). Of these, 92 are based in the
UK, 27 in the US and 12 in Australia and New Zealand (2019:
101, 23, eight). In addition, the Group has 42 de minimis
holdings and 35 organic holdings. (2019: 49, 40).
The Group exited its interest in four companies (2019:
eight) and realised total cash proceeds during the year of
£191.0m (2019: £79.5m). This figure includes £22.0m of cash
from the Group’s partial realisation of its holding in Oxford
Nanopore Technologies Limited in 2019, and £3.5m of
deferred consideration received relating to realisations from
other portfolio companies in previous years. The largest
contributor to cash realisations in the year was the Group’s
Unrealised gains on the
revaluation of investments
Unrealised losses on the
revaluation of investments
Effects of movement in
exchange rates
Change in fair value of equity
and debt investments
Gain on disposals of equity
investments
subsidiary
Gain on deconsolidation of
2020
£m
224.8
2019
£m
86.3
(71.3)
(154.6)
(4.6)
(2.3)
148.9
(70.6)
82.5
–
231.4
16.1
10.6
(43.9)
realisation of its full stake in Ceres Power Holdings plc for
Net portfolio gains/(losses)
proceeds of £128.0m. The Group also realised its full holding
in Concirrus Limited (£4.3m) and Avacta Group plc (£5.1m),
and partially realised its holdings in Enterprise Therapeutics
Limited (£15.4m) and Oxford Sciences Innovation plc (“OSI”,
£7.3m). Deferred consideration of £15.0m was outstanding
at year end (2019: £5.3m), predominantly relating to the
Group’s partial realisation of Enterprise Therapeutics
Limited.
During the year to 31 December 2020, the Group provided
pre-seed, seed and post-seed capital totalling £67.5m to its
portfolio companies (2019: £64.7m). The Group deployed
capital into seven new companies and three new pre-
The largest contributors to unrealised gains on the
revaluation of investments were Oxford Nanopore
Technologies Limited (£76.5m), Hinge Health Inc.
(£39.5m), AIM-quoted Diurnal Group plc (£12.3m),
Apcintex Limited (£11.0m), Wave Optics (£10.0m), AIM-
quoted Mirriad Advertising plc (£9.8m), Inivata Limited
(£7.0m), Featurespace Limited (£6.4m) and Artios Pharma
Limited (£6.4m). These unrealised gains were partially
offset by unrealised losses on the revaluation of Autifony
Therapeutics Limited (£8.4m), Yoyo Wallet Limited (£6.7m),
Creavo Medical Technologies Limited (£6.2m), Econic
Technologies Limited (£5.4m) and Garrison Technology
incorporation projects during the year (2019: ten, six). Two
Limited (£5.2m).
of the companies were sourced from the UK, one from
the US and four from Australia and New Zealand (2019:
two, two, six), and the three pre-incubation projects were
sourced from the US (2019: six, US).
The majority of the £82.5m realised gains on the sale of
investments relates to the sale of the Group’s full holding
in AIM-quoted Ceres Power Holdings plc, which generated
a £53.4m gain on disposal, and the sale of a therapeutic
programme by Enterprise Therapeutics Limited, which gave
rise to a £22.9m gain on disposal.
The performance of the Group’s holdings in companies
quoted on AIM saw a net unrealised fair value increase
of £40.1m (2019: decrease of £12.4m) while the Group’s
holdings in unquoted companies experienced a net
unrealised fair value increase of £108.8m (2019: decrease
of £58.2m).
Investments and realisations
The Group deployed a total of £67.5m across 65 new
and existing projects during the period (2019: £64.7m, 55
projects), versus realisations of £191.0m (2019: £79.5m),
resulting in overall net realisations for the year of £123.5m
(2019: net realisations of £14.8m).
An analysis of amounts invested by company focus is as
follows:
Top 20
Focus
Other (including companies
exited by year end)
Total United Kingdom
United States1
Australia and New Zealand
Total purchase of equity and
debt investments
Less cash proceeds from sales
of equity investments
2020
£m
23.6
14.5
14.5
52.6
11.5
3.4
67.5
(191.0)
Net (realisations) / investment
(123.5)
2019
£m
21.8
21.2
11.8
54.8
6.9
3.0
64.7
(79.5)
(14.8)
1. United States investment total includes £1.8m (2019: £1.6m) invested in
Uniformity Labs, Inc., which is one of the Top 20 holdings by value.
Co-investment analysis
Including the £67.5m invested by the Group, the Group’s
portfolio raised a total of £1.1bn during the year to 31
December 2020 (2019: £430m). Co-investment in 2020
came from more than 170 different investors, excluding
individuals, and only 2% of the funding came from parties
with a greater than 1% shareholding in IP Group plc (2019:
more than 200 investors, less than 1%). An analysis of this
co-investment by source is as follows:
Portfolio capital raised
IP Group2
Funds managed by
Parkwalk Advisors
IP Group plc
shareholders (>1%
holdings)
2020
£m
67.5
6.0
2020
%
6%
1%
2019
£m
64.5
2019
%
15%
13.2
3%
20.0
2%
0.7
0%
Institutional investors
575.0
54%
147.0
34%
Corporate, other EIS,
individuals, universities
and other
Capital into multi-sector
platforms
365.9
35%
138.6
33%
20.0
2%
66.3
15%
Total
1,054.4
100% 430.3
100%
2. Reflects primary investment only; in 2020 the Group made no further
investment via secondary purchase of shares (2019: £0.2m).
2 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Portfolio review
continued
Portfolio analysis by focus
At 31 December 2020, the Group’s portfolio fair value of £1,162.7m was distributed across the portfolio as follows:
As at 31 December 2020
As at 31 December 2019
Fair Value
Number
Fair Value
Number
Stage
Top 20 by value
Focus
Other
Total
De minimis and organic holdings
Total Portfolio
Attributable to third parties1
Gross Portfolio
£m
813.6
114.0
178.6
%
74%
10%
16%
1,106.2
100%
£m
20
23
88
131
%
15%
18%
67%
100%
11.9
1,118.1
44.6
1,162.7
£m
720.2
164.0
110.2
994.4
13.0
1,007.4
38.2
1,045.6
%
72%
16%
12%
100%
£m
20
37
75
132
%
15%
28%
57%
100%
1. Amounts attributable to third parties consist of £16.3m attributable to minority interests represented by third party limited partners in the consolidated fund, IP
Venture Fund II (2019: £17.2m), £15.3m attributable to minority interests represented by third party limited partners in the consolidated US portfolio (2019: 7.2m),
£10.3m attributable to Imperial College London (2019: £10.9m) and £2.7m attributable to other third parties (2019: £2.9m).
Top 20 investments consist of the 20 most valuable
holdings in the Group’s portfolio by the period-end value.
Focus investments are those investments that are not
within the 20 most valuable, but on which the investment
teams focus a significant proportion of their resources
and capital. These investments typically, although not
exclusively, fall within the 100 most valuable portfolio
company holdings by period-end value, and they comprise
84% of the portfolio by value (2019: 88%). Outside of
these companies, the portfolio contains a broad selection
of exciting opportunities, categorised as ‘other’. Many of
these opportunities are at an early stage, and they typically
receive a lower level of capital and management resource.
Companies that are at a very early stage or in which the
Group’s holding is of minimal value, but remain as operating
businesses, are classed as de minimis holdings. Organic
holdings are investments in which the Group has acquired
a shareholding upon creating the company as a result of
its technology transfer relationship with Imperial College
London, but in which it has not actively invested.
The total value of the Group’s portfolio companies
(excluding OSI and Cambridge Innovation Capital
(“CIC”), organic investments and de minimis holdings) is
approximately £7bn (2019: £5bn).
AMSL Aero partners with air ambulance company CareFlight
2 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
2 9
Portfolio review
continued
Portfolio analysis by focus
At 31 December 2020, the Group’s portfolio fair value of £1,162.7m was distributed across the portfolio as follows:
Top 20 by value
Stage
Focus
Other
Total
De minimis and organic holdings
Total Portfolio
Attributable to third parties1
Gross Portfolio
£m
813.6
114.0
178.6
11.9
1,118.1
44.6
1,162.7
As at 31 December 2020
As at 31 December 2019
Fair Value
Number
Fair Value
Number
%
74%
10%
16%
£m
20
23
88
131
%
15%
18%
67%
100%
1,106.2
100%
%
72%
16%
12%
100%
£m
20
37
75
132
%
15%
28%
57%
100%
£m
720.2
164.0
110.2
994.4
13.0
1,007.4
38.2
1,045.6
1. Amounts attributable to third parties consist of £16.3m attributable to minority interests represented by third party limited partners in the consolidated fund, IP
Venture Fund II (2019: £17.2m), £15.3m attributable to minority interests represented by third party limited partners in the consolidated US portfolio (2019: 7.2m),
£10.3m attributable to Imperial College London (2019: £10.9m) and £2.7m attributable to other third parties (2019: £2.9m).
Top 20 investments consist of the 20 most valuable
Companies that are at a very early stage or in which the
holdings in the Group’s portfolio by the period-end value.
Group’s holding is of minimal value, but remain as operating
Focus investments are those investments that are not
businesses, are classed as de minimis holdings. Organic
within the 20 most valuable, but on which the investment
holdings are investments in which the Group has acquired
teams focus a significant proportion of their resources
a shareholding upon creating the company as a result of
and capital. These investments typically, although not
its technology transfer relationship with Imperial College
exclusively, fall within the 100 most valuable portfolio
London, but in which it has not actively invested.
company holdings by period-end value, and they comprise
84% of the portfolio by value (2019: 88%). Outside of
these companies, the portfolio contains a broad selection
of exciting opportunities, categorised as ‘other’. Many of
these opportunities are at an early stage, and they typically
receive a lower level of capital and management resource.
The total value of the Group’s portfolio companies
(excluding OSI and Cambridge Innovation Capital
(“CIC”), organic investments and de minimis holdings) is
approximately £7bn (2019: £5bn).
Portfolio analysis by sector
The Group funds spin-out companies based on a wide variety of scientific research emerging from leading research-
intensive institutions and does not limit itself to funding companies from particular areas of science. The Group splits its
core opportunity evaluation, investment and business-building team into specialist divisions - Life Sciences, Deeptech
and Cleantech. A small number of investments are categorised as “Strategic Opportunities”, which principally includes
Oxford Nanopore Technologies and portfolio companies which also invest in other opportunities. An update on the primary
operating segments is included in the financial review below.
As at 31 December 2020
As at 31 December 2019
Fair Value
Number
Fair Value
Number
Sector
Strategic
Life Sciences
Deeptech
Cleantech
United States
Australia
Total
De minimis and organic holdings
Total portfolio
Attributable to third parties1
Gross portfolio
£m
370.6
392.5
212.5
58.8
64.5
7.3
%
34%
35%
19%
5%
6%
1%
1,106.2
100%
11.9
1,118.1
44.6
1,162.7
£m
4
40
36
12
27
12
131
%
3%
31%
27%
9%
21%
9%
£m
291.6
314.3
203.4
124.3
57.1
3.7
%
29%
32%
20%
13%
6%
0%
100%
994.4
100%
£m
4
41
40
16
23
8
132
%
3%
31%
30%
12%
17%
6%
100%
13.0
1,007.4
38.2
1,045.6
1. Amounts attributable to third parties consist of £16.3m attributable to minority interests represented by third party limited partners in the consolidated fund, IP
Venture Fund II (2019: £17.2m), £15.3m attributable to minority interests represented by third party limited partners in the consolidated US portfolio (2019: 7.2m),
£10.3m attributable to Imperial College London (2019: £10.9m) and £2.7m attributable to other third parties (2019: £2.9m).
The following table lists information on the 20 most valuable portfolio company investments, which represent 70% of the
total portfolio value (2019: 71%). Additional detail on the performance of these companies is included in the Life Sciences,
Deeptech and Cleantech portfolio reviews.
AMSL Aero partners with air ambulance company CareFlight
3 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Portfolio review
continued
Company name
Oxford Nanopore
Technologies Limited
Sector
Strategic
Istesso Limited
Life Sciences
Description
Significant named co-investors at
31 Dec 2020
Primary valuation basis at
31 Dec 2020
"Enabling the analysis of any living thing,
by any person, in any environment"
Amgen, CCB, GIC, Hostplus, Invesco,
Lansdowne, G42 Abu Dhabi, IHC
Reprogramming metabolism to treat
autoimmune disease
Puhua Capital
Hinge Health, Inc.
Life Sciences
The World’s First Digital Clinic for Back and
Joint Pain
Bessemer, Coatue, Insight, Lead Edge,
Tiger Global, Atomico Advisors
Featurespace Limited
Deeptech
Leading predictive analytics company
Highland Europe, Insight, Invoke,
MissionOG, TTV Capital, Robert Sansom,
Merian Chrysalis
Inivata Limited
Life Sciences
Wave Optics Limited
Deeptech
Diurnal Group plc
Life Sciences
Garrison Technology Limited
Deeptech
Ultraleap Holdings Limited
Deeptech
Transforming clinical cancer care with liquid
biopsy
Neogenomics, Cancer Research, CIC, J&J
Innovation, RT Partners
Novel optical waveguides and modules for
augmented reality displays
Bosch Venture Capital, Gobi Partners,
GoerTek Inc., Octopus
Novel products for the treatment of rare
endocrine disorders
Anti-malware solutions for enterprise cyber
defences
Contactless haptic technology
“feeling without touching”
(AIM quoted)
BGF, Dawn Capital, NM Capital
Cornes, Dolby Ventures, Hostplus, Mayfair
Partners
Blue Pool, Fosun Pharma, Invesco,
Lansdowne, Redmile, Sequoia, Temasek,
Tencent
Oxford Sciences
Innovation plc
Strategic
University of Oxford preferred IP partner
under 15-year framework agreement
First Light Fusion Limited
Cleantech
Solving fusion with the simplest possible
machine
OSI Hostplus
Apcintex Limited
Life Sciences
Developing novel haemophilia therapies
Medicxi
Artios Pharma Limited
Life Sciences
Novel oncology therapies
Arix Bioscience, BioDiscovery 5, SV Life
Sciences, Pfizer, Merck Ventures
Ieso Digital Health Limited
Life Sciences
Digital therapeutics for psychiatry
Draper Esprit
Oxbotica Limited
Cleantech
Software to enable every vehicle to
become autonomous
Fundamental Insurance Investments, BT
Technology Ventures, BGF Investments
Mirriad Advertising plc
Deeptech
Uniformity Labs, Inc.
United States
Actual Experience plc
Deeptech
Native in-video advertising allowing post-
production ad placement
"Equipment, materials and software for
additive manufacturing"
Optimising the human experience of
networked applications
(AIM quoted)
Not disclosed
(AIM quoted)
Mission Therapeutics Limited
Life Sciences
Targeting deubiquitylating enzymes for the
treatment of CNS and mitochondrial disorders
Pfizer, Roche, Sofinnova Partners, SR one,
Schroder
MOBILion Systems, Inc.
United States
A platform technology for conducting ion
mobility separations
Not disclosed
"Other companies
(111 companies)"
De minimis and organic
investments
Value not attributable to
equity holdersII
Total
i. Represents the Group’s undiluted beneficial economic equity interest (excluding debt), including only the Group’s portion
of IPVF II and the US portfolio. Voting interest is below 50%..
ii.
Includes £0.7m decrease (2019: £2.7m increase) in revenue share to Imperial College London, with a corresponding increase
in revenue share liability resulting in no net fair value movement.
* Third party valuation specialists used for 31 December 2020 valuation
Group Stake
at 31 Dec
2020i
Fair value
of Group
holding
at 31 Dec
2019
£m
263.8
Unrealised Fair
Net
value movement
investment/
and fees settled in
(divestment)ii
equity
at 31 Dec 2020
Fair value
of Group
holding
£m
340.3
Other
Other*
Recent financing (< 9 months)
Recent financing (> 9 months)
Recent financing (< 9 months)
Recent financing (> 9 months)
Quoted bid price
Other
Recent financing (> 9 months)*
Recent financing (< 9 months)
Recent financing (< 9 months)
Sale process
Other
Other*
Recent funding (< 9 months)
Quoted bid price
Recent financing (< 9 months)
Quoted bid price
Recent financing (< 9 months)
Recent financing (< 9 months)
%
15.0
56.4
2.4
19.7
21.4
17.1
31.9
23.4
22.6
2.3
32.0
27.5
11.7
46.2
16.4
12.3
23.6i
21.2
18.0
27.9i
£m
3.0
1.0
0.9
3.0
–
–
–
–
–
(7.3)
2.5
1.0
2.7
3.2
4.0
0.2
–
–
–
3.1
2.0
7.2
(58.4)
82.6
2.6
29.4
24.0
15.2
9.4
28.8
27.5
23.9
17.9
7.0
8.2
18.4
11.6
5.0
14.1
9.5
13.7
9.3
372.5
13.0
38.2
1,045.6
(31.9)
£m
76.5
–
39.5
6.4
7.0
10.0
12.3
(5.2)
(4.1)
4.0
0.1
11.0
6.4
(4.8)
(0.6)
9.8
0.4
4.9
0.1
0.5
(21.3)
(3.1)
(0.8)
149.0
85.6
42.1
36.8
31.0
26.1
24.7
23.6
23.4
20.6
20.5
19.0
17.3
16.8
15.0
14.8
14.7
14.4
13.8
12.9
292.8
11.9
44.6
1,162.7
3 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
3 1
Portfolio review
continued
Company name
Company name
Oxford Nanopore
Oxford Nanopore
Technologies Limited
Technologies Limited
Sector
Sector
Strategic
Strategic
Description
Description
31 Dec 2020
31 Dec 2020
Significant named co-investors at
Significant named co-investors at
"Enabling the analysis of any living thing,
"Enabling the analysis of any living thing,
Amgen, CCB, GIC, Hostplus, Invesco,
Amgen, CCB, GIC, Hostplus, Invesco,
by any person, in any environment"
by any person, in any environment"
Lansdowne, G42 Abu Dhabi, IHC
Lansdowne, G42 Abu Dhabi, IHC
Istesso Limited
Istesso Limited
Life Sciences
Life Sciences
Reprogramming metabolism to treat
Reprogramming metabolism to treat
Puhua Capital
Puhua Capital
autoimmune disease
autoimmune disease
Primary valuation basis at
Primary valuation basis at
31 Dec 2020
31 Dec 2020
Group Stake
Group Stake
at 31 Dec
at 31 Dec
2020i
2020i
%
%
Other
Other
Other*
Other*
Hinge Health, Inc.
Hinge Health, Inc.
Life Sciences
Life Sciences
The World’s First Digital Clinic for Back and
The World’s First Digital Clinic for Back and
Bessemer, Coatue, Insight, Lead Edge,
Bessemer, Coatue, Insight, Lead Edge,
Recent financing (< 9 months)
Recent financing (< 9 months)
Joint Pain
Joint Pain
Tiger Global, Atomico Advisors
Tiger Global, Atomico Advisors
Featurespace Limited
Featurespace Limited
Deeptech
Deeptech
Leading predictive analytics company
Leading predictive analytics company
Highland Europe, Insight, Invoke,
Highland Europe, Insight, Invoke,
Recent financing (> 9 months)
Recent financing (> 9 months)
MissionOG, TTV Capital, Robert Sansom,
MissionOG, TTV Capital, Robert Sansom,
Merian Chrysalis
Merian Chrysalis
Inivata Limited
Inivata Limited
Life Sciences
Life Sciences
Transforming clinical cancer care with liquid
Transforming clinical cancer care with liquid
Neogenomics, Cancer Research, CIC, J&J
Neogenomics, Cancer Research, CIC, J&J
Recent financing (< 9 months)
Recent financing (< 9 months)
biopsy
biopsy
Innovation, RT Partners
Innovation, RT Partners
Wave Optics Limited
Wave Optics Limited
Deeptech
Deeptech
Novel optical waveguides and modules for
Novel optical waveguides and modules for
Bosch Venture Capital, Gobi Partners,
Bosch Venture Capital, Gobi Partners,
Recent financing (> 9 months)
Recent financing (> 9 months)
Diurnal Group plc
Diurnal Group plc
Life Sciences
Life Sciences
Novel products for the treatment of rare
Novel products for the treatment of rare
(AIM quoted)
(AIM quoted)
augmented reality displays
augmented reality displays
GoerTek Inc., Octopus
GoerTek Inc., Octopus
Garrison Technology Limited
Garrison Technology Limited
Deeptech
Deeptech
Anti-malware solutions for enterprise cyber
Anti-malware solutions for enterprise cyber
BGF, Dawn Capital, NM Capital
BGF, Dawn Capital, NM Capital
endocrine disorders
endocrine disorders
defences
defences
Quoted bid price
Quoted bid price
Other
Other
Ultraleap Holdings Limited
Ultraleap Holdings Limited
Deeptech
Deeptech
Contactless haptic technology
Contactless haptic technology
Cornes, Dolby Ventures, Hostplus, Mayfair
Cornes, Dolby Ventures, Hostplus, Mayfair
Recent financing (> 9 months)*
Recent financing (> 9 months)*
Oxford Sciences
Oxford Sciences
Innovation plc
Innovation plc
“feeling without touching”
“feeling without touching”
Partners
Partners
under 15-year framework agreement
under 15-year framework agreement
Lansdowne, Redmile, Sequoia, Temasek,
Lansdowne, Redmile, Sequoia, Temasek,
Tencent
Tencent
Strategic
Strategic
University of Oxford preferred IP partner
University of Oxford preferred IP partner
Blue Pool, Fosun Pharma, Invesco,
Blue Pool, Fosun Pharma, Invesco,
Recent financing (< 9 months)
Recent financing (< 9 months)
First Light Fusion Limited
First Light Fusion Limited
Cleantech
Cleantech
Solving fusion with the simplest possible
Solving fusion with the simplest possible
OSI Hostplus
OSI Hostplus
Recent financing (< 9 months)
Recent financing (< 9 months)
Apcintex Limited
Apcintex Limited
Life Sciences
Life Sciences
Developing novel haemophilia therapies
Developing novel haemophilia therapies
Medicxi
Medicxi
Artios Pharma Limited
Artios Pharma Limited
Life Sciences
Life Sciences
Novel oncology therapies
Novel oncology therapies
machine
machine
Arix Bioscience, BioDiscovery 5, SV Life
Arix Bioscience, BioDiscovery 5, SV Life
Sciences, Pfizer, Merck Ventures
Sciences, Pfizer, Merck Ventures
Ieso Digital Health Limited
Ieso Digital Health Limited
Life Sciences
Life Sciences
Digital therapeutics for psychiatry
Digital therapeutics for psychiatry
Draper Esprit
Draper Esprit
Sale process
Sale process
Other
Other
Other*
Other*
Oxbotica Limited
Oxbotica Limited
Cleantech
Cleantech
Software to enable every vehicle to
Software to enable every vehicle to
Fundamental Insurance Investments, BT
Fundamental Insurance Investments, BT
Recent funding (< 9 months)
Recent funding (< 9 months)
become autonomous
become autonomous
Technology Ventures, BGF Investments
Technology Ventures, BGF Investments
Mirriad Advertising plc
Mirriad Advertising plc
Deeptech
Deeptech
Native in-video advertising allowing post-
Native in-video advertising allowing post-
(AIM quoted)
(AIM quoted)
Quoted bid price
Quoted bid price
Uniformity Labs, Inc.
Uniformity Labs, Inc.
United States
United States
"Equipment, materials and software for
"Equipment, materials and software for
Not disclosed
Not disclosed
Recent financing (< 9 months)
Recent financing (< 9 months)
Actual Experience plc
Actual Experience plc
Deeptech
Deeptech
Optimising the human experience of
Optimising the human experience of
(AIM quoted)
(AIM quoted)
Quoted bid price
Quoted bid price
Mission Therapeutics Limited
Mission Therapeutics Limited
Life Sciences
Life Sciences
Targeting deubiquitylating enzymes for the
Targeting deubiquitylating enzymes for the
Pfizer, Roche, Sofinnova Partners, SR one,
Pfizer, Roche, Sofinnova Partners, SR one,
Recent financing (< 9 months)
Recent financing (< 9 months)
treatment of CNS and mitochondrial disorders
treatment of CNS and mitochondrial disorders
Schroder
Schroder
MOBILion Systems, Inc.
MOBILion Systems, Inc.
United States
United States
A platform technology for conducting ion
A platform technology for conducting ion
Not disclosed
Not disclosed
Recent financing (< 9 months)
Recent financing (< 9 months)
production ad placement
production ad placement
additive manufacturing"
additive manufacturing"
networked applications
networked applications
mobility separations
mobility separations
15.0
15.0
56.4
56.4
2.4
2.4
19.7
19.7
21.4
21.4
17.1
17.1
31.9
31.9
23.4
23.4
22.6
22.6
2.3
2.3
32.0
32.0
27.5
27.5
11.7
11.7
46.2
46.2
16.4
16.4
12.3
12.3
23.6i
23.6i
21.2
21.2
18.0
18.0
27.9i
27.9i
"Other companies
"Other companies
(111 companies)"
(111 companies)"
De minimis and organic
De minimis and organic
investments
investments
Value not attributable to
Value not attributable to
equity holdersII
equity holdersII
Total
Total
i. Represents the Group’s undiluted beneficial economic equity interest (excluding debt), including only the Group’s portion
i. Represents the Group’s undiluted beneficial economic equity interest (excluding debt), including only the Group’s portion
of IPVF II and the US portfolio. Voting interest is below 50%..
of IPVF II and the US portfolio. Voting interest is below 50%..
ii.
ii.
Includes £0.7m decrease (2019: £2.7m increase) in revenue share to Imperial College London, with a corresponding increase
Includes £0.7m decrease (2019: £2.7m increase) in revenue share to Imperial College London, with a corresponding increase
in revenue share liability resulting in no net fair value movement.
in revenue share liability resulting in no net fair value movement.
* Third party valuation specialists used for 31 December 2020 valuation
* Third party valuation specialists used for 31 December 2020 valuation
Fair value
Fair value
of Group
of Group
holding
holding
at 31 Dec
at 31 Dec
2019
2019
£m
£m
263.8
263.8
82.6
82.6
2.6
2.6
29.4
29.4
24.0
24.0
15.2
15.2
9.4
9.4
28.8
28.8
27.5
27.5
23.9
23.9
17.9
17.9
7.0
7.0
8.2
8.2
18.4
18.4
11.6
11.6
5.0
5.0
14.1
14.1
9.5
9.5
13.7
13.7
9.3
9.3
372.5
372.5
13.0
13.0
38.2
38.2
Net
Net
investment/
investment/
(divestment)ii
(divestment)ii
£m
£m
Unrealised Fair
Unrealised Fair
value movement
value movement
and fees settled in
and fees settled in
equity
equity
£m
£m
Fair value
Fair value
of Group
of Group
holding
holding
at 31 Dec 2020
at 31 Dec 2020
£m
£m
340.3
340.3
85.6
85.6
42.1
42.1
36.8
36.8
31.0
31.0
26.1
26.1
24.7
24.7
23.6
23.6
23.4
23.4
20.6
20.6
20.5
20.5
19.0
19.0
17.3
17.3
16.8
16.8
15.0
15.0
14.8
14.8
14.7
14.7
14.4
14.4
13.8
13.8
12.9
12.9
292.8
292.8
11.9
11.9
44.6
44.6
1,162.7
1,162.7
76.5
76.5
–
–
39.5
39.5
6.4
6.4
7.0
7.0
10.0
10.0
12.3
12.3
(5.2)
(5.2)
(4.1)
(4.1)
4.0
4.0
0.1
0.1
11.0
11.0
6.4
6.4
(4.8)
(4.8)
(0.6)
(0.6)
9.8
9.8
0.4
0.4
4.9
4.9
0.1
0.1
0.5
0.5
(21.3)
(21.3)
(3.1)
(3.1)
(0.8)
(0.8)
149.0
149.0
–
–
3.0
3.0
–
–
1.0
1.0
–
–
0.9
0.9
3.0
3.0
–
–
–
–
(7.3)
(7.3)
2.5
2.5
1.0
1.0
2.7
2.7
3.2
3.2
4.0
4.0
–
–
0.2
0.2
–
–
–
–
3.1
3.1
(58.4)
(58.4)
2.0
2.0
7.2
7.2
1,045.6
1,045.6
(31.9)
(31.9)
Portfolio review: Strategic opportunitiesThe Strategic Opportunities fund is a cross-country and cross-sector fund, the principal asset within which is our holding in Oxford Nanopore. Due to its size and significance to the Group, this asset is managed directly by the Chief Executive with assistance from the leadership team. This fund also contains some smaller holdings in companies that operate in a similar way to IP Group but focus on a specific university, such as OSI (Oxford) and CIC (Cambridge).Oxford NanoporeOxford Nanopore is disrupting the paradigm of biological analysis by making high-performance, novel DNA/RNA sequencing technology that is accessible and easy to use. Its sequencing technology, which scales from portable devices to large high-throughput versions, is now being used in more than 100 countries for a range of biological research applications including large- scale human genomics, cancer research, microbiology, plant science, and environmental research. During 2020, the Company entered the diagnostics market with its first in vitro diagnostic product, LamPORE, a COVID-19 test.The company, which now has approximately 600 employees, remains well financed, having raised £162.1m million last year from both existing and new investors including International Holdings Company (IHC) and RPMI Railpen. It was ranked 20th in the Sunday Times Tech Track 100 annual league table of the UK’s fastest growing private technology companies. The company recorded revenues of £52.1m in 2019, a 60% rise on the prior year, and noted it achieved “strong growth” in 2020.COVID-19Oxford Nanopore remains at the forefront of efforts to tackle the COVID-19 pandemic both in sequencing the virus and also in launching its first diagnostic products (LamPORE) for the detection of the virus in record time. Genomic epidemiology: Oxford Nanopore’s sequencing technology has been used since the start of 2020 to sequence the virus - achievable in under seven hours, providing information critical for epidemiological insights as well as new insights for diagnostic and vaccine development. Many researchers are using the portable MinION device, with higher throughput labs using the larger GridION. Early in the pandemic, the company shipped an additional 200 MinION sequencers and related consumables to China which were deployed to support ongoing surveillance of the COVID-19 outbreak there, supplementing the large number of MinION devices already in operation in the country. In March, it was announced that the UK Government and the Wellcome Trust had funded a COVID-19 genome sequencing alliance, to enable rapid, broad, large-scale sequencing analysis of samples from patients testing positive for COVID-19. The network aims to sequence the virus from every patient sample that has tested positive with the resulting data helping to deliver insights into how the virus is transmitted and how it evolves. Oxford Nanopore is supporting participating teams across the UK in this project, including in the cities of Birmingham, London, Edinburgh, Glasgow, Nottingham, Sheffield, Liverpool, Cardiff, Exeter and Cambridge.Oxford Nanopore’s COVID test, LamPORE has now achieved CE marking for in vitro diagnostic use for the detection of SARS-CoV-2 using the GridION device. This milestone represents Oxford Nanopore’s first IVD clinical diagnostic product and underlines the huge potential of scalable, real-time nanopore sequencing technology for this significant and growing market. Further expansion of the LamPORE product line is anticipated, and additional regulatory approvals, including Emergency Use Authorisation in the United States, are being progressed. A version that includes multiple viruses including influenza, rhinovirus and SARS-CoV-2 is in development.An independent evaluation study of LamPORE of over 500 samples revealed a sensitivity of 99.1% (identification of true positives) and specificity of 99.6% (identification of true negatives). This is comparable to RT-PCR, the current gold-standard test for SARS-CoV-2. LamPORE is currently being rolled out globally, with initial use in the UK, Germany, Switzerland and United Arab Emirates. A more recent study of more than 23,000 samples performed in the NHS confirmed the high performance.In the UK, the company announced an agreement with the UK’s Department of Health and Social Care with an initial order of 450,000 LamPORE SARS-CoV-2 tests and the potential to increase to millions of tests per month as indicated by the recent publication of a contract award notice of £112.6m on the TED (Tenders Electronic Daily) website.Other 2020 highlights & technical progressOther significant developments in the year include the announcement that Oxford Nanopore joined the Africa CDC and other leading industry partners including the Bill and Melinda Gates Foundation to announce the African Pathogen Genomics Initiative. This $100m four-year initiative aims to build a disease surveillance and laboratory network based on genomic sequencing across Africa. This network Alan Aubrey Chief Executive OfficerIP Group plc Annual Report and Accounts for the year ended 31 December 202032Stock Code: IPO will not only help identify and inform research and public health responses to COVID-19 and other epidemic threats, but also tackle endemic diseases such as HIV, tuberculosis, malaria, cholera, and other infectious diseases.Oxford Nanopore has also made significant improvements in the accuracy of its product suite with a new basecalling algorithm that further enhances accuracy, Bonito CRF. This has delivered “raw read” accuracy of >98%, or 99.1% with a new chemistry, which in turn supports a range of accurate genomic insights. Increasing data yields from Oxford Nanopore devices drives new use cases and customer cost effectiveness; in December the company announced a new PromethION yield record of 10 Tb, representing a 25% improvement on the previous record. In January 2021, Novogene announced routine achievement of more than 220Gb per PromethION flow cell, allowing the analysis of three human genomes on a single flow cell. As a PromethION can run up to 48 flow cells, and each flow cell can be purchased for $625 under certain pricing plans, this in combination with the rich datasets delivered by nanopore sequencing positions PromethION competitively for larger genome projects. Oxford Nanopore has also launched a new MinKNOW App which enables users to monitor and control their sequencing experiments remotely using their tablets or even mobile phones.ResearchDuring the fourth quarter of 2020, over 230 scientific studies utilising nanopore technology were published, including 14 papers in high impact journal titles from Nature alone. In the quarter, 28 scientific publications detailing the extensive use of nanopore sequencing to track and characterise SARS-CoV-2 were published including an independent study of more than 23,000 samples which revealed LamPORE COVID-19 to offer highly accurate detection of SARS-CoV-2, in both symptomatic and asymptomatic population settings. Within the field of COVID epidemiology, more than 100 papers were published, including where researchers in Brazil reported the first identification of the highly transmissible SARS-CoV-2 B1.1.7 variants, and researchers used nanopore sequencing to comprehensively analyse 16 SARS-CoV-2 outbreaks in mink farms in the Netherlands with results indicating that the virus was introduced from humans to mink and subsequently evolved. Operational developmentsThe company strengthened its Board with two appointments in 2020. In January, John O’Higgins was appointed as a non-executive director. Mr O’Higgins was previously CEO of Spectris, the international productivity-enhancing instrumentation and controls company. In October, the company announced that Dr Guy Harmelin had joined the Board as a non-executive director. Previously on the leadership team at Harel Insurance Investments and Financial Services, Dr Harmelin invested and worked with multiple successful companies including Lemonade, Innoviz, American Well, Ecoppia, Ayala Pharma, Biond Biologics, Tabit, Assured Allies, Quantum Machines, Rafael and Ein-Tal Hospitals.Oxford Nanopore also held its major conferences remotely this year. In June, its sixth Annual “London Calling” conference attracted over 5,500 attendees from 91 countries with leading scientists presenting their work on a range of topics. In December, meanwhile, more than 2,400 researchers joined its first online Community Meeting.Multi-sector platform companiesThe Group has shareholdings in two multi-sector platform companies, OSI and CIC. As at 31 December 2020, IP Group has a 2.3% holding in OSI valued at £20.6m and a 1.0% holding in CIC valued at £3.1m (2019: 3.3%, £23.9m, 1.0%, £2.8m).As a result of its 15-year framework agreement with the University of Oxford, OSI is the preferred intellectual property partner for the provision of capital to, and development of, Oxford spin-out companies and is entitled to 50% of the university’s founder equity in spin-out companies. In 2020 OSI has continued to support its existing portfolio, and as at 30th September 2020 £71.3m further investment had been made, with OSI leading on 31 investments. The number of investments stood at 82 with a total portfolio value of £386.6m and cash and deposits of £309.0m. Net asset value per share had risen from 118.0p to 122.3p during the first nine months of 2020.CIC is a preferred investor for the University of Cambridge for the commercialisation of intellectual property created at the University under a ten-year memorandum of understanding, and a Cambridge-based investor in technology and healthcare companies from the Cambridge Cluster. Since its inception, CIC has secured £275m of investment, invested £175.5m, and its current portfolio of 31 investments is held at £309.1m.Other holdingsIn addition to the holdings described above, the strategic opportunities fund includes certain other portfolio companies. 2020 saw an additional strategic investment of $3m in MOBILion Systems, Inc. alongside IP Group, Inc. the Group’s North American platform, reflecting an additional capital allocation based on the compelling opportunity that this company presents. MOBILion is covered in further detail in the North American portfolio review.Business OverviewStrategic ReportOur Governance33Our FinancialsPortfolio review: Strategic opportunitiesThe Strategic Opportunities fund is a cross-country and cross-sector fund, the principal asset within which is our holding in Oxford Nanopore. Due to its size and significance to the Group, this asset is managed directly by the Chief Executive with assistance from the leadership team. This fund also contains some smaller holdings in companies that operate in a similar way to IP Group but focus on a specific university, such as OSI (Oxford) and CIC (Cambridge).Oxford NanoporeOxford Nanopore is disrupting the paradigm of biological analysis by making high-performance, novel DNA/RNA sequencing technology that is accessible and easy to use. Its sequencing technology, which scales from portable devices to large high-throughput versions, is now being used in more than 100 countries for a range of biological research applications including large- scale human genomics, cancer research, microbiology, plant science, and environmental research. During 2020, the Company entered the diagnostics market with its first in vitro diagnostic product, LamPORE, a COVID-19 test.The company, which now has approximately 600 employees, remains well financed, having raised £162.1m million last year from both existing and new investors including International Holdings Company (IHC) and RPMI Railpen. It was ranked 20th in the Sunday Times Tech Track 100 annual league table of the UK’s fastest growing private technology companies. The company recorded revenues of £52.1m in 2019, a 60% rise on the prior year, and noted it achieved “strong growth” in 2020.COVID-19Oxford Nanopore remains at the forefront of efforts to tackle the COVID-19 pandemic both in sequencing the virus and also in launching its first diagnostic products (LamPORE) for the detection of the virus in record time. Genomic epidemiology: Oxford Nanopore’s sequencing technology has been used since the start of 2020 to sequence the virus - achievable in under seven hours, providing information critical for epidemiological insights as well as new insights for diagnostic and vaccine development. Many researchers are using the portable MinION device, with higher throughput labs using the larger GridION. Early in the pandemic, the company shipped an additional 200 MinION sequencers and related consumables to China which were deployed to support ongoing surveillance of the COVID-19 outbreak there, supplementing the large number of MinION devices already in operation in the country. In March, it was announced that the UK Government and the Wellcome Trust had funded a COVID-19 genome sequencing alliance, to enable rapid, broad, large-scale sequencing analysis of samples from patients testing positive for COVID-19. The network aims to sequence the virus from every patient sample that has tested positive with the resulting data helping to deliver insights into how the virus is transmitted and how it evolves. Oxford Nanopore is supporting participating teams across the UK in this project, including in the cities of Birmingham, London, Edinburgh, Glasgow, Nottingham, Sheffield, Liverpool, Cardiff, Exeter and Cambridge.Oxford Nanopore’s COVID test, LamPORE has now achieved CE marking for in vitro diagnostic use for the detection of SARS-CoV-2 using the GridION device. This milestone represents Oxford Nanopore’s first IVD clinical diagnostic product and underlines the huge potential of scalable, real-time nanopore sequencing technology for this significant and growing market. Further expansion of the LamPORE product line is anticipated, and additional regulatory approvals, including Emergency Use Authorisation in the United States, are being progressed. A version that includes multiple viruses including influenza, rhinovirus and SARS-CoV-2 is in development.An independent evaluation study of LamPORE of over 500 samples revealed a sensitivity of 99.1% (identification of true positives) and specificity of 99.6% (identification of true negatives). This is comparable to RT-PCR, the current gold-standard test for SARS-CoV-2. LamPORE is currently being rolled out globally, with initial use in the UK, Germany, Switzerland and United Arab Emirates. A more recent study of more than 23,000 samples performed in the NHS confirmed the high performance.In the UK, the company announced an agreement with the UK’s Department of Health and Social Care with an initial order of 450,000 LamPORE SARS-CoV-2 tests and the potential to increase to millions of tests per month as indicated by the recent publication of a contract award notice of £112.6m on the TED (Tenders Electronic Daily) website.Other 2020 highlights & technical progressOther significant developments in the year include the announcement that Oxford Nanopore joined the Africa CDC and other leading industry partners including the Bill and Melinda Gates Foundation to announce the African Pathogen Genomics Initiative. This $100m four-year initiative aims to build a disease surveillance and laboratory network based on genomic sequencing across Africa. This network Alan Aubrey Chief Executive OfficerIP Group plc Annual Report and Accounts for the year ended 31 December 202032Stock Code: IPO Portfolio review: Life sciencesReview of the yearThe Life Sciences division enjoyed strong performance in 2020, with a closing portfolio value of £393m versus £335m at the end of 2019. Net portfolio gains were £85m, representing a return on opening portfolio value of 27%. This is a significant improvement compared with the declines seen in the portfolio in 2018 and 2019. In addition, cash realisations for 2020 amounted to £23m versus £7m in 2019.We consider that the positive portfolio performance is partly attributable to the following actions taken by the Life Sciences team over the past three years, working closely with the boards and operational management of our portfolio companies:1. completion of the consolidation process that the division has been undertaking since the combination of the IP Group and Touchstone Life Sciences portfolios in early 2018, including rationalisation of both the number of companies and historic holding values for individual assets;2. more efficient management of key assets, with a focus on non-dilutive funding to reduce IP Group’s cash commitment in capital intensive businesses; and3. pursuit of M&A to crystallise gains and return cash. Notable individual successes resulting from these actions include the sale of part of Enterprise Therapeutics to Roche in October, involving a £75m up-front cash payment, the $20m investment by NeoGenomics Inc. in Inivata Limited with an option to buy the company, and the $15m investment by Pfizer in Mission Therapeutics Limited. To add to this, in January 2021 the division agreed to the acquisition by Centessa Pharmaceuticals of ApcinteX, a privately held drug-discovery company focused on a single development-stage asset, SerpinPC for haemophilia, and in which IP Group held 27%. Centessa is backed by the Life Sciences investment group Medicxi and is a roll-up of ten of its portfolio companies. Following the acquisition and Centessa’s subsequent $250m Series A financing, IP Group’s resulting minority stake in Centessa is valued at £19.0m, representing a fair value gain of £11.0m from the holding value of ApcinteX at 30 June 2020. The LS division believes the Centessa acquisition has the advantage of spreading the risk of its investment in SerpinPC across a range of different assets and, potentially, providing a more rapid route to liquidity.In addition to this, there were some notable examples of outstanding individual company performance, including Diurnal Group plc’s Dr Sam Williams Managing Partner, Life SciencesInvestedOpeningFair valuemovement Realised£30.2m£(22.7)m£(13.6)mOther£85.1mClosing£313.5m£392.5mLife Sciences PortfolioThe Life Sciences division enjoyed strong performance in 2020, with a closing portfolio value of £393m and net portfolio gains of £85m, representing a 27% return on the opening portfolio value of £335m. We consider that this positive portfolio performance is partly attributable to positive actions taken by the Life Sciences team over the past three years, working closely with the boards and operational management of our portfolio companies”IP Group plc Annual Report and Accounts for the year ended 31 December 202034Stock Code: IPO Business Overview
Strategic Report
Our Governance
Our Financials
3 5
Overall, we believe the outlook for the division entering 2021
continues to be positive. Some of our companies have been
in existence for nearly ten years or more, and have products
that are now approaching key milestones, whether clinical,
regulatory and/or financial. In total, we see more than 15
milestone events during 2021-23 that could prove to be
material value-inflection points.
Major milestones that we expect in 2021 include the
potential approval of Diurnal Group plc’s Chronocort at the
end of Q1, the start of Phase 2b studies for Istesso Limited’s
rheumatoid arthritis drug MBS2320, the possible acquisition
of Inivata by NeoGenomics Inc., proof-of-concept clinical
data in Q4 for ApcinteX Limited’s novel haemophilia drug
SerpinPC, and the start of Phase 3 for Pulmocide Limited’s
novel anti-fungal PC945.
continued commercial traction for Alkindi in the US and
EU, resulting in a 107% share price appreciation and £12m
gain for the division, and Artios’ multi-billion-dollar research
collaboration with Merck, resulting in a £6m increase in our
holding value.
The division has also benefitted from the incredible
development of Hinge Health Inc., a now US-based
company that has developed the most complete Digital
MSK Clinic for the whole body. Having delivered strong
commercial progress during 2020, the company completed
a $300m Series D financing in December, valuing the
company at $3bn and our 2.4% stake at £42m. This resulted
in a fair value increase in the division in 2020 of £40m.
The most notable negative outcomes in terms of individual
NAV result were the £8m write-down in our Autifony
holding following the decision by Boehringer Ingelheim not
to exercise its option on the company’s Kv3 schizophrenia
programme and the £6m write-down in Creavo Medical
Technologies Limited following setbacks with the clinical
development of the company’s lead product for detection
of acute coronary syndrome. Another disappointment
was missed upside in Avacta Group plc, where we sold
our stake days prior to the announcement of a COVID-
related deal with Cytiva which triggered a significant run in
Avacta’s stock. However, while the timing was regrettable
on this occasion, the sale is consistent with our approach of
reducing positions in non-core assets which we continue to
believe will provide the best mid- and long-term returns for
the Group.
Hinge Health: Chronic Program for Knee Pain
Portfolio review: Life sciencesReview of the yearThe Life Sciences division enjoyed strong performance in 2020, with a closing portfolio value of £393m versus £335m at the end of 2019. Net portfolio gains were £85m, representing a return on opening portfolio value of 27%. This is a significant improvement compared with the declines seen in the portfolio in 2018 and 2019. In addition, cash realisations for 2020 amounted to £23m versus £7m in 2019.We consider that the positive portfolio performance is partly attributable to the following actions taken by the Life Sciences team over the past three years, working closely with the boards and operational management of our portfolio companies:1. completion of the consolidation process that the division has been undertaking since the combination of the IP Group and Touchstone Life Sciences portfolios in early 2018, including rationalisation of both the number of companies and historic holding values for individual assets;2. more efficient management of key assets, with a focus on non-dilutive funding to reduce IP Group’s cash commitment in capital intensive businesses; and3. pursuit of M&A to crystallise gains and return cash. Notable individual successes resulting from these actions include the sale of part of Enterprise Therapeutics to Roche in October, involving a £75m up-front cash payment, the $20m investment by NeoGenomics Inc. in Inivata Limited with an option to buy the company, and the $15m investment by Pfizer in Mission Therapeutics Limited. To add to this, in January 2021 the division agreed to the acquisition by Centessa Pharmaceuticals of ApcinteX, a privately held drug-discovery company focused on a single development-stage asset, SerpinPC for haemophilia, and in which IP Group held 27%. Centessa is backed by the Life Sciences investment group Medicxi and is a roll-up of ten of its portfolio companies. Following the acquisition and Centessa’s subsequent $250m Series A financing, IP Group’s resulting minority stake in Centessa is valued at £19.0m, representing a fair value gain of £11.0m from the holding value of ApcinteX at 30 June 2020. The LS division believes the Centessa acquisition has the advantage of spreading the risk of its investment in SerpinPC across a range of different assets and, potentially, providing a more rapid route to liquidity.In addition to this, there were some notable examples of outstanding individual company performance, including Diurnal Group plc’s Dr Sam Williams Managing Partner, Life SciencesInvestedOpeningFair valuemovement Realised£30.2m£(22.7)m£(13.6)mOther£85.1mClosing£313.5m£392.5mLife Sciences PortfolioThe Life Sciences division enjoyed strong performance in 2020, with a closing portfolio value of £393m and net portfolio gains of £85m, representing a 27% return on the opening portfolio value of £335m. We consider that this positive portfolio performance is partly attributable to positive actions taken by the Life Sciences team over the past three years, working closely with the boards and operational management of our portfolio companies”IP Group plc Annual Report and Accounts for the year ended 31 December 202034Stock Code: IPO Portfolio review: TechnologyDeeptech portfolioOur highest value holding in the Deeptech portfolio, Featurespace, which is a world leader in enterprise financial crime prevention for fraud and anti-money laundering, raised £30m in a funding round led by Merian Chrysalis Investment Company in May which generated a £6.4m uplift in the value of IP Group’s holding. Featurespace, whose machine learning models have automatically adapted to the shift in consumer and criminal behaviour during lockdown, continues to expand its customer base and the fact that this financing was achieved during the height of the first lockdown demonstrates the strength of the company’s investment case.2020 has been a transformative year for WaveOptics Limited, which makes waveguides and projectors for augmented reality glasses. Despite COVID-19, the company exceeded order forecasts during the year, reflecting the imminent emergence of mass market augmented reality products. WaveOptics now counts eight of the world’s top ten tech and social media companies as customers and we are optimistic about the prospects for this asset. We have written up the value of our holding in WaveOptics by £10.0m to reflect the positive commercial developments and expectations for an upcoming funding round.In a similar field, Ultraleap experienced COVID-related headwinds in some of its target markets but also saw strong demand for its hand tracking software both in retrofitting or replacing public touchscreen displays to reduce the potential for surface transmission of viral particles, and in emerging virtual and augmented reality products. Ultraleap signed a multi-year co-operation agreement with Qualcomm that will see Ultraleap’s hand tracking pre-integrated into the Qualcomm® Snapdragon™ XR2 5G platform and further development deals with major consumer electronics companies have already begun to stem from that partnership.Our computer vision and artificial intelligence (AI) platform company Mirriad Advertising plc announced a contract with a US-based “tier one media giant” in October and this news, coupled with the launch of Mirriad’s offering to the music video industry, drove strong growth in value of that asset. The company completed a very successful placing in December, raising £26m of new investment, which leaves Mirriad well positioned to capitalise on the global opportunity for its video advertising product.COVID-19 has brought challenges to all our portfolio companies, but we are confident that several can also make a meaningful contribution in helping the world adapt to, and deal with, the crisis. University of Oxford spin-out Mark Reilly Managing Partner, Technology£202.1mOpening£8.7mInvested£(4.9)mRealised£212.5m£6.6mFair value movementClosingDeeptech PortfolioIn addition to our focus on driving value from the more mature portfolio, we continue to develop potentially ground-breaking earlier-stage assets.”Review of the yearIP Group’s Technology portfolio comprises holdings in 48 companies valued at £271m as at 31 December 2020.Our companies were quick to respond to the COVID-19 pandemic, prioritising the health and wellbeing of their staff whilst adopting prudent cash management measures. We saw several instances of private investors pulling out of portfolio company deals in the early stages of lockdown and in some cases the crisis has had an impact on asset value, but we have worked hard to ensure our assets are financially secure throughout the crisis and beyond. The portfolio has performed well despite the circumstances and is well-positioned for future growth.IP Group plc Annual Report and Accounts for the year ended 31 December 202036Stock Code: IPO Business Overview
Strategic Report
Our Governance
Our Financials
3 7
Navenio, for example, is deploying its infrastructure-free
indoor location and workforce artificial intelligence solution
in UK hospitals to help alleviate the pressures brought
on by reduced or changing staff availability, whilst Actual
Experience plc was cited in a white paper published by
Verizon and Boston Consulting Group as delivering a key
tool for managing the changes in working patterns brought
about by lockdown.
In addition to our focus on driving value from the more
mature portfolio, we continue to develop potentially
ground-breaking earlier-stage assets. In that domain,
portfolio company Quantum Motion—which IP Group has
nurtured alongside our co-investor, OSI, from the laboratory
benches of University College London and the University of
Oxford—raised an oversubscribed £8m Series A round to
fund its growth.
On the negative side, we unfortunately saw a significant
write-down in the value of Econic Technologies, which
develops catalyst technologies that incorporate waste
carbon dioxide into polyols to bring benefits to the plastics
industry, due to difficulties in securing third-party funding.
The other significant write-down was for Garrison due to
slower than anticipated commercial progress since its last
funding round; we have recently seen signs of the company
regaining momentum and so remain optimistic for its
prospects. A handful of other assets were also written down
by smaller sums, mostly due to delayed commercial progress,
in many cases due to COVID-related market slowdowns.
Cleantech
The Cleantech portfolio has delivered outstanding
performance this year with net portfolio gains of £54.2m
and realisations of £131.4m, primarily due to the rapid
growth in value of Ceres Power and our divestment of that
asset over the course of the year. The Group first invested
in Ceres in 2012 and we are incredibly proud of the success
it has achieved. Ceres is a great example of how we have
helped to develop and support a world-leading company
based on scientific research carried
out in the UK. Its market-leading
fuel cell technology has attracted
investment from Bosch and Weichai
Power and we were pleased to see
the company’s potential reflected in
its customer progress and share price
growth this year. The success of this
asset provided the opportunity for IP
Group to realise its holding, including
facilitating the expansion of Bosch’s,
a key industrial partner, shareholding
in the company at the start of 2020.
In total, the Group realised cash
proceeds of £128.0m against a total
investment of £18.3m. Our average
price per share purchased has been
£123.0m
Opening
64p so the gross realised and IRR of this investment 48%,
with a multiple of 7.0.
Our autonomous vehicle company Oxbotica secured new
funding in a £27m round led by BP Ventures, leaving the
company well positioned to continue its commercialisation of
software originally developed at the University of Oxford that
can automate any vehicle, in any environment at any time.
Our pioneering portfolio asset First Light Fusion, which
is researching energy generation by inertial confinement
fusion, experienced engineering issues late in 2019. The
company is confident of overcoming these challenges and
has developed a revised roadmap to demonstrating nuclear
fusion using its radical new approach. The roadmap has
been endorsed by First Light’s world-renowned Scientific
Advisory Board, and the company was able to raise £19m of
new funding this year to pursue it.
Bramble Energy, our new fuel cell company spun out from
UCL and Imperial College London, raised a £5m Series
A round this year. Following in the footsteps of Ceres
Power, Bramble has unique technology developed in UK
universities that could play a significant role in the rapidly
growing hydrogen economy. Bramble’s focus is in polymer
(PEM) fuel cells that use pure hydrogen for transport and
portable power applications. It has developed the only
technology capable of producing gigawatts of hydrogen
fuel cells using existing manufacturing facilities (specifically
printed circuit board fabs), dramatically reducing the time
to market and investment needed.
Outside of day-to-day portfolio management, the IP Group
Cleantech team has been heavily involved in the “Making
Mission Possible” report from the Energy Transitions
Commission which has been influential upon the UK, EU,
Chinese and Indian government plans for net zero.
Cleantech Portfolio
£10.0m
£(131.4)m
£58.8m
£54.2m
Invested
Realised
Other
£2.9m
Fair value
movement
Closing
Portfolio review: TechnologyDeeptech portfolioOur highest value holding in the Deeptech portfolio, Featurespace, which is a world leader in enterprise financial crime prevention for fraud and anti-money laundering, raised £30m in a funding round led by Merian Chrysalis Investment Company in May which generated a £6.4m uplift in the value of IP Group’s holding. Featurespace, whose machine learning models have automatically adapted to the shift in consumer and criminal behaviour during lockdown, continues to expand its customer base and the fact that this financing was achieved during the height of the first lockdown demonstrates the strength of the company’s investment case.2020 has been a transformative year for WaveOptics Limited, which makes waveguides and projectors for augmented reality glasses. Despite COVID-19, the company exceeded order forecasts during the year, reflecting the imminent emergence of mass market augmented reality products. WaveOptics now counts eight of the world’s top ten tech and social media companies as customers and we are optimistic about the prospects for this asset. We have written up the value of our holding in WaveOptics by £10.0m to reflect the positive commercial developments and expectations for an upcoming funding round.In a similar field, Ultraleap experienced COVID-related headwinds in some of its target markets but also saw strong demand for its hand tracking software both in retrofitting or replacing public touchscreen displays to reduce the potential for surface transmission of viral particles, and in emerging virtual and augmented reality products. Ultraleap signed a multi-year co-operation agreement with Qualcomm that will see Ultraleap’s hand tracking pre-integrated into the Qualcomm® Snapdragon™ XR2 5G platform and further development deals with major consumer electronics companies have already begun to stem from that partnership.Our computer vision and artificial intelligence (AI) platform company Mirriad Advertising plc announced a contract with a US-based “tier one media giant” in October and this news, coupled with the launch of Mirriad’s offering to the music video industry, drove strong growth in value of that asset. The company completed a very successful placing in December, raising £26m of new investment, which leaves Mirriad well positioned to capitalise on the global opportunity for its video advertising product.COVID-19 has brought challenges to all our portfolio companies, but we are confident that several can also make a meaningful contribution in helping the world adapt to, and deal with, the crisis. University of Oxford spin-out Mark Reilly Managing Partner, Technology£202.1mOpening£8.7mInvested£(4.9)mRealised£212.5m£6.6mFair value movementClosingDeeptech PortfolioIn addition to our focus on driving value from the more mature portfolio, we continue to develop potentially ground-breaking earlier-stage assets.”Review of the yearIP Group’s Technology portfolio comprises holdings in 48 companies valued at £271m as at 31 December 2020.Our companies were quick to respond to the COVID-19 pandemic, prioritising the health and wellbeing of their staff whilst adopting prudent cash management measures. We saw several instances of private investors pulling out of portfolio company deals in the early stages of lockdown and in some cases the crisis has had an impact on asset value, but we have worked hard to ensure our assets are financially secure throughout the crisis and beyond. The portfolio has performed well despite the circumstances and is well-positioned for future growth.IP Group plc Annual Report and Accounts for the year ended 31 December 202036Stock Code: IPO 3 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Portfolio review: North America
In the challenging environment caused by the ongoing
economic impact of the COVID-19 pandemic, IP Group, Inc.
and its portfolio companies continued to make significant
progress. In early 2021, the team secured an additional
$50.0m of capital for the platform, comprising $40.0m from
a new US blue-chip institutional investor alongside $10.0m
from IP Group plc. This brings the total funds raised by the
team over the past twelve months to $63.5m, including
$15.0m from IP Group plc. The funds will support the
continued growth of IP Group, Inc.’s maturing portfolio as
well as its pipeline of new opportunities.
Its portfolio companies have realised a number of financial
and operational achievements over the course of the year,
among them:
• MOBILion closed a $35m Series B funding round
to expand its product portfolio and advance the
commercial efforts for its SLIM technology for
biotherapeutics characterisation and novel biomarker
discovery;
• Carisma Therapeutics closed a $59.0m Series B round.
It also achieved a ground-breaking milestone achieving
clearance by US Food and Drug Administration of its
investigative new drug (IND) application for its lead
candidate, CT-0508, an anti-human epidermal growth
factor receptor 2 (HER2) targeted chimeric antigen
receptor macrophage (CAR-M). The company recently
initiated trial enrollment and patient screening for the
first-of-its-kind, first-in-human study of CAR-M at Penn
and the University of North Carolina. They also entered
into a scientific research and licensing agreement with
Nathaniel R. Landau, PhD, and NYU Langone Health
through which Carisma will attain exclusive rights to
develop and commercialize their Vpx lentiviral vector for
all indications;
• Uniformity Labs completed a $38.35m Series B funding
round to expand its growth in the additive manufacturing
industry;
• Exyn Technologies entered into a partnership
agreement with Sandvik Mining and Rock Technology
that is expected to set the standard in autonomous
underground mining. They launched in Australia
with C.R. Kennedy, one of the largest providers of
survey equipment for mining and government needs
in Australia, and also appointed Dr. Shay Badie, an
experienced investment professional and Goldman Sachs
alumnus, and government acquisition and procurement
expert, Katharina McFarland, to their board of directors;
• TrekIT raised $1m in a seed round to continue the
development of their in-patient workflow application
designed to combine a patient’s health data with
clinician communications, documents and data analytics
in one place, to greatly improve patient care.
Rising to the challenge of the COVID-19 pandemic, IP
Group, Inc’s portfolio made a number of contributions in
the battle to control and eliminate the outbreak. MOBILion
Systems, partnered with pioneering researchers at the
Complex Carbohydrate Research Center at the University
of Georgia, to conduct -19 glycan analysis using their
technology. This provides better and faster glycan analysis
to give researchers valuable insight into how to fight the
virus. Optimeos is providing a potentially game-changing
solution to delivering a COVID-19 vaccine efficiently and
effectively into the body – a point that has been recognised
by the US Small Business Administration’s (SBA) Small
Business Innovation Research (SBIR) programme, with the
approval of a grant to help further develop the technology.
Chip Diagnostics, is using its ExoTENPO technology to try
to identify and categorise the vastly different symptom
presentations and patient outcomes of COVID-19. This will
give doctors critical information to see who is going to
respond to what treatment or even who is more susceptible
to catching COVID-19.
At 31 December 2020, the Group had
a 80.7% ownership interest in the
North American portfolio. Following
completion of the funding round in
January 2021, its interest is now 61.3%.
£(5.4)m
£4.7m
£64.5m
North America Portfolio
£(1.3)m
£9.4m
£57.1m
Opening
Invested
Realised
Fair value
movement
Third-party
funding
Closing
3 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
3 9
Portfolio review: North America
Portfolio review: Australia and New Zealand
The Group continues to build a strong pipeline of new
projects from across its partners.
Throughout the COVID-19 pandemic, the Group has
continued to work closely with its university partners in
Australia and New Zealand. In early December, together
with the Group of Eight, the Group co-convened a
roundtable with leading figures from industry, academia and
investment to discuss the topic “Research-led Recovery:
how can Australia best leverage its university research
excellence to drive increased sustainable growth?”.
In terms of capital, the Group continues to work with
Hostplus, one of Australia’s largest superannuation funds
with over AUD$47.8bn in funds under management through
the AUD$100m IP Group Hostplus Innovation Fund, which
is invested in a number of companies across the global
portfolio.
In Australia and New Zealand, the Group continued to
make significant progress on the solid foundation of its
partnerships with the Group of Eight and the University
of Auckland. Investments were completed into four new
companies, bringing the portfolio to twelve companies in
total.
Selected highlights from the portfolio include:
• AMSL Aero (University of Sydney) is developing
Vertiia, the world’s most efficient eVTOL. In November
the company unveiled the vehicle and launched a
partnership with Australian air ambulance company
CareFlight to develop aeromedical applications of Vertiia.
• Canopus Networks (University of New South Wales)
is developing AI-based real time network analytics. In
October it was listed in the global “top 20 university
spin-offs you should know” by VentureRadar. It also
announced collaborations with Leading Edge Data
Centres and Redfig Networks.
• Kira Biotech (University of Queensland) is developing a
first-in-class, selective, immune cell depleting monoclonal
antibody which targets activated immune cells and aims
to induce immune tolerance. The company announced
the appointment of Chair Michael Grissinger, formerly
Vice President and Head, Worldwide Pharmaceutical
Licensing at Johnson & Johnson.
• RAGE Biotech (Monash University and University of
Western Australia) was launched in July to develop
treatments to help people with chronic inflammatory
lung diseases, including cystic fibrosis, severe asthma
and chronic obstructive pulmonary disease.
North America Portfolio
Australia and New Zealand Portfolio
£0.3m
£7.3m
£3.4m
£3.6m
Opening
Invested
Realised
Fair value
Third-party
Closing
movement
funding
Opening
Invested
Fair value
movement
Closing
In the challenging environment caused by the ongoing
• Uniformity Labs completed a $38.35m Series B funding
economic impact of the COVID-19 pandemic, IP Group, Inc.
round to expand its growth in the additive manufacturing
and its portfolio companies continued to make significant
industry;
progress. In early 2021, the team secured an additional
$50.0m of capital for the platform, comprising $40.0m from
a new US blue-chip institutional investor alongside $10.0m
from IP Group plc. This brings the total funds raised by the
team over the past twelve months to $63.5m, including
$15.0m from IP Group plc. The funds will support the
continued growth of IP Group, Inc.’s maturing portfolio as
well as its pipeline of new opportunities.
Its portfolio companies have realised a number of financial
and operational achievements over the course of the year,
among them:
• MOBILion closed a $35m Series B funding round
to expand its product portfolio and advance the
commercial efforts for its SLIM technology for
biotherapeutics characterisation and novel biomarker
discovery;
• Carisma Therapeutics closed a $59.0m Series B round.
It also achieved a ground-breaking milestone achieving
clearance by US Food and Drug Administration of its
investigative new drug (IND) application for its lead
candidate, CT-0508, an anti-human epidermal growth
factor receptor 2 (HER2) targeted chimeric antigen
receptor macrophage (CAR-M). The company recently
initiated trial enrollment and patient screening for the
first-of-its-kind, first-in-human study of CAR-M at Penn
and the University of North Carolina. They also entered
into a scientific research and licensing agreement with
Nathaniel R. Landau, PhD, and NYU Langone Health
through which Carisma will attain exclusive rights to
develop and commercialize their Vpx lentiviral vector for
all indications;
• Exyn Technologies entered into a partnership
agreement with Sandvik Mining and Rock Technology
that is expected to set the standard in autonomous
underground mining. They launched in Australia
with C.R. Kennedy, one of the largest providers of
survey equipment for mining and government needs
in Australia, and also appointed Dr. Shay Badie, an
experienced investment professional and Goldman Sachs
alumnus, and government acquisition and procurement
expert, Katharina McFarland, to their board of directors;
• TrekIT raised $1m in a seed round to continue the
development of their in-patient workflow application
designed to combine a patient’s health data with
clinician communications, documents and data analytics
in one place, to greatly improve patient care.
Rising to the challenge of the COVID-19 pandemic, IP
Group, Inc’s portfolio made a number of contributions in
the battle to control and eliminate the outbreak. MOBILion
Systems, partnered with pioneering researchers at the
Complex Carbohydrate Research Center at the University
of Georgia, to conduct -19 glycan analysis using their
technology. This provides better and faster glycan analysis
to give researchers valuable insight into how to fight the
virus. Optimeos is providing a potentially game-changing
solution to delivering a COVID-19 vaccine efficiently and
effectively into the body – a point that has been recognised
by the US Small Business Administration’s (SBA) Small
Business Innovation Research (SBIR) programme, with the
approval of a grant to help further develop the technology.
Chip Diagnostics, is using its ExoTENPO technology to try
to identify and categorise the vastly different symptom
presentations and patient outcomes of COVID-19. This will
give doctors critical information to see who is going to
respond to what treatment or even who is more susceptible
to catching COVID-19.
At 31 December 2020, the Group had
a 80.7% ownership interest in the
North American portfolio. Following
completion of the funding round in
January 2021, its interest is now 61.3%.
£(5.4)m
£4.7m
£64.5m
£(1.3)m
£9.4m
£57.1m
Third party fund management: Parkwalk AdvisorsParkwalk, the Group’s specialist EIS fund management subsidiary, now has assets under management of £350m (FY19: £300m) including funds managed in conjunction with the universities of Oxford, Cambridge, Bristol and Imperial College London. Parkwalk has managed the largest EIS fund (by monies raised) in each of the last four years.Despite the difficult macroeconomic climate in 2020, Parkwalk invested £29.7m (FY19: £65.0m) in the university spin-out sector across 35 companies (FY19: 44 investments), including five companies also held directly by IP Group. A further twelve portfolio companies received £17.0m of government support through the Future Fund. Thirteen new companies joined the Parkwalk portfolio and five exits were achieved, three for positive returns and two for losses. This brings Parkwalk’s total exits to £44.6m which have been distributed to investors. In October, Parkwalk won the EIS Association’s “Best EIS Fund Manager” for the fourth year in a row. Over the year, Parkwalk liaised closely with BEIS and HMT on improving the financial ecosystem for knowledge-intensive spin-out companies post-COVID-19 and with the arrival of Brexit. The fund’s strategy is aligned with the government’s goal of the UK becoming a “science superpower” and commercialising the committed increase in R&D spend. Within Parkwalk, and more broadly, the Group continues to explore potential fund management opportunities.Investments were made across a range of technologies including agtech, cleantech, mobility, sensors, healthcare, AI and quantum hardware, and security.Over the year, Parkwalk saw some of its larger investments mature with funding rounds of up to £50m closing, as some portfolio companies started to commercialise in areas such as genomic analysis and cleantech. Seven investments were written down due to COVID-19 related impairments. However, ten companies closed funding rounds at increased valuations. Some of those are involved in diagnosing, treating and analysing COVID-19 issues. Since the period end, Parkwalk has launched one of the first HMRC-approved Knowledge Intensive EIS Funds, a new type of fund proposed by the UK Government following the Patient Capital Review. PARKWALK: 2020 IN NUMBERS24PARKWALK ARTICLES IN THE PRESS ON EIS, ESG, R&D, DEEP-TECH ETC600PORTFOLIO COMPANY MEETINGSc.600NEW SUBSCRIPTIONS>£44mRETURNED TO INVESTORS IN TOTAL (>20% IRR) FROM 35 EXITS TO DATE120WEALTH MANAGER MEETINGS36INVESTED/COMMITTED FUNDING ROUNDSIP Group plc Annual Report and Accounts for the year ended 31 December 202040Stock Code: IPO Portfolio review: Additional portfolio analysisTechCleantechLife SciencesStrategicOrganic and De minimisTotal UKPortfolioValue of companies in the portfolio£212.5m£58.8m£392.5m£370.6m£11.9m£1,046.3m2020 net portfolio gain/(loss) (realised and unrealised)£6.6m£54.2m£85.1m£83.2m(£2.2m)£226.9mNumber of portfolio companies13612404n/a92Cost of holdings sold in 2020£15.7m£24.9m£33.8m£6.2m–£80.6mProceeds of holdings sold in 2020£4.9m£131.4m£22.7m£29.3m£2.7m£191.0mAttention:Top 20£139.0m£35.6m£250.4m£363.2m–£788.2mFocus£36.8m£21.7m£45.1m––£103.6mOther£36.7m£1.6m£97.0m£7.4m–£142.7mOrganic and De minimis––––£11.9m£11.9mUnited StatesAustralia & NZTotal Net PortfolioAttributable to third party investors in VF II & USRevenue shareTotal Gross Portfolio£64.5m£7.3m£1,118.1m£31.6m£13.0m£1,162.7mValue of companies in the portfolio£4.7m£0.3m£231.9m(£1.0m)£0.5m£231.4m2020 net portfolio gain/(loss) (realised and unrealised)2712131––131Number of portfolio companies1––£80.6m––£80.6mCost of holdings sold in 2020––£191.0m––£191.0mProceeds from holdings sold in 2020Attention:£25.4m–£813.6m£11.2m–£824.8mTop 20£8.6m£1.7m£113.9m£4.4m–£118.3mFocus£30.4m£5.6m£178.7m£16.0m£13.0m£207.7mOther––£11.9m––£11.9mOrganic and De minimis1. Excluding organic and de minimis (77 companies)Business Overview41Strategic ReportOur GovernanceOur FinancialsThird party fund management: Parkwalk AdvisorsParkwalk, the Group’s specialist EIS fund management subsidiary, now has assets under management of £350m (FY19: £300m) including funds managed in conjunction with the universities of Oxford, Cambridge, Bristol and Imperial College London. Parkwalk has managed the largest EIS fund (by monies raised) in each of the last four years.Despite the difficult macroeconomic climate in 2020, Parkwalk invested £29.7m (FY19: £65.0m) in the university spin-out sector across 35 companies (FY19: 44 investments), including five companies also held directly by IP Group. A further twelve portfolio companies received £17.0m of government support through the Future Fund. Thirteen new companies joined the Parkwalk portfolio and five exits were achieved, three for positive returns and two for losses. This brings Parkwalk’s total exits to £44.6m which have been distributed to investors. In October, Parkwalk won the EIS Association’s “Best EIS Fund Manager” for the fourth year in a row. Over the year, Parkwalk liaised closely with BEIS and HMT on improving the financial ecosystem for knowledge-intensive spin-out companies post-COVID-19 and with the arrival of Brexit. The fund’s strategy is aligned with the government’s goal of the UK becoming a “science superpower” and commercialising the committed increase in R&D spend. Within Parkwalk, and more broadly, the Group continues to explore potential fund management opportunities.Investments were made across a range of technologies including agtech, cleantech, mobility, sensors, healthcare, AI and quantum hardware, and security.Over the year, Parkwalk saw some of its larger investments mature with funding rounds of up to £50m closing, as some portfolio companies started to commercialise in areas such as genomic analysis and cleantech. Seven investments were written down due to COVID-19 related impairments. However, ten companies closed funding rounds at increased valuations. Some of those are involved in diagnosing, treating and analysing COVID-19 issues. Since the period end, Parkwalk has launched one of the first HMRC-approved Knowledge Intensive EIS Funds, a new type of fund proposed by the UK Government following the Patient Capital Review. PARKWALK: 2020 IN NUMBERS24PARKWALK ARTICLES IN THE PRESS ON EIS, ESG, R&D, DEEP-TECH ETC600PORTFOLIO COMPANY MEETINGSc.600NEW SUBSCRIPTIONS>£44mRETURNED TO INVESTORS IN TOTAL (>20% IRR) FROM 35 EXITS TO DATE120WEALTH MANAGER MEETINGS36INVESTED/COMMITTED FUNDING ROUNDSIP Group plc Annual Report and Accounts for the year ended 31 December 202040Stock Code: IPO Greg Smith Chief Financial OfficerFinancial reviewConsolidated statement of comprehensive incomeA summary analysis of the Group’s financial performance is provided below:2020£m2019£mNet portfolio losses1231.4(43.9)Change in fair value of limited and limited liability partnership interests(3.4)(0.7)Net overheads2(21.6)(22.6)Administrative expenses – consolidated portfolio companies(0.4)(5.4)Administrative expenses – share-based payments charge(2.9)(2.3)IFRS 3 charge in respect of acquisition of subsidiary(1.2)(2.5)Carried interest plan (charge)/release(14.3)1.3Amortisation of intangible assets–(0.3)Goodwill impairment––Net finance expense(1.5)(2.4)Taxation(0.7)(0.1)Profit/(loss) for the year185.4(78.9)Other comprehensive income—0.1Total comprehensive income/(loss) for the year185.4(78.8)Exclude:Amortisation of intangible assets—0.3Goodwill impairment——Share-based payment charge2.92.3IFRS charge in respect of acquisition of subsidiary1.22.5Return on Hard NAV189.5(73.7)1. Defined in note 29 Alternative Performance Measures. 2. See net overheads table below and definition in note 29 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 spin-out businesses, which are analysed in detail in the portfolio review on pages 26 to 42.Net overheads2020£m2019£mOther income6.28.6Administrative expenses – all other expenses(24.8)(29.2)Administrative expenses – Annual Incentive Scheme(3.0)(2.0)Net overheads(21.6)(22.6)Year ended 31 December 2020UK £mNon-UK£mConsolidated£mOther income5.80.46.2Administrative expenses – all other expenses(18.7)(6.1)(24.8)Administrative expenses – Annual Incentive Scheme(1.9)(1.1)(3.0)Net overheads(14.8)(6.8)(21.6)Year ended 31 December 2019UK £mNon-UK£mConsolidated£mOther income8.30.38.6Administrative expenses – all other expenses(23.0)(6.2)(29.2)Administrative expenses – Annual Incentive Scheme(1.1)(0.9)(2.0)Net overheads(15.8)(6.8)(22.6)A transformative year for the Group in which we delivered a return to profitability, generated over £190m of realisations from our portfolio and our confidence in the portfolio’s maturity profile enabled the Board to recommend a maiden dividend”• Profit for the year of £185.4m (2019: loss of £78.9m);• Return on Hard NAV of £189.5m or 17% (2019: -£73.7m or -6%);• Net assets of £1,331.9m (2019: £1,141.9m);• Hard NAV of £1,331.5m (2019: £1,141.5m), representing 125.3p per share (2019: 107.8p).• Recommended maiden final dividend of 1p per share IP Group plc Annual Report and Accounts for the year ended 31 December 202042Stock Code: IPO Business Overview
Strategic Report
Our Governance
Our Financials
4 3
Other income totalled £6.2m (2019: £8.6m), reduced from 2019 primarily due to reduced fund management revenues within
Parkwalk, the Group’s EIS fund management business, which saw its fundraising constrained compared to the previous
year due to the impact of COVID-19. Additionally, £0.6m of the decline in revenue was due to the transfer of the Group’s
Technology Transfer Office to Imperial College London in February 2019, resulting in a reduction in full year revenue and costs
in comparison with 2020.
Other income comprises fund management fees, licensing and patent income from Imperial Innovations, corporate finance
fees as well as consulting and similar fees, typically chargeable to portfolio companies for services including executive search
and selection as well as legal and administrative support.
Other central administrative expenses, excluding performance-based staff incentives and share-based payments charges, have
decreased to £24.8m during the period (2019: £29.2m), primarily as a result of cost savings realised from the transfer of the
TTO noted above, as well the full year effect of other cost reduction measures taken in late 2019, including a small number of
UK redundancies.
The charge of £3.0m in respect of the Group’s Annual Incentive Scheme (2019: £2.0m), reflects performance against 2020 AIS
targets as described in the Directors Remuneration Report on page 107.
Other income statement items
The share-based payments charge of £2.9m (2019: £2.3m) reflects the accounting charge for the Group’s 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.
Included within the Group’s administrative expenses are costs in respect of a small number of other portfolio companies.
Typically, the Group owns a non-controlling interest in its portfolio companies; however, in certain circumstances, the Group
takes a controlling stake and hence consolidates the results of a portfolio company into the Group’s financial statements. The
administrative expenses included in the Group’s results for such companies primarily comprise staff costs, R&D and other
operating expenses. In the prior year, these costs included consolidated costs in respect of MOBILion Systems, Inc., for the first
half of the year until its deconsolidation on 1 July 2019.
The carried interest plan charge of £14.3m (2019: release of £1.3m) relates to the recalculation of liabilities under the Group’s
Long-Term Incentive Carry Schemes (‘LTICS’), which include the current UK scheme, as well as historic IP Group and
Touchstone schemes. 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 in
cash and, accordingly, actual payments under these schemes, if any, may be materially different to those set out above. Our
success in generating realisations at a Group level in 2020 resulted in proceeds exceeding cost and hurdle within two scheme
pools, leading to payments of £0.5m being made to the scheme participants (2019: nil).
Costs of £1.2m (2019: £2.5m) were recognised in relation to a final tranche of contingent consideration payable to the sellers of
Parkwalk Advisors Limited, deemed under IFRS 3 to be a payment for post-acquisition services.
Consolidated statement of financial position
A summary analysis of the Group’s assets and liabilities is provided below:
Goodwill and other intangible assets
Portfolio
Other non-current assets
Cash and deposits
EIB debt facility
Other net current liabilities
Other non-current liabilities
Total Equity or Net Assets
Exclude:
Goodwill and other intangible assets
Hard NAV
Hard NAV per share
Year ended
31 December
2020
£m
Year ended
31 December
2019
£m
0.4
1,162.7
23.0
270.3
(67.3)
7.9
(65.1)
1,331.9
(0.4)
1,331.5
125.3p
0.4
1,045.6
22.5
194.9
(82.5)
6.3
(45.3)
1,141.9
(0.4)
1,141.5
107.8p
The composition of, and movements in, the Group’s portfolio is described in the Portfolio review on pages 26 to 42.
Greg Smith Chief Financial OfficerFinancial reviewConsolidated statement of comprehensive incomeA summary analysis of the Group’s financial performance is provided below:2020£m2019£mNet portfolio losses1231.4(43.9)Change in fair value of limited and limited liability partnership interests(3.4)(0.7)Net overheads2(21.6)(22.6)Administrative expenses – consolidated portfolio companies(0.4)(5.4)Administrative expenses – share-based payments charge(2.9)(2.3)IFRS 3 charge in respect of acquisition of subsidiary(1.2)(2.5)Carried interest plan (charge)/release(14.3)1.3Amortisation of intangible assets–(0.3)Goodwill impairment––Net finance expense(1.5)(2.4)Taxation(0.7)(0.1)Profit/(loss) for the year185.4(78.9)Other comprehensive income—0.1Total comprehensive income/(loss) for the year185.4(78.8)Exclude:Amortisation of intangible assets—0.3Goodwill impairment——Share-based payment charge2.92.3IFRS charge in respect of acquisition of subsidiary1.22.5Return on Hard NAV189.5(73.7)1. Defined in note 29 Alternative Performance Measures. 2. See net overheads table below and definition in note 29 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 spin-out businesses, which are analysed in detail in the portfolio review on pages 26 to 42.Net overheads2020£m2019£mOther income6.28.6Administrative expenses – all other expenses(24.8)(29.2)Administrative expenses – Annual Incentive Scheme(3.0)(2.0)Net overheads(21.6)(22.6)Year ended 31 December 2020UK £mNon-UK£mConsolidated£mOther income5.80.46.2Administrative expenses – all other expenses(18.7)(6.1)(24.8)Administrative expenses – Annual Incentive Scheme(1.9)(1.1)(3.0)Net overheads(14.8)(6.8)(21.6)Year ended 31 December 2019UK £mNon-UK£mConsolidated£mOther income8.30.38.6Administrative expenses – all other expenses(23.0)(6.2)(29.2)Administrative expenses – Annual Incentive Scheme(1.1)(0.9)(2.0)Net overheads(15.8)(6.8)(22.6)A transformative year for the Group in which we delivered a return to profitability, generated over £190m of realisations from our portfolio and our confidence in the portfolio’s maturity profile enabled the Board to recommend a maiden dividend”• Profit for the year of £185.4m (2019: loss of £78.9m);• Return on Hard NAV of £189.5m or 17% (2019: -£73.7m or -6%);• Net assets of £1,331.9m (2019: £1,141.9m);• Hard NAV of £1,331.5m (2019: £1,141.5m), representing 125.3p per share (2019: 107.8p).• Recommended maiden final dividend of 1p per share IP Group plc Annual Report and Accounts for the year ended 31 December 202042Stock Code: IPO 4 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Financial review
continued
Portfolio valuation basis
Quoted
Recent financing (<9 months)
Recent financing (>9 months)
Other valuation methods
Debt
Total portfolio
FY 2020
3%
7%
23%
57%
FY 2019
2%
11%
19%
10%
27%
41%
Year ended
31 December
2020
£m
Year ended
31 December
2019
£m
83.4
286.9
118.1
635.6
38.7
1,162.7
117.7
426.7
279.7
197.8
23.7
1,045.6
Key
Quoted
Recent financing (<9 months)
Recent financing (>9 months)
Other valuation methods
Debt
The table above summarises the valuation basis for the Group’s portfolio. Further details on the Group’s valuation policy can
be found in notes 1 and 13. The Group seeks to use observable market data as the primary basis for determining asset fair
values where appropriate. Other valuation methods include: market-derived valuations adjusted to reflect considerations
including (inter alia) technical measures, financial measures and market and sales measures; discounted cash flows and price-
earnings multiples.
Other assets/liabilities
The majority of non-current assets relate to holdings in LP and LLP funds, namely UCL Technology Fund LP, Apollo
Therapeutics LLP and Technikos LLP. These funds give us both economic interest and direct investment opportunities in a
portfolio of early-stage companies, as well as relationships with high-quality institutional co-investors.
The largest items within other non-current liabilities are loans from LPs of consolidated funds. The Group consolidates the
assets of two managed funds in which it has a significant economic interest, specifically co-investment fund IP Venture
Fund II LP and IPG Cayman LP. The latter was created in late 2018 to facilitate third-party investment into the Group’s US
portfolio. Loans from third parties of consolidated funds represent third-party loans into these partnerships. These loans are
repayable only upon these funds generating sufficient realisations to repay the Limited Partners.
Both IP Group and Touchstone Innovation plc arranged debt facilities with the European Investment Bank (“the EIB”), total
borrowings under which totalled £67.3m at the period end (2019: £82.5m). Of these facilities, £15.4m is due to be repaid
within twelve months of the period end (2019: £15.4m). The facility provides the Group with an additional source of long-
term capital to support the development of the portfolio.
Cash and deposits
At 31 December 2020, the Group held gross cash and deposits of £270.3m (2019: £194.9m). 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.
At 31 December 2020, the Group had a total of £10.3m (2019: £16.6m) held in US Dollars and £0.3m (2019: £0.2m) held in
AUS Dollars.
4 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
4 5
Financial review
continued
Portfolio valuation basis
Quoted
Recent financing (<9 months)
Recent financing (>9 months)
Other valuation methods
Debt
Total portfolio
FY 2020
3%
7%
23%
57%
FY 2019
2%
11%
19%
10%
27%
41%
Year ended
Year ended
31 December
31 December
2020
£m
83.4
286.9
118.1
635.6
38.7
1,162.7
2019
£m
117.7
426.7
279.7
197.8
23.7
1,045.6
Key
Quoted
Recent financing (<9 months)
Recent financing (>9 months)
Other valuation methods
Debt
The table above summarises the valuation basis for the Group’s portfolio. Further details on the Group’s valuation policy can
be found in notes 1 and 13. The Group seeks to use observable market data as the primary basis for determining asset fair
values where appropriate. Other valuation methods include: market-derived valuations adjusted to reflect considerations
including (inter alia) technical measures, financial measures and market and sales measures; discounted cash flows and price-
earnings multiples.
Other assets/liabilities
The majority of non-current assets relate to holdings in LP and LLP funds, namely UCL Technology Fund LP, Apollo
Therapeutics LLP and Technikos LLP. These funds give us both economic interest and direct investment opportunities in a
portfolio of early-stage companies, as well as relationships with high-quality institutional co-investors.
The largest items within other non-current liabilities are loans from LPs of consolidated funds. The Group consolidates the
assets of two managed funds in which it has a significant economic interest, specifically co-investment fund IP Venture
Fund II LP and IPG Cayman LP. The latter was created in late 2018 to facilitate third-party investment into the Group’s US
portfolio. Loans from third parties of consolidated funds represent third-party loans into these partnerships. These loans are
repayable only upon these funds generating sufficient realisations to repay the Limited Partners.
Both IP Group and Touchstone Innovation plc arranged debt facilities with the European Investment Bank (“the EIB”), total
borrowings under which totalled £67.3m at the period end (2019: £82.5m). Of these facilities, £15.4m is due to be repaid
within twelve months of the period end (2019: £15.4m). The facility provides the Group with an additional source of long-
term capital to support the development of the portfolio.
Cash and deposits
At 31 December 2020, the Group held gross cash and deposits of £270.3m (2019: £194.9m). 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.
At 31 December 2020, the Group had a total of £10.3m (2019: £16.6m) held in US Dollars and £0.3m (2019: £0.2m) held in
AUS Dollars.
The principal constituents of the movement in cash and deposits during the year are summarised as follows:
Net cash generated/(used) by operating activities
Net cash generated/(used) in investing activities (excluding cash flows from deposits)
Cash acquired on acquisition of subsidiary undertakings net of cash acquired)
Repayment/drawdown of debt facility
Other financing activities
Effect of foreign exchange rate changes
Movement during period
A categorisation of the Group’s cash and deposits is provided below:
Held within Group subsidiaries
Held by consolidated funds – US
Held by consolidated funds – all other funds
Held by consolidated portfolio companies
Total cash and deposits
Year ended
31 December
2020
£m
Year ended
31 December
2019
£m
(27.5)
119.3
–
(15.3)
(1.1)
–
75.4
(17.3)
9.3
(2.5)
(15.3)
1.7
–
(24.1)
Year ended
31 December
2020
£m
Year ended
31 December
2019
£m
269.5
0.7
0.1
–
270.3
188.1
5.8
0.5
0.5
194.9
Under the terms of its term loans with the EIB, the Group is required to maintain a minimum cash balance of £30m. The
Group is also required to hold six months of debt service costs (interest and capital repayments) in a separate bank
account, which totalled £8.7m at 31 December 2020 (2019: £9.4m).
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 in excess of 10%
in its portfolio companies and those companies are themselves trading, the directors continue to believe that the majority
of its holdings will qualify for the Substantial Shareholdings Exemption (“SSE”). 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 non-qualifying holdings would ordinarily give rise to taxable profits for the Group, to the
extent that these exceed the Group’s operating losses from time to time.
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 Hard NAV, Hard NAV per share and Return on Hard 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 is set out in note 29.
4 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Risk management
Managing risk: our framework for
balancing risk and reward
A robust and effective risk
management framework is
essential for the Group to achieve
its strategic objectives and to
ensure that the directors are
able to manage the business
in a sustainable manner,
which protects its employees,
partners, shareholders and
other stakeholders. Ongoing
consideration of, and regular
updates to, the policies intended to
mitigate risk enable the effective
balancing of 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 matched 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 oversees the effective application of the framework
across the business. The Risk Council is chaired by the
CFO, has representation from operational business units as
required during the year, and is supported in its operation
by PwC. 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 bi-annually, with additional top-down
input from the management team with non-executive
review being carried out by the Audit & Risk Committee at
least annually, see page 128 for details.
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
identify key themes and emerging risks, and ultimately informs
our principal risks which are detailed in the Principal Risk and
Uncertainty 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, 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 & 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.
During 2020 we have continued to build on our 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.
The Risk Council has continued to support the Board in
exercising its responsibility surrounding risk management
through its regular meetings. The risk management activity
in the year included refreshing the Group’s operational,
strategic and principal risk registers and an assessment of
the strategic risks and the appropriateness of our principal
risks which resulted in the removal of one existing principal
risk and the expansion of another, as described below.
As a result of the COVID-19 pandemic, the approach to the
bi-annual and annual operational risk register reviews was
revised and an exercise was conducted to capture both the
key changes in each team’s operational risk registers, as well
as capturing specific COVID-19 impacts, controls which may
be operating less effectively as a result of COVID-19 impacts
and other significant changes in team priorities impacting
their risk landscape. The outcome of this review found that
existing controls continued to operate effectively.
Other projects completed in the year included testing of key
controls over our principal risks, a refresh of the Group’s risk
appetite statements over the principal risks, monitoring key
risk indicators, assessments of the risks posed by a Hard-
Brexit and COVID-19, a control investment review to ensure
the desired levels of controls agreed by the Board were in
place and 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 GDPR, our
Capital Allocation process, payments processes and Cyber
& IT security. Additionally, the PwC internal audit cyber team
hosted a workshop to review the Group’s resilience to cyber
threats in the new, full-time remote working environment.
Priorities for 2021 include further business reviews by
the internal audit function, enhancing risk reporting and
communication across the business, reviewing the Group’s
assessment of climate related risks and opportunities and
preparation for the UK Internal Controls requirements
for listed companies in the UK currently expected to be
implemented by December 2023.
4 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Risk management
Managing risk: our framework for
balancing risk and reward
A robust and effective risk
management framework is
essential for the Group to achieve
its strategic objectives and to
ensure that the directors are
able to manage the business
in a sustainable manner,
which protects its employees,
partners, shareholders and
other stakeholders. Ongoing
consideration of, and regular
updates to, the policies intended to
mitigate risk enable the effective
balancing of 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 matched 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 oversees the effective application of the framework
across the business. The Risk Council is chaired by the
CFO, has representation from operational business units as
required during the year, and is supported in its operation
by PwC. 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 bi-annually, with additional top-down
input from the management team with non-executive
review being carried out by the Audit & Risk Committee at
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 & 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.
During 2020 we have continued to build on our 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.
The Risk Council has continued to support the Board in
exercising its responsibility surrounding risk management
through its regular meetings. The risk management activity
in the year included refreshing the Group’s operational,
strategic and principal risk registers and an assessment of
the strategic risks and the appropriateness of our principal
risks which resulted in the removal of one existing principal
risk and the expansion of another, as described below.
As a result of the COVID-19 pandemic, the approach to the
bi-annual and annual operational risk register reviews was
revised and an exercise was conducted to capture both the
key changes in each team’s operational risk registers, as well
as capturing specific COVID-19 impacts, controls which may
be operating less effectively as a result of COVID-19 impacts
and other significant changes in team priorities impacting
their risk landscape. The outcome of this review found that
existing controls continued to operate effectively.
Other projects completed in the year included testing of key
controls over our principal risks, a refresh of the Group’s risk
appetite statements over the principal risks, monitoring key
risk indicators, assessments of the risks posed by a Hard-
Brexit and COVID-19, a control investment review to ensure
the desired levels of controls agreed by the Board were in
place and continued communication of key outputs of the
risk management programme to operational business heads
least annually, see page 128 for details.
and the wider employee group.
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
identify key themes and emerging risks, and ultimately informs
our principal risks which are detailed in the Principal Risk and
Uncertainty 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, the overall impact on the
Group may be compounded.
Internal audit reviews were conducted over GDPR, our
Capital Allocation process, payments processes and Cyber
& IT security. Additionally, the PwC internal audit cyber team
hosted a workshop to review the Group’s resilience to cyber
threats in the new, full-time remote working environment.
Priorities for 2021 include further business reviews by
the internal audit function, enhancing risk reporting and
communication across the business, reviewing the Group’s
assessment of climate related risks and opportunities and
preparation for the UK Internal Controls requirements
for listed companies in the UK currently expected to be
implemented by December 2023.
IP Group risk management frameworkOversight and challenge by the Risk Council, Central Functions and ManagementIndependent assuranceHong KongBoardRisk CouncilCollated risk registersExecutive ManagementHRFinanceITLegal & CosecCommunications & Investor RelationsIP CapitalAustraliaParkwalkIP Group Inc.Front Line Operations Central FunctionsAudit & Risk CommitteeLife SciencesTechnologyInternal & external auditConsolidation, analysis, reporting, oversightChallenge, feedback, learningKeyDirect ReportingReview and ChallengeRead about our strategy on pages 16 and 17.Read about our governance on pages 82 To 99.010203First Line Of DefenceThird Line Of DefenceSecond Line Of DefenceBusiness OverviewStrategic ReportOur GovernanceOur Financials47 4 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Risk management
continued
Emerging risks
The Group’s management and Board
regularly considers 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 strategy
day in December. Set out below are examples of some
of the potential emerging risks that are currently being
monitored by management and the Board:
Near term
COVID-19
The COVID-19 pandemic has impacted our business
operations, our portfolio companies and the society and
economy in which the Group operates. The Group’s day-
to-day operations have been largely able to continue as
normal albeit remotely. We enacted our business continuity
plan in March 2020, primarily centred around remote
working and employee and portfolio company support.
In line with this plan, a Crisis Response Group comprising
members of the Group’s management team continues to
regularly monitor the risks identified, taking such actions
as are necessary to ensure that the Group can continue to
operate as effectively as possible. The Group has adapted
well to the pandemic and the Board does not consider that
COVID-19 constitutes a principal risk to the business at this
time. A number of the Group’s portfolio companies have
been involved in the response to the pandemic including
virus testing and vaccines showcasing the valuable impact
the Group’s portfolio companies are having on the world.
However, while the pandemic persists the Crisis Response
Group continues to monitor the impacts and support our
employees and portfolio companies through this difficult
time.
Cyber and IT security
Cyber and IT security continue to be areas of risk for
the Group and its portfolio as we continue to invest in
intellectual-property based portfolio companies 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
new legislation such as GDPR. In 2020 the industry saw
a wholescale increase in cyber attacks, likely in response
to the global move to remote working, and it is against
this backdrop that the Group increased both its risk rating
for Cyber and IT Security and its investment in mitigating
controls, staff training and expert advisers to support our
response to this risk area.
Medium term
The UK’s withdrawal from the EU
The UK left the EU on 31 January 2020 and the UK agreed a
trade deal with the EU ahead of the transition period ending
on 31 December 2020. While the Group has considered that
the risk posed by Brexit does not constitute a principal risk
for the Group, uncertainty in the medium term remains over
certain areas that could impact the Group’s strategic aims,
as follows:
Key Risks
Performance and
management of
portfolio companies
The performance and
management of portfolio
companies is crucial to the
success of the Group and,
as a result, the preparation
that portfolio company
management teams have
undertaken to address
key Brexit risks will be
central to the successful
navigation of operational
and other issues that may
impact their performance..
Access to capital
Macroeconomic
environment could cause
a short-term UK recession
which would reduce
investor confidence and
impact access to capital
for both IP Group and its
portfolio companies.
Uncertainty over grant
funding capital available
for the Group’s early-
stage portfolio companies
could cause funding risks
for university spin out
companies in the UK.
People
The macroeconomic environment has an impact on
long-term recruitment and planning for companies.
Additional visa restrictions could also impact academics
and student movement to the UK, thus affecting the
pool for potential portfolio companies.
Longer term
Climate change
Climate change continues to be a key concern of the Group
and all its stakeholders. IP Group invests in technology
which 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, see case studies on Bramble
Energy Limited and Mixergy Limited on page 64. In
addition IP Group has started the process of reporting
against the TCFD recommendations in monitoring risks
and opportunities to the business as presented by climate
change. See page 67.
4 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
4 9
Risk management
continued
Emerging risks
The Group’s management and Board
regularly considers 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 strategy
day in December. Set out below are examples of some
of the potential emerging risks that are currently being
monitored by management and the Board:
Near term
COVID-19
The COVID-19 pandemic has impacted our business
operations, our portfolio companies and the society and
economy in which the Group operates. The Group’s day-
to-day operations have been largely able to continue as
normal albeit remotely. We enacted our business continuity
plan in March 2020, primarily centred around remote
working and employee and portfolio company support.
In line with this plan, a Crisis Response Group comprising
members of the Group’s management team continues to
regularly monitor the risks identified, taking such actions
as are necessary to ensure that the Group can continue to
operate as effectively as possible. The Group has adapted
well to the pandemic and the Board does not consider that
COVID-19 constitutes a principal risk to the business at this
time. A number of the Group’s portfolio companies have
been involved in the response to the pandemic including
virus testing and vaccines showcasing the valuable impact
the Group’s portfolio companies are having on the world.
However, while the pandemic persists the Crisis Response
Group continues to monitor the impacts and support our
employees and portfolio companies through this difficult
time.
Cyber and IT security
Cyber and IT security continue to be areas of risk for
the Group and its portfolio as we continue to invest in
intellectual-property based portfolio companies 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
new legislation such as GDPR. In 2020 the industry saw
a wholescale increase in cyber attacks, likely in response
to the global move to remote working, and it is against
this backdrop that the Group increased both its risk rating
for Cyber and IT Security and its investment in mitigating
controls, staff training and expert advisers to support our
response to this risk area.
Medium term
The UK’s withdrawal from the EU
The UK left the EU on 31 January 2020 and the UK agreed a
trade deal with the EU ahead of the transition period ending
on 31 December 2020. While the Group has considered that
the risk posed by Brexit does not constitute a principal risk
for the Group, uncertainty in the medium term remains over
certain areas that could impact the Group’s strategic aims,
as follows:
Key Risks
Performance and
management of
portfolio companies
Access to capital
Macroeconomic
The performance and
environment could cause
management of portfolio
a short-term UK recession
companies is crucial to the
which would reduce
success of the Group and,
investor confidence and
as a result, the preparation
impact access to capital
that portfolio company
for both IP Group and its
management teams have
portfolio companies.
Uncertainty over grant
funding capital available
for the Group’s early-
stage portfolio companies
could cause funding risks
for university spin out
companies in the UK.
undertaken to address
key Brexit risks will be
central to the successful
navigation of operational
and other issues that may
impact their performance..
People
The macroeconomic environment has an impact on
long-term recruitment and planning for companies.
Additional visa restrictions could also impact academics
and student movement to the UK, thus affecting the
pool for potential portfolio companies.
Longer term
Climate change
Climate change continues to be a key concern of the Group
and all its stakeholders. IP Group invests in technology
which 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, see case studies on Bramble
Energy Limited and Mixergy Limited on page 64. In
addition IP Group has started the process of reporting
against the TCFD recommendations in monitoring risks
and opportunities to the business as presented by climate
change. See page 67.
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 below.
Further discussion of the Group’s approach to principal risks and uncertainties is given on page 94 of the Corporate
Governance Statement and pages 128 to 131 of the report of the Audit & Risk Committee, while further disclosure of the
Group’s financial risk management is set out in note 2 to the consolidated financial statements on pages 159 to 161.
Following the 2020 annual review process, the Group’s principal risks were updated to expand the definition of the
“international operations” risk to include general group operational risks such as business continuity and this updated
risk is labelled “group operations including international operations”. Failure of university relationships risk is no longer
considered a principal risk to the Group as no strategic risks relating to the principal risk were identified in the 2020
risk consolidation process. Opportunity sourcing remains a strategic risk and this is now captured within the insufficient
investment returns principal risk. The heatmap below describes the relative potential risks posed by each of the Group’s
identified principal risks.
Principal risks
Insufficient capital: Group
Insufficient capital: portfolio companies
Insufficient investment returns
Personnel risk
Macro-economic conditions
Legislation, governance and regulation
Cyber and IT Security
3
5
21
4
6
87
t
c
a
p
m
I
4.
3.
2.
1.
Group operations including international operations
1.
2.
3.
4.
Likelihood
2020 principal risk
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 high 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
5 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Risk management
continued
Consideration of risk appetite:
The industry the Group operates in inherently involves accepting risk in order to achieve the Group’s strategic aims of creating
and maintaining a pipeline of compelling intellectual property-based opportunities, developing and supporting its portfolio
companies into a diversified portfolio of robust businesses and delivering attractive financial returns on those assets and
third-party funds. 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 reward. The Board has determined its risk appetite in relation to each of its
principal risks and considered appropriate metrics to monitor performance to ensure it remains within the defined thresholds.
The Board’s assessment of risk appetite is provided in the summary of each principal risk below.
1 It may be difficult for the Group to maintain the required level of capital to continue to operate at optimum levels of
investment activity and overheads
The Group’s business has historically been reliant on capital markets, particularly those in the UK, however the Group’s business model is moving
towards self-sustainability with realisations from the portfolio funding 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 internal capital and managed funds capital
Risk appetite
to deploy in portfolio opportunities
• The Group regularly forecasts cash requirements of the portfolio and
ensures all 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
KPI
• Change in fair value of equity and debt
Development during the year
• Significant proceeds from sale of equity and debt investments in the
investments
• Total equity (“Net Assets”)
• Profit/loss attributable to equity holders
year (£191.0m)
• The Group’s share register further diversified in the year and saw
significant changes in the constitution of its major shareholders
• The Group’s share price continued to trade below NAV during the
year which makes it less attractive to raise new capital through share
issues
Examples of risk
• The Group may not be able to provide the
necessary capital to key strategic assets
which may affect the portfolio companies’
performance or dilute future returns of the
Group
Change from 2019
KEY
Create
Develop
Deliver
Increase
Decrease
No change
New
N
Very low
Low
Balanced
High
Very high
5 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
5 1
Risk management
continued
Consideration of risk appetite:
The industry the Group operates in inherently involves accepting risk in order to achieve the Group’s strategic aims of creating
and maintaining a pipeline of compelling intellectual property-based opportunities, developing and supporting its portfolio
companies into a diversified portfolio of robust businesses and delivering attractive financial returns on those assets and
third-party funds. 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 reward. The Board has determined its risk appetite in relation to each of its
principal risks and considered appropriate metrics to monitor performance to ensure it remains within the defined thresholds.
The Board’s assessment of risk appetite is provided in the summary of each principal risk below.
1 It may be difficult for the Group to maintain the required level of capital to continue to operate at optimum levels of
investment activity and overheads
The Group’s business has historically been reliant on capital markets, particularly those in the UK, however the Group’s business model is moving
towards self-sustainability with realisations from the portfolio funding 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
Actions taken by management
Risk appetite
Access to sufficient levels of capital allows the Group
• The Group has significant internal capital and managed funds capital
to invest in its investment assets, develop early-
stage investment opportunities and invest in its
most exciting companies to ensure attractive future
financial returns.
to deploy in portfolio opportunities
• The Group regularly forecasts cash requirements of the portfolio and
ensures all 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
year (£191.0m)
KPI
Development during the year
• Change in fair value of equity and debt
• Significant proceeds from sale of equity and debt investments in the
investments
• Total equity (“Net Assets”)
• Profit/loss attributable to equity holders
• The Group’s share register further diversified in the year and saw
significant changes in the constitution of its major shareholders
• The Group’s share price continued to trade below NAV during the
year which makes it less attractive to raise new capital through share
issues
Examples of risk
Change from 2019
• The Group may not be able to provide the
necessary capital to key strategic assets
which may affect the portfolio companies’
performance or dilute future returns of the
Group
KEY
Create
Develop
Deliver
Increase
Decrease
No change
New
N
Very low
Low
Balanced
High
Very high
2 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 new 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 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 its
technology and commercial opportunities to ensure
future financial returns.
KPI
• Change in fair value of equity and debt
investments
• Total equity (“Net Assets”)
• Profit/loss attributable to equity holders
Actions taken by management
• The Group operates a corporate finance function which carries out
Risk appetite
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
• While Parkwalk Advisors continues to have independent investment
decision making it has been and is anticipated to continue to be an
important co-investor with the Group, supporting shared portfolio
companies
Development during the year
•
IP Group hosted virtual investor events in 2020 including a Deeptech
Forum for China investors, three Australian portfolio showcases and a
UK capital markets event “human health is the new wealth”.
• Continued management of an AUS$100m trust for an Australian
Super Fund which has a mandate to co-invest with IP Group plc
portfolio companies. In the year, four Group portfolio companies
received funding from this investment vehicle.
• Parkwalk’s planned 2020 fundraising was constrained against
expectations due to the impact of COVID-19
Examples of risk
• The success of those portfolio companies which
Change from 2019
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
5 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Risk management
continued
3 The returns and cash proceeds from the Group’s early-stage companies may be insufficient
Early-stage companies typically face a number or risks, including not being able to secure later rounds of funding at crucial development
inflection points and not being able to source or retain appropriately skilled staff. Other risks arise where competing technologies enter 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.
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.
Risk appetite
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 senior leadership team often serve as non-
executive directors or advisers to portfolio companies to help identify
and remedy critical issues promptly
• Support on operational and legal matters is offered to minimise
failures due to common administrative factors
• 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 demise
• 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
KPI
• Change in fair value of equity and debt
Development during the year
• The Group’s portfolio companies raised approximately £1.1bn of
investments
capital in 2020
• Purchase of equity and debt investments
• The Group maintained board representation on 89% of its “focus”
• Proceeds from the sale of equity investments
companies by number
Change from 2019
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
KEY
Create
Develop
Deliver
Increase
Decrease
No change
New
N
Very low
Low
Balanced
High
Very high
5 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
5 3
Risk management
continued
3 The returns and cash proceeds from the Group’s early-stage companies may be insufficient
Early-stage companies typically face a number or risks, including not being able to secure later rounds of funding at crucial development
inflection points and not being able to source or retain appropriately skilled staff. Other risks arise where competing technologies enter 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.
Link to strategy
Actions taken by management
Uncertain or insufficient cash returns could impact
• The Group’s employees have significant experience in sourcing,
the Group’s ability to deliver attractive returns to
developing and growing early-stage technology companies to
shareholders when our ability to react to portfolio
significant value, including use of the Group’s systematic opportunity
company funding requirements is negatively
evaluation and business building methodologies within delegated
impacted or where budgeted cash proceeds are
board authorities
delayed.
Risk appetite
• Members of the Group’s senior leadership team often serve as non-
executive directors or advisers to portfolio companies to help identify
and remedy critical issues promptly
• Support on operational and legal matters is offered to minimise
failures due to common administrative factors
• 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 demise
• 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
KPI
investments
• Change in fair value of equity and debt
• The Group’s portfolio companies raised approximately £1.1bn of
• Purchase of equity and debt investments
• The Group maintained board representation on 89% of its “focus”
• Proceeds from the sale of equity investments
companies by number
possible stage
Development during the year
capital in 2020
Examples of risk
Change from 2019
• 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
• The value of the Group’s drug discovery and
development portfolio companies may be
significantly impacted by a negative clinical trial
companies
result
• Cash realisations from the Group’s portfolio
through trade sales and IPOs could vary
significantly from year to year
KEY
Create
Develop
Deliver
Increase
Decrease
No change
New
N
Very low
Low
Balanced
High
Very high
4 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 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.
KPI
• Total equity
•
“Net Assets”
• Number of new portfolio companies
• Employee engagement and diversity
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.
Actions taken by management
• Senior team succession plans have been developed
Risk appetite
• 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.
•
IP Connect is the employee forum with an appointed designated non-
executive director to facilitate dialogue with 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.
Development during the year
• Additional pressures on employees as a result of the pandemic has
meant the Group heavily invested in employee wellness during the
year. Virtual fitness classes, mental health and resilience workshops
were made available to all staff.
• Significant increase in frequency of employee communications from
executive directors, investment teams and the Head of HR. High levels
of engagement from employees noted in quarterly “pulse” surveys.
• Continued to dedicate resources to remuneration and incentivisation.
• Staff attrition was 6.1%
• Approximately 40.2% of employees have been with the Company for
at least five years.
Change from 2019
5 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Risk management
continued
5 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, COVID-19 pandemic or similar scenarios, could have a number of potential impacts, including 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
Risk appetite
• Quarterly 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 conducts horizon scanning for upcoming
events which may impact the Group such as climate change.
KPI
• Change in fair value of equity and debt
Development during the year
• Macroeconomic and geopolitical conditions remain uncertain in
the UK. The UK negotiated a Brexit deal with the EU in December
2020 and shortly afterward the transition period ended. Uncertainty
remains on the medium and long-term impacts of Brexit and
anticipated future trade deals.
• The COVID-19 pandemic has increased uncertainty in the global
economy with unprecedented levels of government intervention, job
losses and industry closures.
• The Group has materially increased its cash reserves in the year and
as such is better placed to respond to any shocks in the economy.
• The general macroeconomic environment has become more uncertain
in the year however specific sectors such as the life sciences tools
and biotech markets, in which the Group has significant portfolio
holdings, have experienced significant market buoyancy.
Change from 2019
investments
• Total equity
•
“Net Assets”
• Profit or loss attributable to equity holders
Examples of risk
• The success of those portfolio companies which
require significant external funding may be
influenced by the market’s appetite for investment
in early-stage companies, which may not be
sufficient
• 7% of the Group’s portfolio value is held in
companies quoted on the AIM market and
decreases in values to this market could result in
a material fair value impact to the portfolio as a
whole
KEY
Create
Develop
Deliver
Increase
Decrease
No change
New
N
Very low
Low
Balanced
High
Very high
5 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
5 5
5 Macroeconomic conditions may negatively impact the Group’s ability to achieve its strategic objectives
6 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 from exploitation
as the partnership agreements share returns between universities,
academic founders and the Group
• The Group utilises professional advisers as appropriate to support
its monitoring of, and response to changes in, tax, insurance or other
legislation
Risk appetite
• The Group has internal policies and procedures to ensure its
compliance with applicable FCA regulations
• The Group maintains D&O, professional indemnity and clinical trial
insurance policies
Development during the year
• Ongoing focus on regulatory compliance, including third party reviews
and utilisation of specialist advisers
• Unprecedented legislative changes in response to the COVID-19
pandemic including insolvency legislation, the Enterprise Act, the UK
Future Funding and employee furlough and VAT deferral schemes, US
COVID-19 business support scheme, and changes to the Australian
Foreign Investments and Takeovers Act occurred in the year. The
Group’s legal teams shared legislative changes with the relevant teams
across the business to ensure the Group and its portfolio could benefit
from supports available
Change from 2019
KPI
• Total equity
•
“Net Assets”
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 FCA-authorised subsidiaries, resulting
in loss of fund management contracts, reputational
damage or fines.
Risk management
continued
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, COVID-19 pandemic or similar scenarios, could have a number of potential impacts, including 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
Actions taken by management
Risk appetite
The Group’s strategic objectives of developing
• Senior management receive regular capital market and economic
a portfolio of commercially successful portfolio
updates from the Group’s capital markets team and its brokers
companies and delivering attractive financial
returns on our assets and third-party funds can be
materially impacted by the current macroeconomic
environment.
• Quarterly 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 conducts horizon scanning for upcoming
events which may impact the Group such as climate change.
• Change in fair value of equity and debt
• Macroeconomic and geopolitical conditions remain uncertain in
Development during the year
KPI
investments
• Total equity
•
“Net Assets”
• Profit or loss attributable to equity holders
the UK. The UK negotiated a Brexit deal with the EU in December
2020 and shortly afterward the transition period ended. Uncertainty
remains on the medium and long-term impacts of Brexit and
anticipated future trade deals.
• The COVID-19 pandemic has increased uncertainty in the global
economy with unprecedented levels of government intervention, job
losses and industry closures.
• The Group has materially increased its cash reserves in the year and
as such is better placed to respond to any shocks in the economy.
• The general macroeconomic environment has become more uncertain
in the year however specific sectors such as the life sciences tools
and biotech markets, in which the Group has significant portfolio
holdings, have experienced significant market buoyancy.
Examples of risk
Change from 2019
• The success of those portfolio companies which
require significant external funding may be
influenced by the market’s appetite for investment
in early-stage companies, which may not be
• 7% of the Group’s portfolio value is held in
companies quoted on the AIM market and
decreases in values to this market could result in
a material fair value impact to the portfolio as a
sufficient
whole
KEY
Create
Develop
Deliver
Increase
Decrease
No change
New
N
Very low
Low
Balanced
High
Very high
5 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Risk management
continued
7 The Group 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.
Actions taken by management
• The Group reviews its data and cyber-security processes with its
Risk appetite
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
Development during the year
• Ongoing focus on IT security and staff training, including internal
audit reviews and utilisation of specialist advisers
•
Implementation of network and infrastructure security systems to
respond to emerging threats
• Continued programme of penetration testing
• Review of business continuity and disaster recovery plan undertaken
in the year
• Cyber security training provided to staff specifically to address the
increased risks that were caused by extended periods of remote
working due to the global pandemic in the year
• Lower priority remediation actions from the 2019 internal audit cyber
maturity review were delayed in the year as the team’s priorities
shifted to facilitating a seamless move to remote working and
increasing efforts to prevent the increased risk of cyber-attacks seen
in the year due to the pandemic
Change from 2019
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 cyber security
breach at a corporate or portfolio company level.
KPI
• Total equity
•
“Net Assets”
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
Viability statement
The directors have carried out a robust assessment of the
viability of the Group over a three-year period to December
2023, considering its strategy, its current financial position
and its principal risks. The three-year period reflects the
time horizon 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 at least annually. As a business
which seeks to develop great ideas into world-changing
businesses, our business model seeks to balance cash
investments, the generation of portfolio returns and
ultimately portfolio realisations. The three-year plan is
built using a bottom-up model and makes assumptions
about the level of capital deployed into, and realisations
from, its portfolio of companies, the financial performance
(and valuation) of the underlying portfolio companies, the
Group’s utilisation of its debt finance facility and ability to
raise further capital, the level of the Group’s net overheads
and the level of dividends.
5 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
5 7
7 The Group may be subjected to phishing and ransomware attacks, data leakage and hacking.
8 The Group may be negatively impacted by operational issues both from a UK central and international operations
This could include taking over email accounts to request or authorise payments, GDPR breaches and access to sensitive corporate and portfolio
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.
Actions taken by management
• Local legal and regulatory advisers have been engaged in the
Risk appetite
establishment phase of overseas operations. US and Australasian
teams have their own in-house legal teams who regularly report to
the UK-based General Counsel
• Business continuity plans are in place for the Group and tested regularly
•
IP Exec 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 has temporarily replaced 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
Development during the year
• Continued coordination of risk reporting across Australia, Hong Kong
and USA
• Application for Hong Kong regulatory permissions being prepared
with specialist local advisors
• Business continuity plans put in place across all territories in response
to the global pandemic and public health advice to work from home.
Change from 2019
Link to strategy
The Group’s strategy includes building a portfolio of
compelling intellectual-property based companies
across the UK, US and Australia and New Zealand.
The scale of the Group’s operations, including
internationally represents increased importance of
successful execution of its operations.
KPI
• Total equity
•
“Net Assets”
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
Risk management
continued
company data.
KPI
• Total equity
•
“Net Assets”
Link to strategy
Actions taken by management
Risk appetite
The Group’s strategic objectives of creating and
• The Group reviews its data and cyber-security processes with its
maintaining a portfolio of compelling opportunities
external outsourced IT providers and applies the UK Government’s “ten
to deliver attractive returns for shareholders could
steps” framework or other national equivalents where relevant
be materially impacted by a serious cyber security
breach at a corporate or portfolio company level.
• 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
Development during the year
• Ongoing focus on IT security and staff training, including internal
audit reviews and utilisation of specialist advisers
•
Implementation of network and infrastructure security systems to
respond to emerging threats
• Continued programme of penetration testing
• Review of business continuity and disaster recovery plan undertaken
in the year
• Cyber security training provided to staff specifically to address the
increased risks that were caused by extended periods of remote
working due to the global pandemic in the year
• Lower priority remediation actions from the 2019 internal audit cyber
maturity review were delayed in the year as the team’s priorities
shifted to facilitating a seamless move to remote working and
increasing efforts to prevent the increased risk of cyber-attacks seen
in the year due to the pandemic
Examples of risk
Change from 2019
• 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
Viability statement
The directors have carried out a robust assessment of the
businesses, our business model seeks to balance cash
viability of the Group over a three-year period to December
investments, the generation of portfolio returns and
2023, considering its strategy, its current financial position
ultimately portfolio realisations. The three-year plan is
and its principal risks. The three-year period reflects the
built using a bottom-up model and makes assumptions
time horizon over which the Group places a higher degree
about the level of capital deployed into, and realisations
of reliance over the forecasting assumptions used.
from, its portfolio of companies, the financial performance
The strategy and associated principal risks underpin the
Group’s three-year financial plan and scenario testing,
which the directors review at least annually. As a business
which seeks to develop great ideas into world-changing
(and valuation) of the underlying portfolio companies, the
Group’s utilisation of its debt finance facility and ability to
raise further capital, the level of the Group’s net overheads
and the level of dividends.
To assess the impact of the Group’s principal risks on
the prospects of the Group, the plan is stress-tested by
modelling several severe downside scenarios as part of
the Board’s review of the principal risks of the business.
The severe downside scenarios model situations where at
the end of 2021 the Group has been unable to generate
significant portfolio realisations and sees a significant
reduction in portfolio values, stress-testing the Group’s
minimum cash and portfolio coverage covenants (see
note 19 for details of the Group’s debt covenants). These
downside scenarios reflect the most likely and potentially
significant adverse impacts from COVID-19, over the three-
year period under consideration to be reduced availability
of capital and a weaker macroeconomic environment.
Under these stress-testing scenarios, significant reductions
to portfolio investments are made in the following two
years to preserve the Group’s remaining cash balances. In
all scenarios modelled the Group remains solvent at the
end of the three-year period and no breach of EIB financial
covenants occur.
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 2023.
5 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
ESG and Responsible Investment
Materiality Matrix
The quantitative data was plotted on a matrix, showing how
the respondents, in aggregate, rank the materiality of each
issue. Ranking by external and internal groups was largely
congruent with no obvious outliers in the data, suggesting
that IP Group’s views are aligned with its external
stakeholders.
Key findings
The following themes emerged from the assessment and
will guide strategy during 2021:
Governance and role of IP Group as a responsible
investor
Respondents noted that while IP Group has strong
governance practices at operational level, measuring the
ESG impact of the portfolio was mentioned as a necessary
part of governance and an area where the Group has
an opportunity to make a real difference. The report
highlighted the importance of measuring both the creation
of companies that make a positive contribution to the ESG
agenda as well as ensuring that portfolio companies follow
good ESG practice wherever possible.
Social
There was a positive response to how IP Group approaches
its culture and commitment to staff with acknowledgement
of the actions taken in the area, suggesting limited risk.
However, there was a call for increased clarity around
the need to measure and share employee retention
and turnover rates along with employee engagement
measurement, including net promoter scores and progress
on diversity and inclusion. For more detail on this, please
see page 71.
Environmental
The clear message related to environmental issues is the
importance of the distinction between the direct impact of
IP Group plc which is minimal and being actively offset and
the indirect impact of the portfolio companies. Almost all
recipients noted the importance of looking in more detail
at the portfolio businesses and the need to report on their
progress towards increased environmental disclosure.
Building a sustainable and viable
business
IP Group’s approach to ESG in 2020
In 2020 IP Group carried out an ESG materiality assessment
to identify the ESG risks and opportunities that matter
most to our stakeholders and to inform our strategy and
management of ESG issues, including measurement and
best practice reporting credentials.
The exercise combined qualitative and quantitative inputs
from internal and external stakeholders. Participants
were asked to rank certain ESG factors as well as provide
views on questions around IP Group’s approach to ESG
and responsible investment. The report identified a
strong weighting towards governance and social issues
with environmental being of least concern. It must be
highlighted on the latter that qualitative responses did
focus on the environmental impact of our portfolio and
how we should manage it. Another material issue identified
was stewardship of the portfolio. The assessment also
recommended non-financial KPIs, particularly ones which
may align to executive remuneration, and identified the
metrics which underpin these as well as our broader ESG
reporting. This, in turn, has led to the creation of our first
non-financial KPI related to ESG, details of which can be
found on page 20, marking our commitment to ESG issues
being at the core of the Group and its performance.
5 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
ESG and Responsible Investment
Materiality Matrix
The quantitative data was plotted on a matrix, showing how
the respondents, in aggregate, rank the materiality of each
issue. Ranking by external and internal groups was largely
congruent with no obvious outliers in the data, suggesting
that IP Group’s views are aligned with its external
stakeholders.
Key findings
The following themes emerged from the assessment and
will guide strategy during 2021:
Governance and role of IP Group as a responsible
investor
Respondents noted that while IP Group has strong
governance practices at operational level, measuring the
ESG impact of the portfolio was mentioned as a necessary
part of governance and an area where the Group has
an opportunity to make a real difference. The report
highlighted the importance of measuring both the creation
of companies that make a positive contribution to the ESG
agenda as well as ensuring that portfolio companies follow
Social
There was a positive response to how IP Group approaches
its culture and commitment to staff with acknowledgement
of the actions taken in the area, suggesting limited risk.
However, there was a call for increased clarity around
the need to measure and share employee retention
and turnover rates along with employee engagement
measurement, including net promoter scores and progress
on diversity and inclusion. For more detail on this, please
see page 71.
Environmental
The clear message related to environmental issues is the
importance of the distinction between the direct impact of
IP Group plc which is minimal and being actively offset and
the indirect impact of the portfolio companies. Almost all
recipients noted the importance of looking in more detail
at the portfolio businesses and the need to report on their
progress towards increased environmental disclosure.
Building a sustainable and viable
good ESG practice wherever possible.
business
IP Group’s approach to ESG in 2020
In 2020 IP Group carried out an ESG materiality assessment
to identify the ESG risks and opportunities that matter
most to our stakeholders and to inform our strategy and
management of ESG issues, including measurement and
best practice reporting credentials.
The exercise combined qualitative and quantitative inputs
from internal and external stakeholders. Participants
were asked to rank certain ESG factors as well as provide
views on questions around IP Group’s approach to ESG
and responsible investment. The report identified a
strong weighting towards governance and social issues
with environmental being of least concern. It must be
highlighted on the latter that qualitative responses did
focus on the environmental impact of our portfolio and
how we should manage it. Another material issue identified
was stewardship of the portfolio. The assessment also
recommended non-financial KPIs, particularly ones which
may align to executive remuneration, and identified the
metrics which underpin these as well as our broader ESG
reporting. This, in turn, has led to the creation of our first
non-financial KPI related to ESG, details of which can be
found on page 20, marking our commitment to ESG issues
being at the core of the Group and its performance.
InternalExternal4.4.5.5.3.3.2.2.1.1.Equal remuneration - GenderWater useEnergy useWaste managementClimate change riskGreenhouse gas emissionsEmployee relationsEmployee health, safety & wellbeingEmployee training and developmentWhistleblowing systemDiversity & inclusion - GenderDiversity & inclusion - EthnicityDiversity & inclusion - DisabilityEqual opportunity - GenderEqual opportunity - EthnicityEqual opportunity - DisabilityEqual remuneration - EthnicityEqual remuneration - DisabilityRecruiting and retaining talentBusiness ethics and behaviourPrompt paymentModern slaveryDirector independenceQuality of board oversightRegulatory complianceAnti-competitive practicesAnti-bribery and corruption practicesTax transparencyPolitical contributionsExecutive remunerationCybersecurity and data protectionBoard diversityStewardship practicesResponsible investment processesGrievance managementMateriality MatrixGovernanceSocialEnvironmentBusiness OverviewStrategic ReportOur GovernanceOur Financials59 ESG and Responsible Investment continuedLooking to 2021IP Group has taken the results of the materiality assessment and used them to shape our focus areas for 2021 as our approach to ESG, responsible investment and sustainability continues to evolve. As we align our Ethical Investment Framework to our investment processes, we are aware of the difficulties which may arise from adopting a new ethics approach to our existing portfolio. We are working with all relevant stakeholders to ensure there is an understanding of the aims of our approach and to reassure that this is a transition which we view as taking two years to embed. Our key aims for 2021 include:• Further integrating ESG into overall IP Group strategy and across all of our business units• Engaging internal stakeholders on ESG including relevant training • Improving data collection and reporting particularly around material factors and key metrics as identified by the materiality assessment• Considering formal environmental targets aligned to net zero at operational and portfolio level• Engaging our portfolio on key ESG factors such as diversity• Exploring ways in which the positive impact of our portfolio can be further tracked, measured and disclosedMeasurementIP Group is committed to measuring its ESG progress with the materiality assessment having helped identify both material issues and appropriate metrics. We have begun data collection around these metrics in line with the SASB framework and, in addition, we have started analysis against the Taskforce for Climate Related Financial Disclosures (TCFD) recommendations. These require that we look at the risks and opportunities presented by climate change to the business and our portfolio. In 2020, the UK government announced its intention to make TCFD-aligned disclosures mandatory across the economy by 2025, with a significant portion of mandatory requirements in place by 2023. Our voluntary response and analysis of climate risk positions us as an early mover in our sector. More details of our response to the TCFD can be found on page 67.ESG management processesThe Board of Directors oversees the Group’s approach to ESG and related policies and addresses specific issues if they arise. Day-to-day accountability for ESG rests with executive management and, in particular, the CEO. An ESG Working Group meets once a month to discuss strategy and its implementation. In addition, the Group’s existing investment processes take into account ESG matters through the Ethical Investment Framework (EIF) which is overseen by the Ethics Committee. Responsible Investment “Stewardship practices” and “Responsible investment processes” were identified as material to IP Group in the materiality assessment (page 59) and work in 2020 saw an adoption of a more formal way of embedding these practices and processes in our investment decisions. We focused on ensuring our approach to responsible investment runs through our investment processes, in particular how our EIF aligns with our investment approach and how this impacts our role as an investor. We are aware that implementing a new framework across an existing portfolio and multiple geographies can be challenging and we are looking to evolve our approach. To this end, the Ethics Committee advises on our approach, meeting twice a year under the Chair of Professor Gordon Clark (page 15). It is also available to meet should a particular question arise. Embedding ESG into our investment processesIP Group recognises the importance of stewardship of our ESG aims such as strong governance and encouraging greater diversity across our portfolio.Following the adoption of the Group EIF and ESG Policy, we have amended our investment process to ensure ethical and ESG considerations are incorporated. These changes include the addition of excluded sectors into our investment agreements with portfolio companies and documentation of ESG assessment in the investment decision-making process.While many of our portfolio companies focus on positive change in the Life Sciences and Technology sectors, they are growing companies which may need guidance on compliance of all applicable environmental, ethical and social legislation. Our direct involvement in many of these companies allows greater scope to engage with their management teams on these issues. Responsible stewardship in practice1. Policy Toolkit which includes template policies for anti-facilitation of tax evasion, equal opportunities and diversity, speaking up policy and a GDPR checklist among others. 2. Encouraging greater diversity in our portfolio • As part of IP Group’s work around the ‘Investing in Women Code’ we have increased our focus on gender diversity in the investment process. We are looking at how to improve female representation on investment committees as well as on the boards of our portfolio companies. We have started a data collection exercise to ensure we can measure progress and therefore manage and influence further improvements in gender diversity where needed.IP Group plc Annual Report and Accounts for the year ended 31 December 202060Stock Code: IPO Business Overview
Strategic Report
Our Governance
Our Financials
6 1
Below shows an example of initial data collected, the aim is
to use this data to assess where focus on diversity across
the portfolio should lie.
Portfolio Board Data focused on Top 20 Assets and Tech
Focus Assets (June 2020):
• Top 20 Assets: 11% female directors, but 55% of
companies have all-male boards.
• Tech Focus Portfolio: 4.5% female directors, and 78% of
portfolio boards are all-male.
In 2021, our role as a steward is focused on communicating
with the whole portfolio to raise awareness of IP Group’s
growing emphasis on ESG. As a starting point we
will distribute a letter to the extended portfolio (208
companies) outlining this and highlighting our ESG Policy
and Ethical Investment Framework. The letter will also
include an updated data collection survey to further
measure ESG standards across the portfolio. This data will
build on that collected in 2019, a process which will take
place every two years.
How does IP Group and its
portfolio map against the Sustainable
Development Goals
In order to reiterate our commitment to responsible
business practices and investment, IP Group has aligned
its portfolio with the SDGs. The SDGs, created by the UN,
are the blueprint to achieve a better and more sustainable
future for all. Through the activities of IP Group, we address
a number of the global challenges identified by the SDGs.
As our portfolio companies have shown in 2020, we invest
in businesses that are developing cutting edge solutions in
the fight against communicable diseases such as COVID-19
and non-communicable diseases such as cancer and lung
disease. These companies can help to change the world
through building a healthier society.
The COVID-19 pandemic and response to it has brought
increased focus on the climate emergency and how we
tackle it. Meeting the goals of the Paris Agreement set five
years ago requires an energy transition and the finance
behind it. IP Group identifies companies with technologies
that can lead the transition and provides funding and
support.
In addition, IP Group backs and supports technology
companies that are supporting the digital transformation as
we move to a more digital world and efficient and equitable
working practices.
We estimate that the Group and/or its portfolio companies
are currently influencing all 17 SDGs. In 2020 we have
continued to look at how the SDG targets are associated
with individual goals and how our portfolio companies can
help achieve these targets.
There continues to be a concentration on the six most
relevant SDGs to the Group (as detailed below), with the
inclusion of SDG 8 – ‘Decent Work and Economic Growth’
due to contributions towards economic growth and
productivity through technological innovation.
The table on page 62 outlines in more detail how our focus
companies, including the top 20 by value, map to the
targets. Inclusion can change as it aligns with the focus
companies as outlined on page 28.
• 3 (Good Health and Well-being)
• 7 (Affordable and Clean Energy)
• 8 (Decent Work and Economic Growth)
• 9 (Industry, Innovation and Infrastructure)
• 11 (Sustainable Cities and Communities)
• 13 (Climate Action).
Measuring progress
As part of the progress towards measuring the
impact of IP Group’s portfolio in 2020, we have
looked at the proportion of IP Group’s NAV as it
aligns to the SDGs by determining whether the
business activities of the portfolio companies meet
the targets of any set SDG.
Methodology
We have taken the Top 20 assets by NAV from IP
Group’s portfolio as of 31 December 2020 which
account for 74% of the portfolio. Out of the 20
companies, 18 meet the criteria, meaning 66% of
the Top 20 are aligned to relevant SDGs:
Top 20 by SDG alignment
46% of top 20 aligned to SDG 3
17% ‘Strategic Opportunities’ aligned to SDG 3
30% Deeptech & Cleantech aligned SDG 7, 8 & 9
At group level we:
• Support the health and wellbeing of our employees
• Provide training opportunities to continually develop our
employees
• Have implemented a quarterly speaker series with ‘high
impact women’ in our industry
• Support community projects that support talented
young people from disadvantaged backgrounds
• Endeavour to conduct our business in accordance with
best practice
ESG and Responsible Investment continuedLooking to 2021IP Group has taken the results of the materiality assessment and used them to shape our focus areas for 2021 as our approach to ESG, responsible investment and sustainability continues to evolve. As we align our Ethical Investment Framework to our investment processes, we are aware of the difficulties which may arise from adopting a new ethics approach to our existing portfolio. We are working with all relevant stakeholders to ensure there is an understanding of the aims of our approach and to reassure that this is a transition which we view as taking two years to embed. Our key aims for 2021 include:• Further integrating ESG into overall IP Group strategy and across all of our business units• Engaging internal stakeholders on ESG including relevant training • Improving data collection and reporting particularly around material factors and key metrics as identified by the materiality assessment• Considering formal environmental targets aligned to net zero at operational and portfolio level• Engaging our portfolio on key ESG factors such as diversity• Exploring ways in which the positive impact of our portfolio can be further tracked, measured and disclosedMeasurementIP Group is committed to measuring its ESG progress with the materiality assessment having helped identify both material issues and appropriate metrics. We have begun data collection around these metrics in line with the SASB framework and, in addition, we have started analysis against the Taskforce for Climate Related Financial Disclosures (TCFD) recommendations. These require that we look at the risks and opportunities presented by climate change to the business and our portfolio. In 2020, the UK government announced its intention to make TCFD-aligned disclosures mandatory across the economy by 2025, with a significant portion of mandatory requirements in place by 2023. Our voluntary response and analysis of climate risk positions us as an early mover in our sector. More details of our response to the TCFD can be found on page 67.ESG management processesThe Board of Directors oversees the Group’s approach to ESG and related policies and addresses specific issues if they arise. Day-to-day accountability for ESG rests with executive management and, in particular, the CEO. An ESG Working Group meets once a month to discuss strategy and its implementation. In addition, the Group’s existing investment processes take into account ESG matters through the Ethical Investment Framework (EIF) which is overseen by the Ethics Committee. Responsible Investment “Stewardship practices” and “Responsible investment processes” were identified as material to IP Group in the materiality assessment (page 59) and work in 2020 saw an adoption of a more formal way of embedding these practices and processes in our investment decisions. We focused on ensuring our approach to responsible investment runs through our investment processes, in particular how our EIF aligns with our investment approach and how this impacts our role as an investor. We are aware that implementing a new framework across an existing portfolio and multiple geographies can be challenging and we are looking to evolve our approach. To this end, the Ethics Committee advises on our approach, meeting twice a year under the Chair of Professor Gordon Clark (page 15). It is also available to meet should a particular question arise. Embedding ESG into our investment processesIP Group recognises the importance of stewardship of our ESG aims such as strong governance and encouraging greater diversity across our portfolio.Following the adoption of the Group EIF and ESG Policy, we have amended our investment process to ensure ethical and ESG considerations are incorporated. These changes include the addition of excluded sectors into our investment agreements with portfolio companies and documentation of ESG assessment in the investment decision-making process.While many of our portfolio companies focus on positive change in the Life Sciences and Technology sectors, they are growing companies which may need guidance on compliance of all applicable environmental, ethical and social legislation. Our direct involvement in many of these companies allows greater scope to engage with their management teams on these issues. Responsible stewardship in practice1. Policy Toolkit which includes template policies for anti-facilitation of tax evasion, equal opportunities and diversity, speaking up policy and a GDPR checklist among others. 2. Encouraging greater diversity in our portfolio • As part of IP Group’s work around the ‘Investing in Women Code’ we have increased our focus on gender diversity in the investment process. We are looking at how to improve female representation on investment committees as well as on the boards of our portfolio companies. We have started a data collection exercise to ensure we can measure progress and therefore manage and influence further improvements in gender diversity where needed.IP Group plc Annual Report and Accounts for the year ended 31 December 202060Stock Code: IPO 6 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
ESG and Responsible Investment
continued
THEMATIC FOCUS
PORTFOLIO COMPANY
SDG TARGET
SUSTAINABLE
DEVELOPMENT GOAL
AMSL Innovations
11.2 Affordable and sustainable
ANALYTICS
h DATA
c
e
t
p
e
e
D
CYBER
DEFENCE
TECH TO IMPROVE
EFFICIENCY
h RENEWABLE
c
ENERGY
e
t
n
a
e
C
ENERGY
TRANSITION
SUSTAINABLE
TRANSPORT
l
Aqdot
Featurespace
Garrison Technology
Ultraleap Holdings Ltd
C-Capture
Mixergy
Oxbotica
Oxford Sciences
Innovation plc
Uniformity Labs
WaveOptics
Import.IO
Chromosol
Yoyo Wallet
Azuri Technologies
Bramble Energy
C-Capture
First Light Fusion
Mixergy
Oxbotica
Oxford Nanopore
Technologies
RFC Power
transport systems
11.3 Inclusive & sustainable
urbanisation
11.6 Reduce the environmental
impact of cities
9.1
Develop sustainable, resilient &
inclusive infrastructures
9.4 Upgrade all industries and
infrastructures for sustainability
9.5
Enhance research and upgrade
industrial technologies
9.C Universal access to ICT
8.2
Achieve higher levels of
productivity of economies
through diversification,
technological upgrading and
innovation.
7.1 Universal access to modern
energy
7.2 Increase global percentage of
renewable energy
7.3 Double energy efficiency
7.A
Promote R&D and investment
into cleantech
7.B Expand & upgrade energy
services in developing countries
13.2 Integrate climate change
measures into policies &
planning
13.3 Build knowledge & capacity to
meet climate change
s
e
c
n
e
i
c
S
e
f
i
L
Artios Pharma
3.3
Centessa (Apcintex)
Crescendo Biologics
Diurnal Group
Enterprise Therapeutics
Hinge Health
DIAGNOSTICS
Ieso Digital Health
3.4
THERAPEUTICS
ONCOLOGY
Inivata
Istesso
Microbiotica
DIGITAL HEALTH
Mission Therapeutics
By 2030, end the epidemics
of AIDS, tuberculosis, malaria
and neglected tropical diseases
and combat hepatitis, water-
borne diseases and other
communicable diseases
By 2030, reduce by one third
premature mortality from non-
communicable diseases and
promote mental health and well
being
MOBILion
Navenio
Oxford Nanopore
Technologies
PsiOxus Therapeutics
Pulmocide Ltd
3.D Strengthen the capacity for
early warning, risk reduction
and management of national
and global health risks.
* Companies based on 2020 ‘Focus’ companies
6 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
6 3
ESG and Responsible Investment
continued
THEMATIC FOCUS
PORTFOLIO COMPANY
SDG TARGET
SUSTAINABLE
DEVELOPMENT GOAL
AMSL Innovations
11.2 Affordable and sustainable
Health
Azuri Technologies
7.1 Universal access to modern
h DATA
ANALYTICS
CYBER
DEFENCE
c
e
t
p
e
e
D
TECH TO IMPROVE
EFFICIENCY
Aqdot
Featurespace
Garrison Technology
Ultraleap Holdings Ltd
C-Capture
Mixergy
Oxbotica
Oxford Sciences
Innovation plc
Uniformity Labs
WaveOptics
Import.IO
Chromosol
Yoyo Wallet
Bramble Energy
C-Capture
First Light Fusion
Mixergy
Oxbotica
Oxford Nanopore
Technologies
RFC Power
h RENEWABLE
ENERGY
SUSTAINABLE
TRANSPORT
ENERGY
TRANSITION
c
e
t
n
a
e
l
C
s
e
c
n
e
i
c
S
e
f
i
L
transport systems
11.3 Inclusive & sustainable
urbanisation
11.6 Reduce the environmental
impact of cities
9.1
Develop sustainable, resilient &
inclusive infrastructures
9.4 Upgrade all industries and
infrastructures for sustainability
9.5
Enhance research and upgrade
industrial technologies
9.C Universal access to ICT
8.2
Achieve higher levels of
productivity of economies
through diversification,
technological upgrading and
innovation.
energy
7.2 Increase global percentage of
renewable energy
7.3 Double energy efficiency
7.A
Promote R&D and investment
into cleantech
7.B Expand & upgrade energy
services in developing countries
13.2 Integrate climate change
measures into policies &
planning
13.3 Build knowledge & capacity to
meet climate change
of AIDS, tuberculosis, malaria
and neglected tropical diseases
and combat hepatitis, water-
borne diseases and other
communicable diseases
premature mortality from non-
communicable diseases and
promote mental health and well
being
3.D Strengthen the capacity for
early warning, risk reduction
and management of national
and global health risks.
Artios Pharma
3.3
By 2030, end the epidemics
DIAGNOSTICS
Ieso Digital Health
3.4
By 2030, reduce by one third
THERAPEUTICS
ONCOLOGY
DIGITAL HEALTH
Mission Therapeutics
Centessa (Apcintex)
Crescendo Biologics
Diurnal Group
Enterprise Therapeutics
Hinge Health
Inivata
Istesso
Microbiotica
MOBILion
Navenio
Oxford Nanopore
Technologies
PsiOxus Therapeutics
Pulmocide Ltd
* Companies based on 2020 ‘Focus’ companies
Responding to COVID-19
In the weeks following the announcement of the UK lockdown in
March 2020, Ieso identified an 84% increase in referrals to its 1-1
online CBT service, relative to the same period in 2019. Up to a
third of patients mentioned COVID-19 as a reason for presenting
for mental health treatment and patient worries about viruses also
increased, with up to 15% of in-session worries about COVID-19.
Using digital tools to provide mental health services, such as Ieso’s
online talking therapies, can help widen availability and accessibility
at a time of urgent need. It also opens up the potential for gaining
data-led insights that improve patient outcomes.
Ieso provides world-class digital mental healthcare through flexible
and confidential 1:1 therapy, digital tools and partnerships. The
company helps people gain effective help, where and when they
need it.
Mental healthcare lags far behind physical healthcare, with far-
reaching human, societal and economic consequences. Ieso brings
together expert clinicians, scientists and digital technologists
innovating together to understand the crucial learnings which are
available in every treatment session. By turning them into data and
researching patterns over many thousands of treatment sessions,
they are able to see what makes people ill and how to help them
get better. Already, putting this knowledge into action means that
patients treated are more and more likely to recover.
Ieso partners with:
• NHS: Ieso has a track record in improving patient care beyond
national targets and has already treated more than 70,000
patients through over 400,000 hours of therapy under the NHS
IAPT programme (Improving Access to Psychological Therapies).
Ieso treatment is currently available across 49 NHS clinical
commissioning groups and 27 NHS providers.
• Employer healthcare: Ieso recently signed a major contract with
a globally renowned telecommunications company to provide
mental healthcare to its employees, and is actively building
activities with corporate and insurance companies.
• Digital tools: Combining collective knowledge and smart
technology, data-led clinical insights are enabling the company to
develop new digital tools to drive better quality and consistency
of care across the globe. Ieso will start bringing these products
to market in 2021 alongside commercial partners, helping other
organisations to transform their treatment pathways.
Digital Economy
Ultraleap is a next generation user interface company aiming to
deliver interaction solutions that remove the boundaries between the
physical and digital worlds. The company offers world-leading hard
tracking technology and unique virtual touch technology that uses
ultrasound to generate tactile sensations in mid-air, creating virtual
buttons, switches and other objects that can be felt, but not seen.
With COVID-19 bringing increasing attention to potential infection
through public touchscreens, the touchless self-service kiosk
market has seen a remarkable increase in demand and represents
a significant opportunity. In response to the pandemic and the
demand, Ultraleap launched TouchFree, a new, award-winning,
touchless solution that allows customers to retrofit existing
interactive screens and make them touchless. The company is
involved in programmess for multiple-use-cases including quick-
service restaurants, airports, train stations, elevators, ATMs, and
smart buildings.
In the XR (extend reality) market Ultraleap signed a multi-year
contract with Qualcomm Technologies to integrate its Gemini hand
tracking technology in Qualcomm’s Snapdragon XR2 5G chipset in
September 2020. Another feature of the pandemic is the growth
in demand for people to communicate virtually so XR technology
presents many opportunities for the future. Ultraleap’s interface
has been highlighted as enabling a ‘seamless interaction through a
natural connection between people and technology’.
Ultraleap: TouchFree application turns existing screens into
touchless ones
6 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
ESG and Responsible Investment
continued
Climate change
Mixergy is dedicated to developing intelligent solutions which
address the challenges around the electrification of heat whilst
simultaneously adding flexibility to the energy system. It is achieving
this through cost-effective, energy-efficient and convenient solutions
for householders, installers and developers. Mixergy’s flagship
product is the “Mixergy Tank”, a smart hot water tank which saves
energy by only heating what you need whilst providing a reliable
energy storage service to utilities and network operators.
Bramble Energy, has produced the world’s most scalable
hydrogen fuel cell. It is the only technology capable of producing
gigawatts of hydrogen fuel cells using existing global manufacturing
resources, dramatically reducing the time to market and investment
needed versus existing fuel cell designs. Hydrogen fuel cells
generate electric power from an electrochemical reaction rather
than combustion, thereby eliminating carbon emissions from the
power unit and producing only water and heat as by-products.
The Mixergy tank has been launched nationally through British Gas
and is now delivering over 1MW of flexibility to National Grid which
is being monetised through Mixergy’s powerful software platform.
Mixergy’s customers are benefitting through intelligent sensing and
control which provides visibility of how much hot water is in each
tank at all times.
Point two of the UK’s 10-point plan for a green industrial revolution
announced in November 2020 focused on “Driving the Growth of
Low Carbon Hydrogen” and laid out a timeline of target milestones
for hydrogen technology in the UK. Bramble is well placed to be at
the forefront of the adoption of hydrogen as a mainstream clean
technology.
Highlights:
• Pioneering hydrogen vehicles and pure electric company fleets:
Bramble Energy’s PCBFC™ innovative lightweight and cost
effective fuel cell is set to bring even further transformation to
the mobility and automotive industries. Passenger cars powered
by hydrogen fuel cells, either as range extenders or as prime
movers have rapid refuelling and high peak power densities.
Hydrogen fuel cells are also becoming a primary power source
for ships, trains, buses and forklift trucks.
• Off grid power solutions: The silent and portable SD range offers
solutions for powering long-term operations. The system works
with all Industrial Grade Hydrogen and has no GHG emissions
or particulates at point of use. It is a net zero power solution
displacing diesel generators with clean hydrogen.
The 2020s is the decade to decarbonise heat and the role that
smart and connected hot water cylinders can play in helping social
landlords to make the challenging transition to low carbon heating.
Ambitious policy and tightening regulations are rapidly accelerating
the uptake of Mixergy tanks in new build housing where systems can
be easily installed alongside heat pumps, solar PV and solar thermal,
as well as conventional boiler or electric heating systems.
But the greater challenge lies in the decarbonisation of heat in
existing housing stock. Mixergy supports social housing providers
in the transition from the old to the new with smart, connected
hot water storage which gives tenants a better, faster and cheaper
solution for their hot water needs whilst also reducing carbon
emissions.
Highlights:
• The Mixergy tank can also be easily programmed to take
advantage of off-peak tariffs or new dynamic time-of-use tariffs.
• For tenants on mains gas, Mixergy has been demonstrated to
save up to 21% on gas consumption through better, smarter
control of the cylinder set-point temperature, and on average
12% reduction in gas consumption in hot water production.
(Verified by the Energy Savings Trust)
• Aside from these direct savings, Mixergy tanks provide a zero-
cost way for residents to improve their understanding of energy
efficiency by being able to interact through a simple and intuitive
gauge or through the Mixergy App.
•
In 2020 Mixergy worked on a case study with Ocean Housing
with the project producing – 35% reduction in running costs from
£125 to £80 per year, 16% reduction in carbon emissions, 12%
reduction in energy consumed.
6 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
6 5
ESG and Responsible Investment
continued
Climate change
Mixergy is dedicated to developing intelligent solutions which
Bramble Energy, has produced the world’s most scalable
address the challenges around the electrification of heat whilst
hydrogen fuel cell. It is the only technology capable of producing
simultaneously adding flexibility to the energy system. It is achieving
gigawatts of hydrogen fuel cells using existing global manufacturing
this through cost-effective, energy-efficient and convenient solutions
resources, dramatically reducing the time to market and investment
for householders, installers and developers. Mixergy’s flagship
needed versus existing fuel cell designs. Hydrogen fuel cells
product is the “Mixergy Tank”, a smart hot water tank which saves
generate electric power from an electrochemical reaction rather
energy by only heating what you need whilst providing a reliable
than combustion, thereby eliminating carbon emissions from the
energy storage service to utilities and network operators.
power unit and producing only water and heat as by-products.
The Mixergy tank has been launched nationally through British Gas
Point two of the UK’s 10-point plan for a green industrial revolution
and is now delivering over 1MW of flexibility to National Grid which
announced in November 2020 focused on “Driving the Growth of
is being monetised through Mixergy’s powerful software platform.
Low Carbon Hydrogen” and laid out a timeline of target milestones
Mixergy’s customers are benefitting through intelligent sensing and
for hydrogen technology in the UK. Bramble is well placed to be at
control which provides visibility of how much hot water is in each
the forefront of the adoption of hydrogen as a mainstream clean
tank at all times.
technology.
The 2020s is the decade to decarbonise heat and the role that
Highlights:
smart and connected hot water cylinders can play in helping social
landlords to make the challenging transition to low carbon heating.
Ambitious policy and tightening regulations are rapidly accelerating
the uptake of Mixergy tanks in new build housing where systems can
be easily installed alongside heat pumps, solar PV and solar thermal,
as well as conventional boiler or electric heating systems.
But the greater challenge lies in the decarbonisation of heat in
existing housing stock. Mixergy supports social housing providers
• Pioneering hydrogen vehicles and pure electric company fleets:
Bramble Energy’s PCBFC™ innovative lightweight and cost
effective fuel cell is set to bring even further transformation to
the mobility and automotive industries. Passenger cars powered
by hydrogen fuel cells, either as range extenders or as prime
movers have rapid refuelling and high peak power densities.
Hydrogen fuel cells are also becoming a primary power source
for ships, trains, buses and forklift trucks.
in the transition from the old to the new with smart, connected
• Off grid power solutions: The silent and portable SD range offers
hot water storage which gives tenants a better, faster and cheaper
solutions for powering long-term operations. The system works
solution for their hot water needs whilst also reducing carbon
with all Industrial Grade Hydrogen and has no GHG emissions
or particulates at point of use. It is a net zero power solution
displacing diesel generators with clean hydrogen.
emissions.
Highlights:
• The Mixergy tank can also be easily programmed to take
advantage of off-peak tariffs or new dynamic time-of-use tariffs.
• For tenants on mains gas, Mixergy has been demonstrated to
save up to 21% on gas consumption through better, smarter
control of the cylinder set-point temperature, and on average
12% reduction in gas consumption in hot water production.
(Verified by the Energy Savings Trust)
• Aside from these direct savings, Mixergy tanks provide a zero-
cost way for residents to improve their understanding of energy
efficiency by being able to interact through a simple and intuitive
gauge or through the Mixergy App.
•
In 2020 Mixergy worked on a case study with Ocean Housing
with the project producing – 35% reduction in running costs from
£125 to £80 per year, 16% reduction in carbon emissions, 12%
reduction in energy consumed.
Environment
We believe the indirect environmental impact of the Group
to be positive when considering the potential of our
portfolio companies to influence major global challenges
addressed by the UN’s 17 SDGs. However, we also consider
the direct negative environmental impact of IP Group plc
and its subsidiary companies, including through emissions
caused by staff activity (e.g. travel) and premises and are
committed to ensuring these remain as low as possible.
We aim to ensure that the business operates in an
environmentally responsible and sustainable manner.
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 for
the first time for the period 1 January 2020 to 31 December
2020, in line with its financial reporting period. 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.
As in previous years, IP Group engaged Rio ESG (formerly
known as Ditto Sustainability) to independently calculate
and provide assurance of energy, water and waste
performance information, including GHG emissions.
The greenhouse gas inventory has been calculated in
accordance with ISO14064 and the World Resources
Institute’s greenhouse gas protocol. The scope of the
reporting is in line with IP Group’s operational boundary.
IP Group rent all office spaces and as such have limited
capacity to implement their own operating procedures.
Emissions do not include any investment subsidiaries.
Overall, in 2020 IP Group’s total emissions have reduced by
86% and carbon intensity has decreased by 84.3% tCO2e/
employee and 83.7% tCO2e/m2 compared to 2019.
The data presents a marked decline in carbon emissions
since IP Group began reporting in 2016. A significant
proportion of this change is attributable to a decrease in
business travel, particularly rail travel and flights, which
remain the largest contributor to the Group’s carbon
footprint. Reduced mobility as a result of the COVID-19
pandemic has had a noticeable effect on the business
globally from March 2020 explaining the decrease in
business travel and associated emissions in 2020. As in
previous years, increased use of teleconferencing has
reduced the need to travel for business purposes.
Additional reasons for reduction include increased accuracy
in data reporting, as in earlier years IP Group originally
provided economic data, which requires a series of
assumptions in order to provide an estimation of the overall
carbon figure.
Total emissions breakdown by scope
2020
GHG emissions
Scope 1(1)
Scope 2 (location-based)(2)
Scope 3(3)
Carbon offset via woodland
projects
Total GHG emissions post
carbon offset
2020
Tonnes
CO2e
138.8
–
20.6
117.8
2019
restated4
Tonnes
CO2e
973.9
7.8
113.8
852.3
(138.4)
(973.9)
–
–
(1) Scope 1 being emissions from the Group’s combustion of fuel (direct
emissions) and operation of facilities.
(2) Scope 2 being electricity (indirect emissions), heat, steam and cooling
purchased for the Group’s own use.
(3) Scope 3 being all indirect emissions (not in scope 2) that occur in the value
chain of the reporting company, including both upstream and downstream
emissions 2020 (96 employees and 1920m2 office space).
(4) Restated *increase compared to 2019 reported figure is due to carbon
calculation methodologies.
Carbon offsetting at Lowther Whale, Penrith, UK
6 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
ESG and Responsible Investment
continued
Intensity ratio
In order to provide context to IP Group’s emissions year-on-year we have calculated the total carbon in relation to two
relevant metrics, floor area (m2) and full time employees (E), which give an indication to the size of the organisation and its
potential impact on the resulting carbon emissions. The below tables reflect the intensity ratios for the full reporting period
and for 1 January to 31 March 2019/20 to compare like-for-like data prior to full COVID-19 lockdown measures. Overall, in the
period of January – March IP Group’s total emissions had reduced by 49.6% and carbon intensity has decreased by 44.8%
tCO2e/employee and 41.7% tCO2e /m2 in 2020 compared to the same period in 2019.
2020
2019
2020 (01/01-31/03)
2019 (01/01-31/03)
Carbon
tCO2e
138.8
973.9
Carbon
tCO2e
133.4
257.5
No.E
101
111
No.E
101
111
m2
1,920
2,245
tCO2e/Emp
1.37
8.77
tCO2e/m2
0.07
0.43*
m2
1,920
2,245
tCO2e/Emp
1.32
2.39
tCO2e/m2
0.07
0.12*
*Restated to reflect consistent methodology basis with 2020 GHG emissions.
Total Global Energy Usage 2020
Scope
Australia
United Kingdom
United States of America
kWh
1,528
44,160
21,477
The Woodland Carbon Code delivers independently
certified woodland creation projects – audited by UKAS
accredited bodies to ISO standards – that offer tangible
social and environmental benefits; it is the only standard
of its kind in the UK. Woodland Carbon Code credits are
an accepted mitigation mechanism under government
corporate environmental reporting guidelines.
Efficiency Actions
• Motion sensor lights are installed in office buildings to
maximise energy efficiency.
• Majority of appliances and large office equipment are
maximally energy efficient.
• Staff engagement and education have been provided via
Rio Engage on energy efficiency, renewable energy and
energy monitoring.
Offsets
Despite the relatively low direct negative environmental
impact of the Group, we have, for the third year, offset 100%
of the Group’s direct 2020 CO2 equivalent greenhouse gas
emissions. As in 2018 and 2019, we have done this through
a programme of supporting UK woodland creation certified
under the Government’s Woodland Carbon Code through
Forest Carbon.
All Woodland Carbon Code certified projects offer public
access as a core requirement, and woodlands also have
a significant role to play in mitigating flooding, reducing
air pollution, cleaning watercourses and creating habitat
for biodiversity. An investment in woodland creation
contributes to the UK’s rural economy by helping to create
jobs in the forestry and nursery sector, and also makes a
contribution to the UK’s national carbon budget, enabling
the country to meet its climate change obligations.
The 2020 credits will contribute to our project at Lowther,
near Penrith UK. This is converted arable and grazing land
to sustainable forestry. There are 3079 trees planted over
2.16 hectares accounting for 1042 tonnes CO2. The project
brings additional benefits by helping flood mitigation and
improving water quality.
6 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
ESG and Responsible Investment
continued
Intensity ratio
In order to provide context to IP Group’s emissions year-on-year we have calculated the total carbon in relation to two
relevant metrics, floor area (m2) and full time employees (E), which give an indication to the size of the organisation and its
potential impact on the resulting carbon emissions. The below tables reflect the intensity ratios for the full reporting period
and for 1 January to 31 March 2019/20 to compare like-for-like data prior to full COVID-19 lockdown measures. Overall, in the
period of January – March IP Group’s total emissions had reduced by 49.6% and carbon intensity has decreased by 44.8%
tCO2e/employee and 41.7% tCO2e /m2 in 2020 compared to the same period in 2019.
2020
2019
2020 (01/01-31/03)
2019 (01/01-31/03)
Scope
Australia
United Kingdom
United States of America
Efficiency Actions
*Restated to reflect consistent methodology basis with 2020 GHG emissions.
Total Global Energy Usage 2020
Carbon
tCO2e
138.8
973.9
Carbon
tCO2e
133.4
257.5
No.E
101
111
No.E
101
111
m2
tCO2e/Emp
tCO2e/m2
1,920
2,245
1,920
2,245
1.37
8.77
1.32
2.39
0.07
0.43*
0.07
0.12*
m2
tCO2e/Emp
tCO2e/m2
kWh
1,528
44,160
21,477
The Woodland Carbon Code delivers independently
certified woodland creation projects – audited by UKAS
accredited bodies to ISO standards – that offer tangible
social and environmental benefits; it is the only standard
of its kind in the UK. Woodland Carbon Code credits are
an accepted mitigation mechanism under government
corporate environmental reporting guidelines.
All Woodland Carbon Code certified projects offer public
• Motion sensor lights are installed in office buildings to
access as a core requirement, and woodlands also have
maximise energy efficiency.
• Majority of appliances and large office equipment are
maximally energy efficient.
• Staff engagement and education have been provided via
Rio Engage on energy efficiency, renewable energy and
energy monitoring.
Offsets
Despite the relatively low direct negative environmental
impact of the Group, we have, for the third year, offset 100%
of the Group’s direct 2020 CO2 equivalent greenhouse gas
emissions. As in 2018 and 2019, we have done this through
a programme of supporting UK woodland creation certified
under the Government’s Woodland Carbon Code through
Forest Carbon.
a significant role to play in mitigating flooding, reducing
air pollution, cleaning watercourses and creating habitat
for biodiversity. An investment in woodland creation
contributes to the UK’s rural economy by helping to create
jobs in the forestry and nursery sector, and also makes a
contribution to the UK’s national carbon budget, enabling
the country to meet its climate change obligations.
The 2020 credits will contribute to our project at Lowther,
near Penrith UK. This is converted arable and grazing land
to sustainable forestry. There are 3079 trees planted over
2.16 hectares accounting for 1042 tonnes CO2. The project
brings additional benefits by helping flood mitigation and
improving water quality.
Progress report GovernanceDisclose the organisation’s governance and climate related risks and opportunities.IP Group’s approach to ESG including climate change and related policies is overseen by the Board of Directors and accountability for sustainability rests with executive management and, in particular, the Chief Executive Officer. In addition, the Group’s existing investment processes take into account ESG matters including matters around climate change through the Ethical Investment Framework which is overseen by the Ethics Committee. IP Group’s operational oversight of climate change is covered by its ESG and Sustainability Policy. The Group has an ESG Working Group which meets once a month and oversees the implementation of related work including climate related matters. (see page 58 for ESG management)StrategyDisclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material.This year IP Group, in line with TCFD recommendations, undertook a climate-related materiality analysis of the prevailing physical and transitional risks and opportunities facing the Group. This was to establish a baseline assessment of the impact of climate-related risks and opportunities on the business and its strategy. This will ensure the identified risks are minimised and high impact opportunities are extensively explored. We have also mapped stakeholder perceptions of climate-related risks and opportunities to understand where greater engagement on topical themes is needed to align with the TCFD recommendations. These findings will feed into agendas set by the ESG Working Group as well as the Audit and Risk Committee. Risk ManagementDisclose how the organization identifies, assesses, and manages climate-related risks.The Group’s management and Board regularly consider emerging internal and external risks and opportunities which have the potential to affect the Group in the short, medium and long term. By undertaking a strategic review of climate-related risks and opportunities, including the magnitude of their impact and likelihood, we are able to focus on those which are most material to the resilience of our business. A review of climate-related risks and opportunities will take place at least annually for consideration by the Audit and Risk Committee. Metrics & targetsDisclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.We identify year-on-year trends in our scope 1-3 GHG emissions and intensity ratios to assess and manage the likely impact of climate-related risks and opportunities on our business. Although we have seen a decrease in overall carbon emissions in 2020, we largely ascribe this to the remote-working patterns and travel restrictions implemented in response to the COVID-19 pandemic. Reduction in our scope 3 emissions, particularly transport, remain a focus for IP Group given that scope 3 emissions accounted for 85% of total emissions in 2020. Using historic GHG emissions, carbon footprints and relevant external climate change data, IP Group aspire to set meaningful targets in 2021 to reduce climate related-risk and maximise climate-related opportunity.More information can be found in our 2020 TCFD report: www.ipgroupplc.comBusiness Overview67Strategic ReportOur GovernanceOur Financials 6 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
ESG and Responsible Investment
continued
Social
IP Group aims to conduct its business in a socially
responsible manner, to contribute to the communities
in which it operates and to respect the needs of its
stakeholders.
The Group also seeks to ensure that there is diversity in
the supply chain, working with SMEs as well as larger
organisations. Where possible, we work with local suppliers,
therefore impacting positively on the communities where
we operate. The Group is also a signatory to the Prompt
Payment Code. IP Group seeks to operate as a responsible
employer and has adopted standards which promote
corporate values designed to help and guide employees
in their conduct and business relationships. The Group
seeks to comply with all laws, regulations and rules
applicable to its business and to conduct the business in
line with applicable established best practice. We take a
zero-tolerance approach to bribery and corruption and
implement and enforce effective systems. The Group is
bound by the laws of the UK, including the Bribery Act
2010, and has implemented policies and procedures based
on such laws.
Governance
The Group seeks to conduct all of its operating and
business activities in an honest, ethical and socially
responsible manner and these values underpin our
business model and strategy. We are committed to acting
professionally, fairly and with integrity in all of our business
dealings and relationships with consideration for the needs
of all of our stakeholders, including university partners,
investors, suppliers, employees, and the businesses in which
the Group has holdings. IP Group endeavours to conduct its
business in accordance with established best practice, to be
a responsible employer and to adopt values and standards
designed to help guide staff in their conduct and business
relationships. As a publicly traded entity, IP Group actively
seeks to engage and maintain an open dialogue with both
institutional and private shareholders through its investor
relations programme.
Policies
Copies of the Group’s policies in relation to anti-corruption
and bribery, anti-slavery, modern slavery, environmental,
equal opportunities and diversity, prompt payments,
speaking up, anti-facilitation of tax evasion, data protection,
health and safety, sustainability and ESG, ethical investment,
stakeholder engagement and “treating customers fairly” can
be found in the ESG section of the Group’s website: www.
ipgroupplc.com.
Cyber security
Cyber security reports are regularly provided to the Audit
and Risk Committee and, on request, to the plc Board. The
committee takes a keen interest in the measures that are in
place and the roadmap for future developments. The Group
carried out a follow-up cyber maturity assessment in late
2020 with the PwC internal audit team. The report includes
recommendations that IP Group will act on to further
improve governance, system and infrastructure security. The
Group will continue to assess cyber security on an annual
basis to ensure that best practice is followed.
The focus for cyber at the Group in 2021 will be on
standardising the framework, KPIs and reporting across all
regions in which the Group operates. The Group conducted
a GDPR audit in 2020 with auditor PwC. PwC rated the
outcome as “satisfactory”, the highest rating that can be
achieved. To further ensure that the Group was capable of
responding swiftly and comprehensively to a Subject Access
Request (SAR), an exercise was carried out in late 2020 with
satisfactory results. The Group received no SARs in 2020.
IP Group has been awarded Cyber Essentials certification. IP
Group commissions regular external penetration testing on
IT infrastructure and has implemented multiple cloud and
on-premises technologies to monitor endpoints, network
traffic and mitigate the risk of intrusion and data breach.
The Group carries out diligence to ensure that third party
suppliers are maintaining good standards of security.
IP Group continues to ensure that all members of staff
receive annual mandatory cyber security training with
additional training delivered in reaction to emerging external
factors, such as working from home during lockdown and in
reaction to increased levels of phishing attacks.
A quarterly phishing test takes place and staff that fall
short of expectations are contacted to carry out additional
training.
The Group takes the threat of a cyber incident very seriously
and endeavours to mitigate the risk wherever possible. The
Group maintains a business continuity plan and reviews
this plan annually. This plan includes playbooks to react to
incidents such as a data breach or other cyber incident.
Community engagement
In August 2020, the Group’s partnership with education
charity Generating Genius came to the end of its term.
While the search for a new partner charity was delayed due
to COVID-19 disruptions, the charity liaison team sought to
support charities with individual contributions and engage
staff, details of which are below:
Crossing Continents
Between May and June, IP Group held a virtual “Crossing
Continents” challenge to raise funds for Médecins Sans
Frontières. IP Group staff were challenged to collect
donations for the charity’s COVID-19 appeal while collectively
walking, running, or cycling 3,000 K. Our staff raised £1,930,
which was matched and further supplemented by a base
donation of £5,000 by the Group for a total of £8,860.
Thirty-four employees from around the world participated in
the challenged, covering 7643.56 K between them.
Participants in the Crossing Continents challenge were able
to share photos of their experience with colleagues.
6 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
6 9
ESG and Responsible Investment
continued
Social
IP Group aims to conduct its business in a socially
responsible manner, to contribute to the communities
in which it operates and to respect the needs of its
stakeholders.
The Group also seeks to ensure that there is diversity in
the supply chain, working with SMEs as well as larger
organisations. Where possible, we work with local suppliers,
therefore impacting positively on the communities where
we operate. The Group is also a signatory to the Prompt
Payment Code. IP Group seeks to operate as a responsible
employer and has adopted standards which promote
corporate values designed to help and guide employees
in their conduct and business relationships. The Group
seeks to comply with all laws, regulations and rules
applicable to its business and to conduct the business in
line with applicable established best practice. We take a
zero-tolerance approach to bribery and corruption and
implement and enforce effective systems. The Group is
bound by the laws of the UK, including the Bribery Act
2010, and has implemented policies and procedures based
on such laws.
Governance
The Group seeks to conduct all of its operating and
business activities in an honest, ethical and socially
responsible manner and these values underpin our
business model and strategy. We are committed to acting
professionally, fairly and with integrity in all of our business
dealings and relationships with consideration for the needs
of all of our stakeholders, including university partners,
investors, suppliers, employees, and the businesses in which
the Group has holdings. IP Group endeavours to conduct its
business in accordance with established best practice, to be
a responsible employer and to adopt values and standards
designed to help guide staff in their conduct and business
relationships. As a publicly traded entity, IP Group actively
seeks to engage and maintain an open dialogue with both
institutional and private shareholders through its investor
relations programme.
Policies
Copies of the Group’s policies in relation to anti-corruption
and bribery, anti-slavery, modern slavery, environmental,
equal opportunities and diversity, prompt payments,
speaking up, anti-facilitation of tax evasion, data protection,
health and safety, sustainability and ESG, ethical investment,
stakeholder engagement and “treating customers fairly” can
be found in the ESG section of the Group’s website: www.
ipgroupplc.com.
Cyber security
carried out a follow-up cyber maturity assessment in late
2020 with the PwC internal audit team. The report includes
recommendations that IP Group will act on to further
improve governance, system and infrastructure security. The
Group will continue to assess cyber security on an annual
basis to ensure that best practice is followed.
The focus for cyber at the Group in 2021 will be on
standardising the framework, KPIs and reporting across all
regions in which the Group operates. The Group conducted
a GDPR audit in 2020 with auditor PwC. PwC rated the
outcome as “satisfactory”, the highest rating that can be
achieved. To further ensure that the Group was capable of
responding swiftly and comprehensively to a Subject Access
Request (SAR), an exercise was carried out in late 2020 with
satisfactory results. The Group received no SARs in 2020.
IP Group has been awarded Cyber Essentials certification. IP
Group commissions regular external penetration testing on
IT infrastructure and has implemented multiple cloud and
on-premises technologies to monitor endpoints, network
traffic and mitigate the risk of intrusion and data breach.
The Group carries out diligence to ensure that third party
suppliers are maintaining good standards of security.
IP Group continues to ensure that all members of staff
receive annual mandatory cyber security training with
additional training delivered in reaction to emerging external
factors, such as working from home during lockdown and in
reaction to increased levels of phishing attacks.
A quarterly phishing test takes place and staff that fall
short of expectations are contacted to carry out additional
training.
The Group takes the threat of a cyber incident very seriously
and endeavours to mitigate the risk wherever possible. The
Group maintains a business continuity plan and reviews
this plan annually. This plan includes playbooks to react to
incidents such as a data breach or other cyber incident.
Community engagement
In August 2020, the Group’s partnership with education
charity Generating Genius came to the end of its term.
While the search for a new partner charity was delayed due
to COVID-19 disruptions, the charity liaison team sought to
support charities with individual contributions and engage
staff, details of which are below:
Crossing Continents
Between May and June, IP Group held a virtual “Crossing
Continents” challenge to raise funds for Médecins Sans
Frontières. IP Group staff were challenged to collect
donations for the charity’s COVID-19 appeal while collectively
walking, running, or cycling 3,000 K. Our staff raised £1,930,
which was matched and further supplemented by a base
donation of £5,000 by the Group for a total of £8,860.
Cyber security reports are regularly provided to the Audit
Thirty-four employees from around the world participated in
and Risk Committee and, on request, to the plc Board. The
the challenged, covering 7643.56 K between them.
committee takes a keen interest in the measures that are in
place and the roadmap for future developments. The Group
Participants in the Crossing Continents challenge were able
to share photos of their experience with colleagues.
Generating Genius students at work experience day
The Felix Project
With the Walbrook Office closed, the Crisis Response Group
and Charity teams agreed that a portion of savings from
running the office should go to a local charity. A donation of
£3,460, representing three months of office expenditures,
was made to The Felix Project, a London-based charity that
collects surplus food from commercial supply chains and
redistributes it to schools and charities.
Generating Genius
The charity aims to address the attainment gap of black,
Asian and minority ethnic (BAME) students compared with
other demographics within STEM (science, technology,
engineering and maths) subjects and related industries by
supporting talented and able students over a prolonged
period of time with a mix of academic and professional
engagement.
IP Group was also able to host six young people in February
2020 for a work experience week. The students were set
the challenge of developing a business idea and pitching it
to a panel of Group staff, while simultaneously attending a
series of meetings to learn about the business.
During the year, the original cohort of 50 students
supported by the Group’s donation completed their first
year of the Uni Genius programme. Due to COVID-19 and
lockdown, students were not able to sit their AS-Level
exams. However, 23 of the 50 students were awarded
predicted grades by their schools. These include:
• 18 A-A*s in Maths
• 5 A-A*s in Further Maths
• 9 A-A*s in Biology
• 13 A-A*s in Chemistry
• 7 A-A*s in Physics
Post year end
In the post-year-end period, the Group held a staff vote on
its future charity partnership. A shortlist of four potential
charities was chosen by the charity liaison team from an
original pool of staff-sourced suggestions and proposals
made available for the final vote.
The chosen charity was IntoUniversity, an educational
charity that supports young people in accessing higher
education or other ambitions through a network of learning
centres spanning the UK.
A list of the other charities that IP Group has
supported to date can be found on the Group’s website:
www.ipgroupplc.com.
Every member of the company
that I met was extremely friendly
and interesting conversations were
held and advice given in terms of
academic goals and options, whilst
them giving us their own experience
of their route to success. I can say
that I have a clearer vision in the
way that I want to go in terms of my
future career.”
(Student when asked about the best part of their
work experience)
7 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Culture
Aligning our people with our purpose
The success of IP Group depends on the quality of our
talent across a broad range of disciplines. Our purpose -
addressing some of the fundamental challenges faced by
our planet by evolving great ideas into world-changing
businesses – drives a deep intrinsic level of commitment
from our team. Our continued focus on our culture seeks
to build on this, with the ultimate aim of creating an
environment which allows us to attract, retain and engage
exceptional people.
Pandemic response
As with most companies, 2020 was dominated by our
response to COVID-19. In response to the unique challenges
posed by such a fundamental change to both the external
environment and our own ways of working, we made a
conscious choice to de-prioritise some of our original plans.
This included delaying the start of our planned project
to form a new Executive Committee, which after kick-off
was then further delayed by the comprehensive Executive
Leadership succession planning exercise undertaken, which
is outlined in the Nominations Committee report on page
100. We also postponed our work on the re-definition of
Values, pending an expected longer-term change in our
ways of working.
Resource was instead deployed in ensuring all of our people
were (and remain) supported, protected and productive
during a period of significant disruption. Of course, we
worked hard to ensure all of our people were provided
with the range of tools required to shift to a home-based
working pattern.
We also recognised the need to do as much as we could
to support the wellbeing of our people. The capability of
our people is our greatest asset, and we place just as much
importance upon supporting our team as we do on the
development of our portfolio companies.
As a result of this focus, we implemented a “mind, body,
spirit” model to the provision of support, ensuring our
people were aware of the existing benefits and support
available to them and implementing new support
mechanisms where required. This approach continues to
develop.
During 2020, highlights included:
• Providing access to our internal Mental Health First Aider
as a first port of call for struggling employees, as well as
mindfulness training and support for all of our people.
• Keeping our employees active by providing regular free
sporting and wellness activities, including regular online
exercise and yoga sessions available for employees
and their families. Keeping our people healthy through
funded flu vaccinations, supplementing our existing
Vitality Health and BUPA dental support.
• Equipping our people to cope with changes in working
patterns through sustained resilience training and
support and mitigating some of the stresses caused by
the pandemic through the offer of hardship loans to all
employees.
In order to maintain our positive working culture during the
extended period of working from home, we significantly
increased both the breadth and frequency of employee
communication. A bi-weekly cycle of All Staff meetings
was supplemented by our weekly Portfolio Update
Programme to ensure our people remained close to the
business. Our CEO and our People Director also deliver
separate all-employee communications on a weekly basis,
respectively ensuring our people were (and remain) aware
of commercial progress and the range of practical and
emotional support available to them.
Retention, engagement and performance have all improved
significantly through 2020. This has created a solid
platform for future improvements in our culture, which in
turn will enable further improvements in performance.
Having reacted quickly and decisively to support our
people through the early stages of the pandemic, our focus
in 2021 will be on how we make the most of the lessons we
have learned. As the world returns to more normal patterns
of working in 2021 and beyond, we’ll seek to identify and
implement a best of both worlds approach – retaining the
flexibility and agility of a remote approach whilst focussing
on effective ways to provide our people with value-add
face to face interaction in a safe, secure environment.
The sections below provide more detail on our progress
throughout 2020, and our ambition for the coming year
and beyond.
Diversity and inclusion
Creating a diverse and inclusive working environment
is central to our culture at IP Group. We are, of course,
committed to equal opportunities when it comes to
recruitment, selection and development. But it’s not only
a focus because it’s the right thing to do. Our people are
likely to be happier and more productive if they can be
themselves at work. Our success depends upon the quality
of investment decisions we make and the advice we give,
both of which can only be improved when influenced by a
wider range of representative views. Therefore, inclusion of
a broad range of experiences, characteristics and outlooks
within our business is also a way we can improve our
performance.
As set out above, our ambition to improve gender diversity
in our senior management team as part of the formation of
a new Executive Committee commenced later in the year
than we originally planned. As a result, at 2020 year-end,
our gender balance across the business remained broadly
comparable with that reported for 2019.
7 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
7 1
Culture
Aligning our people with our purpose
The success of IP Group depends on the quality of our
talent across a broad range of disciplines. Our purpose -
addressing some of the fundamental challenges faced by
our planet by evolving great ideas into world-changing
businesses – drives a deep intrinsic level of commitment
from our team. Our continued focus on our culture seeks
to build on this, with the ultimate aim of creating an
environment which allows us to attract, retain and engage
exceptional people.
Pandemic response
As with most companies, 2020 was dominated by our
response to COVID-19. In response to the unique challenges
posed by such a fundamental change to both the external
environment and our own ways of working, we made a
conscious choice to de-prioritise some of our original plans.
This included delaying the start of our planned project
to form a new Executive Committee, which after kick-off
was then further delayed by the comprehensive Executive
Leadership succession planning exercise undertaken, which
is outlined in the Nominations Committee report on page
100. We also postponed our work on the re-definition of
Values, pending an expected longer-term change in our
ways of working.
Resource was instead deployed in ensuring all of our people
were (and remain) supported, protected and productive
during a period of significant disruption. Of course, we
worked hard to ensure all of our people were provided
with the range of tools required to shift to a home-based
working pattern.
We also recognised the need to do as much as we could
to support the wellbeing of our people. The capability of
our people is our greatest asset, and we place just as much
importance upon supporting our team as we do on the
development of our portfolio companies.
As a result of this focus, we implemented a “mind, body,
spirit” model to the provision of support, ensuring our
people were aware of the existing benefits and support
available to them and implementing new support
mechanisms where required. This approach continues to
develop.
During 2020, highlights included:
• Equipping our people to cope with changes in working
patterns through sustained resilience training and
support and mitigating some of the stresses caused by
the pandemic through the offer of hardship loans to all
employees.
In order to maintain our positive working culture during the
extended period of working from home, we significantly
increased both the breadth and frequency of employee
communication. A bi-weekly cycle of All Staff meetings
was supplemented by our weekly Portfolio Update
Programme to ensure our people remained close to the
business. Our CEO and our People Director also deliver
separate all-employee communications on a weekly basis,
respectively ensuring our people were (and remain) aware
of commercial progress and the range of practical and
emotional support available to them.
Retention, engagement and performance have all improved
significantly through 2020. This has created a solid
platform for future improvements in our culture, which in
turn will enable further improvements in performance.
Having reacted quickly and decisively to support our
people through the early stages of the pandemic, our focus
in 2021 will be on how we make the most of the lessons we
have learned. As the world returns to more normal patterns
of working in 2021 and beyond, we’ll seek to identify and
implement a best of both worlds approach – retaining the
flexibility and agility of a remote approach whilst focussing
on effective ways to provide our people with value-add
face to face interaction in a safe, secure environment.
The sections below provide more detail on our progress
throughout 2020, and our ambition for the coming year
and beyond.
Diversity and inclusion
Creating a diverse and inclusive working environment
is central to our culture at IP Group. We are, of course,
committed to equal opportunities when it comes to
recruitment, selection and development. But it’s not only
a focus because it’s the right thing to do. Our people are
likely to be happier and more productive if they can be
themselves at work. Our success depends upon the quality
of investment decisions we make and the advice we give,
both of which can only be improved when influenced by a
wider range of representative views. Therefore, inclusion of
a broad range of experiences, characteristics and outlooks
within our business is also a way we can improve our
• Providing access to our internal Mental Health First Aider
as a first port of call for struggling employees, as well as
performance.
mindfulness training and support for all of our people.
• Keeping our employees active by providing regular free
sporting and wellness activities, including regular online
exercise and yoga sessions available for employees
and their families. Keeping our people healthy through
funded flu vaccinations, supplementing our existing
Vitality Health and BUPA dental support.
As set out above, our ambition to improve gender diversity
in our senior management team as part of the formation of
a new Executive Committee commenced later in the year
than we originally planned. As a result, at 2020 year-end,
our gender balance across the business remained broadly
comparable with that reported for 2019.
Gender split as at 31 December 2020
Board
Senior Leadership Team
Senior Managers/
Partners
Combined SLT
All employees
Male
Female
#
7
8
14
22
55
%
70%
100%
67%
76%
54%
#
3
0
7
7
46
%
30%
0%
33%
24%
46%
We have, however, made progress in this area. The project
to form a new Executive Committee has since concluded,
with final appointments to the new Committee to be made
prior to the publication of the Group’s half-year results. At
the time of writing, eight of the eleven intended posts on the
Committee have been appointed, and of these appointees
two are female, increasing representation to 25%.
Two of the remaining vacancies are Employee Executive
roles. The primary purpose of these roles is to bring more
diversity of thought into the decision-making processes
at the top of IP Group. We expect those appointed will
be able to utilise this broader perspective (including
their experience and view as an employee) to offer
constructive and challenging input to both strategic and
operational decisions. The selection process for both of
these roles has now begun internally, with a focus on
both performance, track record and demonstration of the
strengths, perspectives and experiences that we believe will
supplement those in the existing team.
Our internal 30% Club group has continued to meet
through 2020, with the aim of promoting gender equality
within our company. During the year, the group continued
to sponsor an internal mentoring programme. The
programme came to a planned completion in summer
2020. Whilst the programme was generally positively
received, following input from mentees we have not re-
launched. Rather, we are assessing whether a more bespoke
development programme for individuals might be more
beneficial in future, and we will incorporate this work into
our wider plans for employee development in 2021 (see
below).
The 30% Club also continued to sponsor an ‘Inspirational
Speakers’ series. However, the series (which relied on live
sessions with interesting female speakers) was paused early
in 2020, as a result of the significant change in working
patterns. A one-off remote session, featuring Dr Jing Zhang,
the founder of Aqdot was well received, as was a session
with Tanni Grey-Tompson, who spoke as part of our focus
on Resilience and Wellbeing. Further sessions in this series
are already planned for 2021.
Of course, our commitment to building a diverse and
inclusive organisation extends beyond the focus on gender.
We are committed to ensuring that all people feel included
and able to contribute, and we aspire to reflect this in the
shape and structure of our business.
As we move into 2021, our dual focus is on improving
recruitment, promotion and the support available to
under-represented groups. We will also ensure that our
internal decision-making committees below Board and
Executive Committee level (including our Capital Allocation
Committee and our various Investment Committees)
include a more diverse range of experience and capability.
We aim to report significant progress in these areas in our
2021 Annual Report.
Supporting diversity and inclusion:
2021 and beyond
• Diversity Listening Project (H2 2020)
• 100 Black Interns commitment and appointment
• Revised recruitment and selection policy
• Positive language guidelines developed
•
Inclusion of team diversity metrics in our non-financial
KPI
• Commitment to greater diversity on all decision making
forums
• Diversity Oversight Committee constituted, and expert
external advisers appointed
We are planning to support these development areas
by initiating regular data collection on a wider range
of characteristics across our employee group. This
will enable us to better understand the existing profile
of our population, identify any issues or concerning
trends more quickly, and target improvement in key
underlying measures.
The exercise will be wholly voluntary and, once launched,
our people will be able to change or remove information on
a self-serve basis at any time.
Finally, we take our responsibility to promote Diversity and
Inclusion in our portfolio equally seriously. As a long-term
investor, focussed on building successful companies over
the longterm, we believe our portfolio companies should
share our commitment and focus in this area, and plan to
work proactively with our portfolio to ensure that this is
the case.
Listening to our people
As set out throughout this report, our long-term success
is highly dependent upon the quality of our team, and
their willingness to contribute to our success over the long
term. Ensuring our people remain engaged, motivated
and aligned with our ambition to make a positive impact
upon the world is critical. We therefore place a high level
of importance upon both hearing from and responding or
reacting to our employees on a wide range of issues.
7 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Culture
continued
During 2020, we continued with our regular cycle of
meetings with IP Connect, our employee forum. IP Connect,
which is sponsored and attended by Aedhmar Hynes as
the Designated Non-executive Director for workforce
engagement (“Designated NED”), acts as a conduit
between the Board and the wider team. During 2020, the
members of the group and their constituents provided
feedback on a broad range of topics (see further detail on
page 74). We also gather employee feedback more widely
via our annual Engagement survey and regular updates via
a Pulse survey cycle to check on engagement levels. During
2020 we ran four of these surveys.
In addition to our regular feedback cycle, we engage
regularly with our employees’ opinions on specific topics.
For example, during 2020 we engaged our people on how
we could improve the experience of employees with diverse
characteristics through a listening exercise, surveyed on
how and where our people might prefer to work post-
pandemic and engaged directly (as well as with IP Connect)
on how we could simplify reward. Feedback in all of these
areas has been critical to building our future approach(es),
in a way that ensures continued engagement across the
whole team.
Listening to and then acting upon the feedback of our
people is something we are committed to continuing as we
move into 2021. IP Connect will continue to meet regularly,
representing the views of our employees to the Executive
Directors and wider Board. Outside of this forum, our
employees are able to easily access our executive team,
wider leadership group or the HR lead, and are encouraged
to do so.
Engaging our team
Making sure our team is engaged and aligned with our
purpose has always been important to us. This became
even more important during 2020 with the move to home-
working and virtual meetings inevitably weakening the
natural ties with and between our people.
We reacted to this by strengthening the focus on the
positive benefits of working with IP Group – in particular
on aligning our people with our overall purpose, through
increased communication.
We implemented a cycle of weekly live, virtual
communications, combining our Portfolio Update
Programme sessions with our All Staff meetings. The
Portfolio update sessions give our people the opportunity
to learn about specific portfolio company technology and
performance direct from our investment teams. The All
Staff meetings ensure regular updates from our executive
directors and other key leaders and team members on the
performance of our own business and more specific issues
relevant to a wide range of our people.
We continue to believe that we can help to inspire
exceptional people to do exceptional things through reward.
During 2020 we consulted with staff on changes they would
like to see to reward structures and packages, with the aim
of increasing engagement in this area. We concluded that
a focus on simplification and evolution within the same
overall reward framework would strike the right balance.
These evolutionary developments will be implemented and
communicated to employees throughout 2021.
Implicit in our approach is the belief that employee
engagement is far more than just a number. We aspire
to build a team that is genuinely aligned with our core
purpose. That said, we have made significant advances
in measured levels of engagement in 2020. We believe
the +25 point gain in eNPS (see below), delivered
against a wider environment of uncertainty and change,
demonstrates this.
We were also pleased to see a reduction in unplanned
turnover in 2020. Whilst 17 colleagues (14%) left the
business overall, only four leavers were unplanned.
Encouragingly, two of those (50%) left to join portfolio
companies, and so will continue to positively contribute to
our future.
In 2021, our objective is simply to maintain or slightly
improve this high level of overall engagement, building on
the success of 2020. We will continue to survey our people
regularly to measure progress. More importantly, one of the
lessons that we have learned through 2020 is the power
of more frequent communication, regularly delivered via
accessible channels. This is something we will maintain as
we move forward and seek to build on our existing cycle
of weekly virtual/email communications with additional
opportunities for face to face interaction as we pivot into
post-COVID ways of working.
eNPS: Improved from -2 to +23
during 2020
• Measured using responses to “I would recommend
IP Group as a great place to work” in our regular
survey
• Question answered on scale 1 – 5
• eNPS = % employees answering 5, less % answering
1, 2 or 3. Outcomes range from -100 (low) to +100
(high)
Building skills and capability
Our people gain significant experience from working with a
number of start- up enterprises and seeing first hand what
works and what doesn’t, sharing knowledge and discussing
these experiences both within and across our teams.
All employees who are involved with the regulated business
of managing investment transactions receive compliance
and anti-money laundering training, with periodic refresher
courses. All of our people also participated in Cyber
Security, GDPR and anti-money laundering training,
7 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Culture
continued
During 2020, we continued with our regular cycle of
meetings with IP Connect, our employee forum. IP Connect,
which is sponsored and attended by Aedhmar Hynes as
the Designated Non-executive Director for workforce
engagement (“Designated NED”), acts as a conduit
between the Board and the wider team. During 2020, the
members of the group and their constituents provided
like to see to reward structures and packages, with the aim
of increasing engagement in this area. We concluded that
a focus on simplification and evolution within the same
overall reward framework would strike the right balance.
These evolutionary developments will be implemented and
communicated to employees throughout 2021.
feedback on a broad range of topics (see further detail on
Implicit in our approach is the belief that employee
page 74). We also gather employee feedback more widely
engagement is far more than just a number. We aspire
via our annual Engagement survey and regular updates via
to build a team that is genuinely aligned with our core
a Pulse survey cycle to check on engagement levels. During
purpose. That said, we have made significant advances
2020 we ran four of these surveys.
In addition to our regular feedback cycle, we engage
regularly with our employees’ opinions on specific topics.
For example, during 2020 we engaged our people on how
in measured levels of engagement in 2020. We believe
the +25 point gain in eNPS (see below), delivered
against a wider environment of uncertainty and change,
demonstrates this.
we could improve the experience of employees with diverse
We were also pleased to see a reduction in unplanned
characteristics through a listening exercise, surveyed on
turnover in 2020. Whilst 17 colleagues (14%) left the
how and where our people might prefer to work post-
business overall, only four leavers were unplanned.
pandemic and engaged directly (as well as with IP Connect)
Encouragingly, two of those (50%) left to join portfolio
on how we could simplify reward. Feedback in all of these
companies, and so will continue to positively contribute to
areas has been critical to building our future approach(es),
our future.
in a way that ensures continued engagement across the
whole team.
In 2021, our objective is simply to maintain or slightly
improve this high level of overall engagement, building on
Listening to and then acting upon the feedback of our
the success of 2020. We will continue to survey our people
people is something we are committed to continuing as we
regularly to measure progress. More importantly, one of the
move into 2021. IP Connect will continue to meet regularly,
lessons that we have learned through 2020 is the power
representing the views of our employees to the Executive
of more frequent communication, regularly delivered via
Directors and wider Board. Outside of this forum, our
accessible channels. This is something we will maintain as
employees are able to easily access our executive team,
we move forward and seek to build on our existing cycle
wider leadership group or the HR lead, and are encouraged
of weekly virtual/email communications with additional
opportunities for face to face interaction as we pivot into
post-COVID ways of working.
to do so.
Engaging our team
Making sure our team is engaged and aligned with our
purpose has always been important to us. This became
even more important during 2020 with the move to home-
working and virtual meetings inevitably weakening the
natural ties with and between our people.
We reacted to this by strengthening the focus on the
positive benefits of working with IP Group – in particular
on aligning our people with our overall purpose, through
increased communication.
We implemented a cycle of weekly live, virtual
communications, combining our Portfolio Update
Programme sessions with our All Staff meetings. The
Portfolio update sessions give our people the opportunity
to learn about specific portfolio company technology and
performance direct from our investment teams. The All
Staff meetings ensure regular updates from our executive
directors and other key leaders and team members on the
performance of our own business and more specific issues
relevant to a wide range of our people.
We continue to believe that we can help to inspire
eNPS: Improved from -2 to +23
during 2020
• Measured using responses to “I would recommend
IP Group as a great place to work” in our regular
• Question answered on scale 1 – 5
• eNPS = % employees answering 5, less % answering
1, 2 or 3. Outcomes range from -100 (low) to +100
survey
(high)
Building skills and capability
Our people gain significant experience from working with a
number of start- up enterprises and seeing first hand what
works and what doesn’t, sharing knowledge and discussing
these experiences both within and across our teams.
All employees who are involved with the regulated business
of managing investment transactions receive compliance
exceptional people to do exceptional things through reward.
and anti-money laundering training, with periodic refresher
During 2020 we consulted with staff on changes they would
courses. All of our people also participated in Cyber
Security, GDPR and anti-money laundering training,
In 2020, we also started the process of improving our broader training offer. In doing so, we aim to create a positive, adaptable environment within which our people can thrive as individuals whilst positively contributing to our performance. Development opportunities offered in 2020 covered topics as diverse as ESG investing, Finance/Accounting and Genetics and Neuroscience. We supported the business with a significant investment in Wellbeing training, including the provision of weekly Yoga and fitness classes, Mindfulness training and support, Resilience training and a series of sessions on mental health, stress and building alternative perspectives. Our commitment to remaining safe, legal and compliant across the business was supported through the provision of Anti-Money Laundering training.This development process will continue in 2021, with a further increase in the level of investment we make in discretionary training. Our programme for 2021 will include a focus on Leadership skills, as well as targeted coaching and mentoring.We hope and expect this investment in skills to result in an increase in the proportion of our team who feel ready for promotion or broader career progression. To facilitate this, and to ensure we are prepared if and when employees choose to leave the business, we will also undertake more structured succession planning in 2021 below board level.As a result of this process, we will ensure that we have a nominated short- medium- and long-term succession option for at least every Executive Committee and wider senior leadership/management role in the organisation. As part of this process, we will identify employees with medium- and long-term potential to progress into senior leadership positions within the group,and build individual development plans to support this progression. More details can be found on page 102 of the Nomination committee report. As a result of this, we would expect to further increase engagement and retention of our employees. We would also expect to increase the attractiveness of IP Group to external candidates, ensuring we continue to attract a diverse mix of talented people. The overall effect of will be to both strengthen and broaden the pipeline of talent available to the Group at every level.Protecting Our PeopleAll our people are responsible for the promotion of, and adherence to, health and safety measures in the workplace. Our Chief Operating Officer has overall responsibility for the implementation of the Group’s health and safety policies and procedures.The primary purpose of the Group’s health and safety policy is to enable all of the Group’s people to go about their everyday business at work in the expectation that they can do so safely and without risk to their health. During the year ended 31 December 2020, no reportable accidents occurred under UK Health and Safety regulations. Our overall ambition in 2021 is to develop our approach in three key areas (below):Diversity DevelopmentIncrease the diversity of thought and experience within our teams and ensure everyone feels included within our business.Make sure we take advantage of the broad experience within our current population to improve our decision making.Redesign critical processes to improve inclusion and diversity.Individual DevelopmentInvest in the development of our people. Embed a dual focus on both professional capability and broader skills.Aim to ensure our people are fully equipped to perform in role, and ready to progress within our business when the opportunity presents.Organisational DevelopmentImprove the operational effectiveness of the business. Facilitate the organisational and structural changes needed to optimise both culture and commercial outcomes whilst ensuring we remain sensitive to the needs and requirements of our broader stakeholder group – especially our people.Business Overview73Strategic ReportOur GovernanceOur Financials 74
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Working with the Group’s stakeholders
Statement by the directors in
performance of their duties in
accordance with s172(1) Companies
Act 2006
The directors of IP Group plc consider, both individually
and together as a Board, that they have acted in the way
that they consider, in good faith, 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)
Companies Act 2006 when performing its duties under
s172 Companies Act 2006 (“s172”) for the year ended 31
December 2020.
Engaging with stakeholders
Engaging with stakeholders is an integral part of the
Group’s business and critical to ensuring the future
success of the business. Please refer to pages 95 to 98
of the Corporate Governance Report for details of the
key stakeholders identified by the Group, the Group’s
engagement with such stakeholders during the year and the
issues that matter to such stakeholders, as well as the table
set out on page 95 detailing how the Board has responded
to stakeholder feedback throughout 2020.
Consideration of long-term
consequences in decision-making and
strategy.
The Group’s long-term strategy is to develop and support
intellectual property-based businesses that will have
a positive impact on the environment and society into
robust businesses, from cradle to maturity, with the aim
of delivering positive social and environmental impact
alongside financial returns for the Group. A detailed
explanation of the long-term strategy is set out on pages
08 to 09, and the Group’s business model is set out on
pages 10-11.
The Group considers environmental, social and governance
(“ESG”) factors in relation to its role as a responsible
investor and in relation to the impact of its portfolio
companies. Three executive directors of the Group are
members of the Group’s ESG Working Group, which was
established in 2018. One of the key purposes of the ESG
Working Group is to ensure that the Group’s investment
process is aligned with the Group’s strategy, of building
businesses with a positive impact on the environment and
society whilst achieving financial returns. Details of the
actions the ESG Working Group completed during 2020
and its planned focus for 2021 are set out on pages 58 to
60. In particular, the Group has updated its investment
committee processes to ensure that ESG considerations are
now a standing item in any investment decision made in
relation to a portfolio company.
In addition, CEO Alan Aubrey is also a member of the
Group’s Ethics Committee which was established in 2020.
Further details of the Group’s Ethics Committee and the
Ethical Investment Framework can be found on page 60.
In its role as a responsible investor, the Group sets the
expectation of high levels of corporate governance within
its portfolio, taking up director positions on the boards of
the majority of the Group’s focus companies which helps
to ensure robust corporate governance processes are in
place within such companies, facilitating introductions to
external advisers, and sharing any best practice or helpful
guidance on new legislation. In 2020, the Group developed
an ESG policy toolkit for its portfolio companies, providing
template policies for key corporate governance policies that
the Group expects its portfolio companies to have in place.
Further information on the Group’s stewardship activities is
detailed on pages 60 to 61.
The Group considers one of its key stakeholders to be
the wider community, and an example of how the Group
engages in this respect can be seen through the Group’s
charitable work, following a three-year partnership with
Generating Genius and the recent engagement with
IntoUniversity as the Group’s new charitable partner.
Further details are set out on pages 68 to 69.
Culture
As described on pages 87 to 88, one of the key roles of
the Board is to help to establish and embed the Group’s
purpose, values and culture and make sure that these are
taken into account when making its decisions. The Group’s
strategy has an inbuilt focus on long-term investment and
its core purpose, to evolve great ideas into world-changing
businesses, requires strong engagement with its portfolio
companies. The Group prides itself on its high standards of
business conduct and expects that its portfolio companies,
co-investors, employees and suppliers hold the same high
standards when conducting their respective businesses.
Employee engagement via IP Connect
IP Connect, the Group’s employee forum, continued to
thrive in 2020 and ensured a two-way dialogue between the
Board and the employees, facilitated by Aedhmar Hynes,
the Group’s Designated NED responsible for engaging with
the Group’s workforce. IP Connect met seven times and
were consulted on various matters including the Group’s
strategy, its diversity and inclusion policies, its culture and
values, its response to the COVID-19 pandemic and the
potential long-term change in working patterns as a result
of the pandemic. IP Connect have also been consulted on
the Group’s practices around executive remuneration, as
further detailed on page 72. Aedhmar acts as the liaison
between IP Connect and the Board, bringing relevant
Board matters to the forum for input and, in turn, reporting
on how the Board has taken into account the views of IP
Connect, and by extension the wider employee base, in
any relevant decisions it has made. At the start of 2021, a
three tier review of IP Connect and its purpose (as set out
in the IP Connect terms of reference) was carried out, with
feedback sought from the Board, IP Connect members and
the wider workforce. The feedback was largely positive, and
confirmed that the combination of a Designated NED and
an employee forum is a sensible and appropriate approach
to employee engagement within the Group. Aedhmar
will work with the Chair of IP Connect to implement the
recommendations from the review during 2021.
74
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
7 5
Working with the Group’s stakeholders
Statement by the directors in
performance of their duties in
accordance with s172(1) Companies
Act 2006
The directors of IP Group plc consider, both individually
and together as a Board, that they have acted in the way
that they consider, in good faith, would be most likely to
promote the success of the Company for the benefit of
its members as a whole. This statement describes how
In its role as a responsible investor, the Group sets the
expectation of high levels of corporate governance within
its portfolio, taking up director positions on the boards of
the majority of the Group’s focus companies which helps
to ensure robust corporate governance processes are in
place within such companies, facilitating introductions to
external advisers, and sharing any best practice or helpful
guidance on new legislation. In 2020, the Group developed
an ESG policy toolkit for its portfolio companies, providing
template policies for key corporate governance policies that
the Group expects its portfolio companies to have in place.
Further information on the Group’s stewardship activities is
the Board has had regard to the matters set out in s172(1)
detailed on pages 60 to 61.
Companies Act 2006 when performing its duties under
s172 Companies Act 2006 (“s172”) for the year ended 31
December 2020.
Engaging with stakeholders
Engaging with stakeholders is an integral part of the
Group’s business and critical to ensuring the future
success of the business. Please refer to pages 95 to 98
of the Corporate Governance Report for details of the
key stakeholders identified by the Group, the Group’s
engagement with such stakeholders during the year and the
issues that matter to such stakeholders, as well as the table
set out on page 95 detailing how the Board has responded
to stakeholder feedback throughout 2020.
Consideration of long-term
consequences in decision-making and
strategy.
The Group’s long-term strategy is to develop and support
intellectual property-based businesses that will have
a positive impact on the environment and society into
robust businesses, from cradle to maturity, with the aim
of delivering positive social and environmental impact
alongside financial returns for the Group. A detailed
explanation of the long-term strategy is set out on pages
08 to 09, and the Group’s business model is set out on
pages 10-11.
The Group considers environmental, social and governance
(“ESG”) factors in relation to its role as a responsible
investor and in relation to the impact of its portfolio
companies. Three executive directors of the Group are
members of the Group’s ESG Working Group, which was
established in 2018. One of the key purposes of the ESG
Working Group is to ensure that the Group’s investment
process is aligned with the Group’s strategy, of building
businesses with a positive impact on the environment and
society whilst achieving financial returns. Details of the
actions the ESG Working Group completed during 2020
and its planned focus for 2021 are set out on pages 58 to
60. In particular, the Group has updated its investment
committee processes to ensure that ESG considerations are
now a standing item in any investment decision made in
relation to a portfolio company.
In addition, CEO Alan Aubrey is also a member of the
Group’s Ethics Committee which was established in 2020.
Further details of the Group’s Ethics Committee and the
Ethical Investment Framework can be found on page 60.
The Group considers one of its key stakeholders to be
the wider community, and an example of how the Group
engages in this respect can be seen through the Group’s
charitable work, following a three-year partnership with
Generating Genius and the recent engagement with
IntoUniversity as the Group’s new charitable partner.
Further details are set out on pages 68 to 69.
Culture
As described on pages 87 to 88, one of the key roles of
the Board is to help to establish and embed the Group’s
purpose, values and culture and make sure that these are
taken into account when making its decisions. The Group’s
strategy has an inbuilt focus on long-term investment and
its core purpose, to evolve great ideas into world-changing
businesses, requires strong engagement with its portfolio
companies. The Group prides itself on its high standards of
business conduct and expects that its portfolio companies,
co-investors, employees and suppliers hold the same high
standards when conducting their respective businesses.
Employee engagement via IP Connect
IP Connect, the Group’s employee forum, continued to
thrive in 2020 and ensured a two-way dialogue between the
Board and the employees, facilitated by Aedhmar Hynes,
the Group’s Designated NED responsible for engaging with
the Group’s workforce. IP Connect met seven times and
were consulted on various matters including the Group’s
strategy, its diversity and inclusion policies, its culture and
values, its response to the COVID-19 pandemic and the
potential long-term change in working patterns as a result
of the pandemic. IP Connect have also been consulted on
the Group’s practices around executive remuneration, as
further detailed on page 72. Aedhmar acts as the liaison
between IP Connect and the Board, bringing relevant
Board matters to the forum for input and, in turn, reporting
on how the Board has taken into account the views of IP
Connect, and by extension the wider employee base, in
any relevant decisions it has made. At the start of 2021, a
three tier review of IP Connect and its purpose (as set out
in the IP Connect terms of reference) was carried out, with
feedback sought from the Board, IP Connect members and
the wider workforce. The feedback was largely positive, and
confirmed that the combination of a Designated NED and
an employee forum is a sensible and appropriate approach
to employee engagement within the Group. Aedhmar
will work with the Chair of IP Connect to implement the
recommendations from the review during 2021.
The wellbeing of employees was of paramount importance to the Group during 2020 and IP Connect played an important
role in allowing employees to express their thoughts on the Group’s handling of the COVID-19 pandemic, ensuring any
concerns would be raised with the Board. Further information on how the Group responded to the COVID-19 pandemic
within the wider context of the Group’ culture is set out on page 72.
How stakeholders’ views are reported to the Board and influence the
Board agenda
By understanding the views of its stakeholders, the Board can take into account their opinions, needs and concerns when
debating and making decisions. Where considered appropriate, major institutional shareholders are consulted on significant
decisions and transactions, changes to the Board and the structure of the Executive Directors’ remuneration. For example,
key stakeholders were consulted on the Group’s approach to capital allocation as detailed further below on page 77. In
addition, major shareholders were consulted on the Group’s ESG materiality assessment which was undertaken to identify
the material ESG factors that the Group should focus on and to assist it in developing some relevant key performance
indicators in this area. The following table details some examples of interaction between the Board and key stakeholders on
certain matters during 2020, which enabled the Board to take the relevant stakeholders’ views into account when making
related decisions.
Theme
Discussion topics with and feedback
from stakeholders
Action taken by the Board as a result of
stakeholder engagement
Capital
allocation
Several shareholders had requested a
greater understanding of the Board’s
approach to capital allocation. Specific
queries from shareholders (both during
routine and roadshow meetings and via
the AGM Q&A process) related to the
Group’s improved cash resources as a
result of recent realisations and if, or
when, such resources would be used to
buy back the Group’s shares, particularly
when shares are trading at a discount to
NAV per share.
The Board discussed the Group’s approach to capital
allocation at length during 2019 and 2020 and, following
engagement with a number of key shareholders and
a detailed deliberation and number of iterations,
adopted a formal capital allocation policy in July. The
Board determined that the Group’s capital priority
remained organic growth through investment into its
portfolio. However, being mindful of interactions with
shareholders around cash resources, the Board approved
a provisional capital allocation for the buyback of the
Company’s shares should the appropriate opportunity
arise. Such approval provided the Executive Directors
with authority to pursue a potential buyback within
defined parameters, including providing a benefit to
all stakeholders through the removal of an ‘overhang’
and considering any difference between the Group’s
share price and its NAV per share at the relevant time.
In applying its capital allocation policy the Board noted
that the Group would also need to be mindful of the
differing business units within the Group, including its
international business units, and sought the views of
the employees who would be directly affected by the
Group’s capital allocation in their day-to-day business.
An internal audit review on the capital allocation
procedures in place completed in 2020 received
a “satisfactory” rating, the highest available. The
Board also updated its approach to dividends during
early 2021.
Further detail on stakeholder engagement relating to the
capital allocation policy and its application in defining
the approach for 2021, and the longer term,
is illustrated below.
7 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Working with the Group’s stakeholders
continued
Theme
Discussion topics with and feedback
from stakeholders
Action taken by the Board as a result of
stakeholder engagement
Oxford
Nanopore
Technologies
Shareholders frequently request updates
on Oxford Nanopore’s commercial,
technical and operational progress.
As Oxford Nanopore has continued to
develop and increase in value and given
the size and significance of Oxford
Nanopore to the Group, shareholders
often seek to better understand the
Board’s strategy regarding the Group’s
shareholding in this company and
particularly, any approach the Board may
take in the event of any exit opportunity
and/or liquidity event.
Impact of
COVID-19 on
the Group’s
business
The Group engaged with a wide range
of stakeholders in relation to the impact
of COVID-19 on its business, including
employees, shareholders, portfolio
companies and co-investors.
Long Term
Incentive
Plan (“LTIP”)
The Group engaged and consulted with
its major shareholders before it took the
LTIP rules to its Annual General Meeting
(“AGM”) for approval.
The Board has considered various potential methods for
optimising the value of the Group’s holding in Oxford
Nanopore in the future for its shareholders, including, for
example, selling shares or distributing shares in specie
concurrent with or following a future value inflection
point and/or retaining some shares as the company
continues to develop.
Consistent with its approach to any realisation that is
very significant, of a one-off nature and/or results in
cash in excess of short to medium term requirements,
the Directors have discussed potential approaches to
value maximisation with major shareholders as part of its
ongoing dialogue with this important stakeholder group.
The Board considered the Group’s three main priorities
during the COVID-19 pandemic to be: the health
and wellbeing of employees; supporting its portfolio
companies; and maintaining business-as-usual virtually.
The Board discussed the additional initiatives to staff
which included increased communications and wellbeing
initiatives. A Crisis Response Group, comprising three
Executive Directors and members of the Group’s
management team, was put in place and still meets on
a regular basis, to ensure the Company is able to react
quickly to the needs of its employees and other key
stakeholders The Board also engaged with portfolio
companies and gave consideration to the interactions
with them, and the work undertaken to assess and
mitigate the potential impact on their businesses,
including the impact of funding rounds. In particular,
the Group enabled some of its portfolio companies to
access the Government Future Fund scheme.
Following feedback from major shareholders that the
400% limit on individual LTIP awards in the LTIP rules
was higher than they could support, notwithstanding
that this higher limit had not been used in practice,
the Board engaged in dialogue with such shareholders
ahead of taking the LTIP rules back to shareholders
for approval at the 2020 AGM. The outcome of this
dialogue was agreement by the Board to reduce the
400% limit in the LTIP rules to 300%, thus aligning
the rules with the Directors’ Remuneration Policy and
removing the discretion to make excess awards in
exceptional circumstances. The LTIP rules were approved
by shareholders on that basis at the Group’s Annual
General Meeting in 2020, receiving 98.7% of the votes
cast in favour.
7 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
7 7
Working with the Group’s stakeholders
continued
Theme
Discussion topics with and feedback
Action taken by the Board as a result of
from stakeholders
stakeholder engagement
Oxford
Nanopore
Technologies
Shareholders frequently request updates
The Board has considered various potential methods for
on Oxford Nanopore’s commercial,
optimising the value of the Group’s holding in Oxford
technical and operational progress.
Nanopore in the future for its shareholders, including, for
As Oxford Nanopore has continued to
develop and increase in value and given
the size and significance of Oxford
Nanopore to the Group, shareholders
example, selling shares or distributing shares in specie
concurrent with or following a future value inflection
point and/or retaining some shares as the company
continues to develop.
often seek to better understand the
Consistent with its approach to any realisation that is
Board’s strategy regarding the Group’s
very significant, of a one-off nature and/or results in
shareholding in this company and
cash in excess of short to medium term requirements,
particularly, any approach the Board may
the Directors have discussed potential approaches to
take in the event of any exit opportunity
value maximisation with major shareholders as part of its
and/or liquidity event.
ongoing dialogue with this important stakeholder group.
The Group engaged with a wide range
The Board considered the Group’s three main priorities
of stakeholders in relation to the impact
during the COVID-19 pandemic to be: the health
Impact of
COVID-19 on
the Group’s
business
of COVID-19 on its business, including
employees, shareholders, portfolio
companies and co-investors.
The Group engaged and consulted with
Following feedback from major shareholders that the
Long Term
Incentive
Plan (“LTIP”)
its major shareholders before it took the
LTIP rules to its Annual General Meeting
(“AGM”) for approval.
and wellbeing of employees; supporting its portfolio
companies; and maintaining business-as-usual virtually.
The Board discussed the additional initiatives to staff
which included increased communications and wellbeing
initiatives. A Crisis Response Group, comprising three
Executive Directors and members of the Group’s
management team, was put in place and still meets on
a regular basis, to ensure the Company is able to react
quickly to the needs of its employees and other key
stakeholders The Board also engaged with portfolio
companies and gave consideration to the interactions
with them, and the work undertaken to assess and
mitigate the potential impact on their businesses,
including the impact of funding rounds. In particular,
the Group enabled some of its portfolio companies to
access the Government Future Fund scheme.
400% limit on individual LTIP awards in the LTIP rules
was higher than they could support, notwithstanding
that this higher limit had not been used in practice,
the Board engaged in dialogue with such shareholders
ahead of taking the LTIP rules back to shareholders
for approval at the 2020 AGM. The outcome of this
dialogue was agreement by the Board to reduce the
400% limit in the LTIP rules to 300%, thus aligning
the rules with the Directors’ Remuneration Policy and
removing the discretion to make excess awards in
exceptional circumstances. The LTIP rules were approved
by shareholders on that basis at the Group’s Annual
General Meeting in 2020, receiving 98.7% of the votes
cast in favour.
Training and Board processes
The Board identifies principal decisions by reference to the Matters Reserved for the Board and the Group’s Delegated
Investment and Realisations Authorities policy, which governs the approval process for significant investments and
realisations which are over a certain threshold. The Board has received training on its s172 obligations, and information
relating to stakeholder issues is included in relevant Board papers to enable the Board to be able to sufficiently understand
and consider any relevant stakeholder interests when making any principal decisions, including any feedback sought from
relevant stakeholders prior to the decision being made and the impact of such decisions on the relevant stakeholder groups.
Following any principal Board decision, the Board will endeavour to provide feedback to the relevant stakeholders, where
appropriate, as part of its continued meaningful stakeholder engagement process. Where appropriate, being mindful of its
obligations as a listed company and confidentiality requirements, the Board will seek input from key stakeholders prior to
a decision being implemented. 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 strategy to create long-term value for its shareholders.
Principal decision: Capital Allocation Policy
The Board seeks to ensure that the Group has sufficient capital to optimally pursue its long-term strategic aims. A
key example of a principal decision relating to the Group’s strategy taken by the Board in 2020, following stakeholder
engagement, is the adoption of the Group’s capital allocation policy and its application when determining capital
allocations for 2021 and beyond. This was considered at meetings of the Board in November and December 2020 (see
page 88) and again during 2021. Following a number of realisations by the Group (including Ceres Power, as further
detailed on page 18) during 2019 and 2020, along with a maturing portfolio, the Board concluded it was desirable to
formulate a more formal, yet flexible and iterative, capital allocation policy. The policy would facilitate the balancing of
the shorter- and longer-term capital needs of the Group’s various business units.
The capital allocation policy is principles-based and includes detail on processes and governance. The capital
allocation policy was adopted by the Board in July 2020, with the Board considering the policy in light of the Group’s
risk appetite statement, its existing delegated investment and realisation authorities and its ESG policy and Ethical
Investment Framework.
When discussing and subsequently adopting the capital allocation policy, the Board had regard to the following
considerations:
• Shareholders and consideration of long-term effects of the decision and link with Group’s strategy:
The Board considered its priorities for capital allocation. These included investing to pursue the Group’s core
purpose, primarily through investment into portfolio companies to generate attractive financial returns and, where
appropriate, would enable the Group to return capital to shareholders. In doing so, the Board was mindful that
some shareholders had asked specific questions around the level of cash resources from realisations made in 2020
and the appropriateness of a possible buyback of the Company’s shares. The Board considered these shareholder
queries and, as a result, approved a provisional allocation for the buyback of the Company’s shares within defined
parameters should the appropriate opportunity arise whereby the Board considered a buyback to be in the best
interests of the Company’s members as a whole. The Board also acknowledged that, in making any decision which
applied the Group’s capital allocation policy in this way, it would need to consider any gap between the Group’s
share price and its net asset value per share at the relevant time.
The Board determined that it was necessary to set an appropriate maximum level commitment for each business
unit, taking into account the Group’s overall strategy and its current resources, forecast realisations and additional
funding options. These included both the UK-based investment partnerships and international business units, as
well as some provisional allocation towards some of the fund opportunities and the other strategies to leverage
external co-investment, in furtherance of the Group’s hybrid approach to future access to capital.
The Board agreed that the management team would, on at least an annual basis, assess the level of capital required
to fulfil the Group’s purpose over a longer period, noting that portfolio companies often take at least five years to
mature and consequently that any capital allocation considerations needed to be viewed on a three-to-five-year
basis. Following such assessment, the Board agreed that the management team should then determine if there is,
or is expected to be, excess capital over this period and the allocation of any such potential excess capital would
be recommended to the Board by the Executive Directors at the relevant time.
7 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Working with the Group’s stakeholders
continued
Principal decision: Capital Allocation Policy continued
The Group finished 2020 with cash resources well in excess of expectations at the start of the year and, mindful
of the maturation of a number of focus assets in our portfolio and the resultant opportunities for cash realisations,
determined it was appropriate to further update its capital allocation policy as it related to dividends. In doing so,
the Board took into account various factors including the capital available and anticipated to be available for organic
growth, the capital made available for potential returns to shareholders during its most recent planning cycle, as
well as the volatility of the Group’s share price and its relationship to Hard NAV per share. The Board also took into
account the fact that success in realisations in 2020 had led to the first payments, totalling approximately £0.5m,
being made to employees under the Group’s long-term incentive carry schemes. Overall, the Board concluded that
the business model had now reached a sufficient stage of maturity that it would recommend to shareholders that
a modest but growing dividend should form part of the overall shareholder value proposition. Given the primarily
long-term capital returns nature of the Group’s approach to total shareholder returns, the Board also decided that it
would be appropriate to propose the introduction of an optional scrip dividend programme, allowing shareholders
to choose to receive dividends in the form of newly issued, fully paid shares in IP Group plc in lieu of cash.
Further, the Board considered that it should clarify that if the Group made realisations that were very significant,
of a one-off nature and/or resulted in cash requirements in excess of capital required in the short-to-medium term,
the Directors would intend to discuss with major shareholders an appropriate approach to distributing this excess
on a case-by-case basis as part of its ongoing dialogue with this important stakeholder group. The Board considers
that the Company is in a strong position to do so, either by way of a share buyback or dividend (including
distribution in specie) following the capital reduction completed in 2019.
• Debt providers:
The Board considered that another key priority when developing its capital allocation policy was the servicing of the
Group’s debt facilities, specifically its loan from the European Investment Bank. The Board discussed that, in the event
it considers any return of capital to shareholders or effects a share buyback in the future, such decisions would factor
in an appropriate level of headroom above current debt and borrowing covenants. Further any contractual terms
would be adhered to or permissions sought ahead of making any distributions or commitments to do so.
• Portfolio companies:
The Group’s business model, as further described on pages 10 to 11, is to generate attractive returns by investing in
world-changing businesses whilst applying an active approach to growing the value of such portfolio companies.
Where appropriate, the aim is to ‘back what we create’ and continue to make investments into portfolio companies,
helping to develop a healthy pipeline of investments into, and realisations from, portfolio companies. The interests
of portfolio companies are, therefore, central to the Group’s capital allocation policy. The Board agreed that
the Group needs to maintain sufficient capital to meet ongoing portfolio investment requirements and balance
potential timing issues between realisations and new investment requirements across its different jurisdictions.
• Employees:
The directors considered the impact of the capital allocation policy on its employees and, in particular, noted that
employees worked across different business units which are each at different stages of maturity with differing
capital allocation requirements. The directors consulted and engaged with all business units and, following
consultation with and feedback from the Board, each business unit then developed a plan which detailed the level
of investment it required for the relevant period and the returns it believed could be achieved over the appropriate
time period, which were presented to the Board as part of its November strategy session. Given the importance
of the Group’s capital allocation policy to the overall strategy of the Group, the Executive Directors communicated
and explained the allocations to all employees at various all-staff presentations, and employees were given the
opportunity to ask questions relating to the allocations. The policy was also discussed at an IP Connect meeting,
and the outcome of such discussions fed back to the Board by the Designated NED.
• Co-investors:
The directors considered the Group’s relationship with co-investors in its portfolio companies, noting that the
relationship which the Group has with its co-investors may be negatively impacted if the Group did not allocate
sufficient capital to meet the needs of its portfolio companies or that co-investors may seek to detriment the
Group’s position if it was perceived to have insufficient capital.
7 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Working with the Group’s stakeholders
continued
Principal decision: Capital Allocation Policy continued
The Group finished 2020 with cash resources well in excess of expectations at the start of the year and, mindful
of the maturation of a number of focus assets in our portfolio and the resultant opportunities for cash realisations,
determined it was appropriate to further update its capital allocation policy as it related to dividends. In doing so,
the Board took into account various factors including the capital available and anticipated to be available for organic
growth, the capital made available for potential returns to shareholders during its most recent planning cycle, as
well as the volatility of the Group’s share price and its relationship to Hard NAV per share. The Board also took into
account the fact that success in realisations in 2020 had led to the first payments, totalling approximately £0.5m,
being made to employees under the Group’s long-term incentive carry schemes. Overall, the Board concluded that
the business model had now reached a sufficient stage of maturity that it would recommend to shareholders that
a modest but growing dividend should form part of the overall shareholder value proposition. Given the primarily
long-term capital returns nature of the Group’s approach to total shareholder returns, the Board also decided that it
would be appropriate to propose the introduction of an optional scrip dividend programme, allowing shareholders
to choose to receive dividends in the form of newly issued, fully paid shares in IP Group plc in lieu of cash.
Further, the Board considered that it should clarify that if the Group made realisations that were very significant,
of a one-off nature and/or resulted in cash requirements in excess of capital required in the short-to-medium term,
the Directors would intend to discuss with major shareholders an appropriate approach to distributing this excess
on a case-by-case basis as part of its ongoing dialogue with this important stakeholder group. The Board considers
that the Company is in a strong position to do so, either by way of a share buyback or dividend (including
distribution in specie) following the capital reduction completed in 2019.
• Debt providers:
The Board considered that another key priority when developing its capital allocation policy was the servicing of the
Group’s debt facilities, specifically its loan from the European Investment Bank. The Board discussed that, in the event
it considers any return of capital to shareholders or effects a share buyback in the future, such decisions would factor
in an appropriate level of headroom above current debt and borrowing covenants. Further any contractual terms
would be adhered to or permissions sought ahead of making any distributions or commitments to do so.
• Portfolio companies:
The Group’s business model, as further described on pages 10 to 11, is to generate attractive returns by investing in
world-changing businesses whilst applying an active approach to growing the value of such portfolio companies.
Where appropriate, the aim is to ‘back what we create’ and continue to make investments into portfolio companies,
helping to develop a healthy pipeline of investments into, and realisations from, portfolio companies. The interests
of portfolio companies are, therefore, central to the Group’s capital allocation policy. The Board agreed that
the Group needs to maintain sufficient capital to meet ongoing portfolio investment requirements and balance
potential timing issues between realisations and new investment requirements across its different jurisdictions.
• Employees:
The directors considered the impact of the capital allocation policy on its employees and, in particular, noted that
employees worked across different business units which are each at different stages of maturity with differing
capital allocation requirements. The directors consulted and engaged with all business units and, following
consultation with and feedback from the Board, each business unit then developed a plan which detailed the level
of investment it required for the relevant period and the returns it believed could be achieved over the appropriate
time period, which were presented to the Board as part of its November strategy session. Given the importance
of the Group’s capital allocation policy to the overall strategy of the Group, the Executive Directors communicated
and explained the allocations to all employees at various all-staff presentations, and employees were given the
opportunity to ask questions relating to the allocations. The policy was also discussed at an IP Connect meeting,
and the outcome of such discussions fed back to the Board by the Designated NED.
• Co-investors:
The directors considered the Group’s relationship with co-investors in its portfolio companies, noting that the
relationship which the Group has with its co-investors may be negatively impacted if the Group did not allocate
sufficient capital to meet the needs of its portfolio companies or that co-investors may seek to detriment the
Group’s position if it was perceived to have insufficient capital.
The capital allocation policy remains subject to ongoing review by the Board to ensure it continues to align with the Group’s overall strategy. When deciding future allocations, the Board will also consider the following criteria in line with the Group’s purpose and strategy to:• create companies based on leading science and grow them into world-changing businesses;• fund businesses which create a meaningful impact on society and the environment;• generate strong financial returns for stakeholders, both capital and income;• further the Group’s diversity objectives; and• utilise third-party funds. Board approvalThe Strategic Report as set out on pages 04 to 79 has been approved by the Board. On behalf of the boardSir Douglas Flint9 March 2021Business Overview79Strategic ReportOur GovernanceOur Financials OURGOVERNANCEIP Group plc Annual Report and Accounts for the year ended 31 December 202080Stock Code: IPO Business OverviewStrategic ReportOur GovernanceOur Financials81Board of Directors 82Corporate governance framework 85Corporate governance statement 86Nomination committee report 100Directors’ remuneration report 107Report of the audit and risk committee 128Directors’ report 132Statement of directors’ responsibilities 135OURGOVERNANCEIP Group plc Annual Report and Accounts for the year ended 31 December 202080Stock Code: IPO Board of Directors1. Sir Douglas Flint was considered by the Board to be independent on appointment.2. Excludes appointments to Group portfolio company boards.3. Excludes appointments to Group portfolio company boardsAlan Aubrey Chief Executive OfficerEffective date of current service agreement: 20 January 2005Age: 59Independent: NoTenure: 16 years Term of office: Permanent, 6 months’ noticeRe-election to Board:Annually at AGMSkills and Experience: Alan was the joint founder of Techtran Group, which went on to merge with IP2IPO Limited and the combined business was subsequently renamed IP Group. Alan has significant experience in finance as well as in the commercialisation of science and the creation of new businesses that address global markets, particularly in the high-technology manufacturing, clean technology and life science sectors. He brings 7 years’ experience as partner at KPMG and significant experience of audit and risk processes in both the private and public sectors.Current external appointments:3Non-executive Chairman Proactis Holdings plcCommittee memberships: NoneSir Douglas Flint CBE Non-executive ChairmanEffective date of current letter of appointment:Appointed as a Non-executive Director from 17 September 2018 and as Chairman from 1 November 2018Age: 64Independent: N/A1Tenure: 2 yearTerm of office: 3 years2, 3 months’ noticeRe-election to Board: Annually at AGMSkills and Experience: Sir Douglas has a strong track record of Board leadership and in-depth knowledge of financial reporting, banking and investment business and brings this wealth of finance and governance experience and expertise to the Board. Former positions include Group Chairman of HSBC for 7 years, HSBC’s Group Finance Director for 15 years and Non-executive Director of BP plc for 6 years. Formerly a partner in KPMG.Current external appointments: Chairman of Standard Life Aberdeen plc, HM Treasury’s Special Envoy to China’s Belt and Road Initiative, Chairman of the Just Finance Foundation, Director of the Centre for Policy Studies, sits on the Global Advisory Council of Motive Partners, Chairman of the Corporate Board of Cancer Research UK, and a Trustee of the Royal Marsden Cancer Charity. Committee memberships: Nomination (Chair) and Remuneration.Mike Townend Chief Investment OfficerEffective date of current service agreement: 5 March 2007Age: 58Independent: NoTenure: 14 yearsTerm of office: Permanent, 6 months’ noticeRe-election to Board:Annually at AGMSkills and Experience: Mike’s knowledge and experience of all aspects of equity capital markets and investment process are invaluable to the Board. He holds over 18 years’ equity capital markets experience from positions at Lehman Brothers and Donaldson, Lufkin and Jenrette.Current external appointments:3 Green Urban Transport LimitedCommittee memberships: NoneGreg Smith Chief Financial OfficerEffective date of current service agreement: 2 June 2011Age: 42Independent: NoTenure: 9 years Term of office: Permanent, 6 months’ noticeRe-election to Board:Annually at AGMSkills and Experience: Greg’s financial expertise plays a fundamental role in driving the Group to meet its financial goals. Prior to joining IP Group, Greg worked in senior positions at Tarchon Capital Management and KPMG. Greg is a Fellow of the ICAEW and holds a degree in Mathematics. Current external appointments:3 NoneCommittee memberships: NoneIP Group plc Annual Report and Accounts for the year ended 31 December 202082Stock Code: IPO David Baynes Chief Operating OfficerEffective date of current service agreement: 20 March 2014Age: 57Independent: NoTenure: 7 years Term of office: Permanent, 6 months’ noticeRe-election to Board:Annually at AGMSkills and Experience: David was appointed to the Board in March 2014 following the acquisition by the Group of Fusion IP plc where he held the position of Chief Executive for 10 years. David also brings previous experience taking companies from start-up to full listing on the London Stock Exchange. David was also previously CFO of Codemasters Limited, the UK’s largest privately held games company.Current external appointments:3 NoneCommittee memberships: NoneProfessor David Begg Senior Independent DirectorEffective date of current letter of appointment: 18 October 2017Age: 70Independent: YesTenure: 3 years4Term of office: 3 years, 2 3 months’ noticeRe-election to Board: Annually at AGMSkills and Experience: Previously a Non-executive Director at Imperial Innovations, Touchstone Innovations, and Trace Group, Professor Begg has also held a number of distinguished advisory and academic appointments including Principal of Imperial College Business School, Vice Master of Birkbeck College, Visiting Professor at M.I.T, and Economic Policy Advisor to the Bank of England. Key external appointments: None Committee memberships: Nomination, Audit & Risk and Remuneration.Dr Elaine Sullivan Non-executive DirectorEffective date of current letter of appointment: 30 July 2015Age: 60Independent: YesTenure: 5 yearsTerm of office: 3 years2, 3 months’ noticeRe-election to Board: Annually at AGMSkills and Experience: Dr Elaine Sullivan has over 25 years’ international experience working in the pharmaceutical industry, and was a member of the senior management teams in R&D at Eli Lilly and Astra Zeneca. Dr Sullivan is also co-founder and former CEO of Carrick Therapeutics. She has extensive experience in partnerships with venture, equity and strategic collaborations and was a member of the Investment Committees of Lilly Ventures and Lilly Asian Ventures. She has an outstanding track record of identifying drug hunting cutting-edge technologies at beta stage and working with the inventors to produce the commercial product. Current external appointments: Supervisory Board of Evotec AG Executive Entrepreneur and Advisor to Carrick Therapeutics and Non-executive Director of Open Orphan plc.Committee memberships: Nomination, Audit and Remuneration.Heejae Chae Non-executive DirectorEffective date of current letter of appointment: 3 May 2018Age: 52Independent: YesTenure: 2 years Term of office: 3 years2, 3 months’ noticeRe-election to Board: Annually at AGMSkills 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. He was also former Group Chief Executive of Volex Group plc and Group General Manager for Amphenol Corporation. Current external appointments: CEO of Scapa Group plc and Board of Overseers at Boston Children’s HospitalCommittee memberships: Nomination, Audit and Remuneration (Chair)Business Overview83Strategic ReportOur FinancialsOur GovernanceBoard of Directors1. Sir Douglas Flint was considered by the Board to be independent on appointment.2. Excludes appointments to Group portfolio company boards.3. Excludes appointments to Group portfolio company boardsAlan Aubrey Chief Executive OfficerEffective date of current service agreement: 20 January 2005Age: 59Independent: NoTenure: 16 years Term of office: Permanent, 6 months’ noticeRe-election to Board:Annually at AGMSkills and Experience: Alan was the joint founder of Techtran Group, which went on to merge with IP2IPO Limited and the combined business was subsequently renamed IP Group. Alan has significant experience in finance as well as in the commercialisation of science and the creation of new businesses that address global markets, particularly in the high-technology manufacturing, clean technology and life science sectors. He brings 7 years’ experience as partner at KPMG and significant experience of audit and risk processes in both the private and public sectors.Current external appointments:3Non-executive Chairman Proactis Holdings plcCommittee memberships: NoneSir Douglas Flint CBE Non-executive ChairmanEffective date of current letter of appointment:Appointed as a Non-executive Director from 17 September 2018 and as Chairman from 1 November 2018Age: 64Independent: N/A1Tenure: 2 yearTerm of office: 3 years2, 3 months’ noticeRe-election to Board: Annually at AGMSkills and Experience: Sir Douglas has a strong track record of Board leadership and in-depth knowledge of financial reporting, banking and investment business and brings this wealth of finance and governance experience and expertise to the Board. Former positions include Group Chairman of HSBC for 7 years, HSBC’s Group Finance Director for 15 years and Non-executive Director of BP plc for 6 years. Formerly a partner in KPMG.Current external appointments: Chairman of Standard Life Aberdeen plc, HM Treasury’s Special Envoy to China’s Belt and Road Initiative, Chairman of the Just Finance Foundation, Director of the Centre for Policy Studies, sits on the Global Advisory Council of Motive Partners, Chairman of the Corporate Board of Cancer Research UK, and a Trustee of the Royal Marsden Cancer Charity. Committee memberships: Nomination (Chair) and Remuneration.Mike Townend Chief Investment OfficerEffective date of current service agreement: 5 March 2007Age: 58Independent: NoTenure: 14 yearsTerm of office: Permanent, 6 months’ noticeRe-election to Board:Annually at AGMSkills and Experience: Mike’s knowledge and experience of all aspects of equity capital markets and investment process are invaluable to the Board. He holds over 18 years’ equity capital markets experience from positions at Lehman Brothers and Donaldson, Lufkin and Jenrette.Current external appointments:3 Green Urban Transport LimitedCommittee memberships: NoneGreg Smith Chief Financial OfficerEffective date of current service agreement: 2 June 2011Age: 42Independent: NoTenure: 9 years Term of office: Permanent, 6 months’ noticeRe-election to Board:Annually at AGMSkills and Experience: Greg’s financial expertise plays a fundamental role in driving the Group to meet its financial goals. Prior to joining IP Group, Greg worked in senior positions at Tarchon Capital Management and KPMG. Greg is a Fellow of the ICAEW and holds a degree in Mathematics. Current external appointments:3 NoneCommittee memberships: NoneIP Group plc Annual Report and Accounts for the year ended 31 December 202082Stock Code: IPO Board of DirectorsDr Caroline Brown Non-Executive DirectorEffective date of current letter of appointment: 1 July 2019Age: 58Independent: YesTenure: 1 yearTerm of office: 3 years2, 3 months’ noticeRe-election to Board: Annually at AGMSkills and Experience: Dr Brown 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 20 years plc board experience and held previous positions in corporate finance at Merrill Lynch (New York), USB and HSBC. Caroline is a Fellow of the Chartered Institute of Management AccountantsCurrent external appointments: Independent Director of Georgia Capital plc and Luceco plc. Committee memberships: Nomination, Audit (Chair) and Remuneration.Aedhmar Hynes Non-Executive Director and Designated Non-executive Director for employee engagementEffective date of current letter of appointment: 1 August 2019Age: 54Independent: YesTenure: 1 yearTerm of office: 3 years2, 3 months’ noticeRe-election to Board: Annually at AGMSkills and Experience: Aedhmar brings fresh and valuable experience to the Board in relation to technology disruption, digital transformation and marketing and strategic communications. Aedhmar has multiple years’ experience in communications and is the former CEO of Text100, a digital communications agency with 22 offices and over 600 consultants across Europe, Asia and North America. Aedhmar is also the Group’s Designated Non-executive Director for employee engagement on the Board.Current external appointments: Trustee of The Page Society, member of the Advisory Council of the MIT Media Lab, Board Director of Technoserve, Board Director of Tupperware Brands Corporation, member of the US Foundation Board of the National University of Ireland, Galway and a Henry Crown Fellow at The Aspen Institute. Committee memberships: Nomination, Audit and Remuneration.1. Sir Douglas Flint was considered by the Board to be independent on appointment.2. Subject to renewal for subsequent three-year terms as set out on page 1023. Excludes appointments to Group portfolio company boards4. This excludes Professor David Begg’s 6 year tenure as a director of Touchstone Innovations plc IP Group plc Annual Report and Accounts for the year ended 31 December 202084Stock Code: IPO Business Overview
Strategic Report
Our Governance
Our Financials
8 5
Corporate Governance Framework
Compliance with the UK Corporate Governance Code 2018 (the “Code”)
The Directors are committed to a high standard of
corporate governance and to compliance with best
practice as set out in the Code (available at www.frc.org.
uk/directors/corporate-governance-and-stewardship/uk-
corporate-governance-code). The directors consider that
the Group has been and continues to be in compliance with
all of the relevant provisions set out in the Code.
Further explanation as to how the main principles set out in
the Code have been applied by the Group is set out below,
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.
Board of Directors
Audit & Risk
Committee
Remuneration
Committee
Nomination
Committee
Pages 128 to 131
Pages 107 to 127
Pages 100 to 106
Disclosure
Committee
Page 89
Chairman
Leadership and conduct of the Board,
encouraging open and constructive discussion
Promotes high standards of governance and
board effectiveness
Ensures active engagement and effective
communication with shareholders
Sets the Board’s agenda and 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 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
Leads on development and delivery of strategy
Leads the management of the Group alongside
the senior executive team and establishes
financial and operational targets
Leads delivery of the Group’s operating plans
and budgets and the execution of Board
decisions
Monitors operating and financial performance
and reports to the Board on the same
Ensures the Group’s financial structure and
capacity supports the Group’s objectives
Leads succession planning for the senior
executive positions alongside the Head of HR
Represents the Group to external stakeholders
Senior Independent
Director
Available to shareholders to discuss their views
Intermediary between the Board and the Chair
Leads the Board in deliberations where the Chair
is conflicted
Leads assessment of the Chair’s
Company Secretary
Responsible for governance matters
Ensures Board policies and procedures
are followed
Ensures compliance with laws and regulations
Ensures Board papers are concise, clear and that
their purpose is explicitly stated
Executive Directors
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
Non-executive
Directors
Approve Group strategy and operating plans
Approve business and financing models
Discuss and constructively challenge executive
recommendations within matters brought to
the Board
Monitor and performance manage delivery of
strategy and operating plans
Portfolio investment and realisation decisions (other than those reserved for the Board) are delegated to the Investment Committees of the Life Sciences
and Technology Partnerships.
Investment Committees – Life Sciences and Technology
Board of DirectorsDr Caroline Brown Non-Executive DirectorEffective date of current letter of appointment: 1 July 2019Age: 58Independent: YesTenure: 1 yearTerm of office: 3 years2, 3 months’ noticeRe-election to Board: Annually at AGMSkills and Experience: Dr Brown 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 20 years plc board experience and held previous positions in corporate finance at Merrill Lynch (New York), USB and HSBC. Caroline is a Fellow of the Chartered Institute of Management AccountantsCurrent external appointments: Independent Director of Georgia Capital plc and Luceco plc. Committee memberships: Nomination, Audit (Chair) and Remuneration.Aedhmar Hynes Non-Executive Director and Designated Non-executive Director for employee engagementEffective date of current letter of appointment: 1 August 2019Age: 54Independent: YesTenure: 1 yearTerm of office: 3 years2, 3 months’ noticeRe-election to Board: Annually at AGMSkills and Experience: Aedhmar brings fresh and valuable experience to the Board in relation to technology disruption, digital transformation and marketing and strategic communications. Aedhmar has multiple years’ experience in communications and is the former CEO of Text100, a digital communications agency with 22 offices and over 600 consultants across Europe, Asia and North America. Aedhmar is also the Group’s Designated Non-executive Director for employee engagement on the Board.Current external appointments: Trustee of The Page Society, member of the Advisory Council of the MIT Media Lab, Board Director of Technoserve, Board Director of Tupperware Brands Corporation, member of the US Foundation Board of the National University of Ireland, Galway and a Henry Crown Fellow at The Aspen Institute. Committee memberships: Nomination, Audit and Remuneration.1. Sir Douglas Flint was considered by the Board to be independent on appointment.2. Subject to renewal for subsequent three-year terms as set out on page 1023. Excludes appointments to Group portfolio company boards4. This excludes Professor David Begg’s 6 year tenure as a director of Touchstone Innovations plc IP Group plc Annual Report and Accounts for the year ended 31 December 202084Stock Code: IPO Corporate Governance StatementSir Douglas Flint Chairman The Company’s purpose of evolving great ideas into world-changing businesses is supported by our commitment to effective governance, the execution of which is continuously evolving to reflect the changing expectations of our key stakeholders and the product of wide ranging discussion within the Board around opportunities for self-improvement.”During 2020, the Group focused on maintaining the highest standards of corporate governance notwithstanding the COVID-19 pandemic. The Group’s response to the COVID-19 pandemic demonstrates that the interests of stakeholders are fully integrated into the Board’s decision-making processes.The Board aims to ensure the highest standards of corporate governance and accountability are met alongside promoting a culture of risk identification, reporting and mitigation. The Board is accountable to the Company’s shareholders for good governance, and this report, together with the Reports of the Remuneration, Nomination, and Audit & Risk Committees of the Board, describe the Group’s detailed approach to corporate governance and the key developments which have taken place in this area during the year.Effective corporate governance is integral to the Board’s oversight of the execution of the Group’s strategy and is critical to building strong relationships with all the Group’s stakeholders in order to earn their backing for the Group’s purpose to support outstanding businesses based on unique intellectual property. The Group continues to foster a culture of innovation, mutual support and diversity, whilst encouraging employees to engage in healthy debate and challenge to consider a wide range of opinions when making decisions. For more information on the culture the Group and its Board wishes to foster, see page 70. A key focus of the Group during the year has been to further develop the Group’s processes for recording its engagement with stakeholders and reporting feedback to the Board. For further details on how the directors have complied with their duties under s172 of the Companies Act 2006 (the “CA 2006”) in their decision making, please refer to pages 74 to 79. The Group upholds strong business values which focus on being passionate, principled and pioneering in all of its activities and actions. These values continue to guide the Group in implementing its strategy and employees are committed to demonstrating these values throughout their work. The ESG Working Group, established in 2019, which has implemented the Group’s ESG policy and Ethical Investment Framework as outlined on page 58, ensures that the Group’s values and culture are also implemented in the Group’s approach to its investments. Further details of how the Group mitigates climate-related risk are included on page 67. The Board welcomes the opportunity to discuss any matters relating to corporate governance with shareholders during the year or, where possible, at the Group’s forthcoming Annual General Meeting (“AGM”) in June 2021. The Group will be following government guidance relating to COVID-19 and public gatherings, and as such is keeping the AGM arrangements under review. The Board will update shareholders via the AGM notice (when published) and/or the Regulatory News Service, as appropriate. The AGM notice and any such announcements shall also be uploaded to the Company’s website (https://www.ipgroupplc.com/ investor-relations/shareholder-information/agm). The Company encourages shareholders to check its website regularly for the latest information on the arrangements for the AGM. In addition, and to facilitate engagement with shareholders throughout the year, the Group maintains a dedicated company secretary email address cosec@ipgroupplc.com) to which shareholders can submit questions as any time.Sir Douglas FlintChairmanIP Group plc Annual Report and Accounts for the year ended 31 December 202086Stock Code: IPO Business Overview
Strategic Report
Our Governance
Our Financials
8 7
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 which
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; ensuring that
the necessary financial and human resources are in place
to meet those aims; monitoring performance against key
financial and non-financial indicators; planning for Board
and senior management succession; overseeing the system
of risk management; setting values and standards in
governance matters; monitoring environmental, social and
governance policies and performance and helping to shape
and embed the Group’s purpose, values and culture. The
Board recognises that its role in setting and maintaining the
Group’s 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
is on page 70.
In supporting the Group’s business and its portfolio
companies, the Board acknowledges the key roles of Group
functions in the fields of executive search, capital raising,
intellectual property strategy and due diligence support
and legal support alongside the hands-on approach and
high level of support 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
to provide 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, considering 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 approval process, scrutinising
the performance of management against targets set
and determining appropriate levels of remuneration. The
non-executive directors must also satisfy themselves on
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 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 StatementSir Douglas Flint Chairman The Company’s purpose of evolving great ideas into world-changing businesses is supported by our commitment to effective governance, the execution of which is continuously evolving to reflect the changing expectations of our key stakeholders and the product of wide ranging discussion within the Board around opportunities for self-improvement.”During 2020, the Group focused on maintaining the highest standards of corporate governance notwithstanding the COVID-19 pandemic. The Group’s response to the COVID-19 pandemic demonstrates that the interests of stakeholders are fully integrated into the Board’s decision-making processes.The Board aims to ensure the highest standards of corporate governance and accountability are met alongside promoting a culture of risk identification, reporting and mitigation. The Board is accountable to the Company’s shareholders for good governance, and this report, together with the Reports of the Remuneration, Nomination, and Audit & Risk Committees of the Board, describe the Group’s detailed approach to corporate governance and the key developments which have taken place in this area during the year.Effective corporate governance is integral to the Board’s oversight of the execution of the Group’s strategy and is critical to building strong relationships with all the Group’s stakeholders in order to earn their backing for the Group’s purpose to support outstanding businesses based on unique intellectual property. The Group continues to foster a culture of innovation, mutual support and diversity, whilst encouraging employees to engage in healthy debate and challenge to consider a wide range of opinions when making decisions. For more information on the culture the Group and its Board wishes to foster, see page 70. A key focus of the Group during the year has been to further develop the Group’s processes for recording its engagement with stakeholders and reporting feedback to the Board. For further details on how the directors have complied with their duties under s172 of the Companies Act 2006 (the “CA 2006”) in their decision making, please refer to pages 74 to 79. The Group upholds strong business values which focus on being passionate, principled and pioneering in all of its activities and actions. These values continue to guide the Group in implementing its strategy and employees are committed to demonstrating these values throughout their work. The ESG Working Group, established in 2019, which has implemented the Group’s ESG policy and Ethical Investment Framework as outlined on page 58, ensures that the Group’s values and culture are also implemented in the Group’s approach to its investments. Further details of how the Group mitigates climate-related risk are included on page 67. The Board welcomes the opportunity to discuss any matters relating to corporate governance with shareholders during the year or, where possible, at the Group’s forthcoming Annual General Meeting (“AGM”) in June 2021. The Group will be following government guidance relating to COVID-19 and public gatherings, and as such is keeping the AGM arrangements under review. The Board will update shareholders via the AGM notice (when published) and/or the Regulatory News Service, as appropriate. The AGM notice and any such announcements shall also be uploaded to the Company’s website (https://www.ipgroupplc.com/ investor-relations/shareholder-information/agm). The Company encourages shareholders to check its website regularly for the latest information on the arrangements for the AGM. In addition, and to facilitate engagement with shareholders throughout the year, the Group maintains a dedicated company secretary email address cosec@ipgroupplc.com) to which shareholders can submit questions as any time.Sir Douglas FlintChairmanIP Group plc Annual Report and Accounts for the year ended 31 December 202086Stock Code: IPO 8 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Corporate Governance Statement continued
Board activities during 2020
Principal Decisions
• Approved the phased disposal of shares in Ceres Power
Holdings plc (please see page 12 for further details)
• Approved other portfolio company investments
and divestments required in line with the Group’s
delegated investment and realisation authorities
• Approved the Group’s capital allocation policy
(please see page 77 for further details including
s172 considerations)
• Approved the Group’s ESG Policy and Ethical
Investment Framework (please see page 58 for
further details)
Board and Committee Composition
and Conduct
• Agreed the succession approach to the position of
Senior Independent Director
• Refreshed succession planning for the future
Executive leadership of the Group
Strategy and Risk
• Discussed and considered the impact of COVID-19 as
a principal risk to fulfilment of the Company’s strategy
and those of the Group’s portfolio companies (for
further detail on the Group’s response to COVID-19
please refer to page 22)
• Discussed and considered the implications of the
expansion of the Group’s largest portfolio company,
Oxford Nanopore into COVID testing
• Reviewed the pipeline of potential M&A and IPO
activity within the Group’s portfolio and considered
the implications thereof
• Assessed various strategic options including, in
particular, the Group’s geographic footprint, its access
to capital and its funding model
• Considered the Group’s short, medium and long-term
strategy and objectives
• Debated in detail the Board’s risk appetite regarding
the Group’s principal risks
• Agreed the Group’s approach to capital allocation
after engaging with key stakeholders (please see page
75 for further detail on this engagement)
• Discussed the evolution of the shareholder base
Corporate Governance
• Reviewed and updated processes and procedures to
ensure compliance with the Code
• Approved updated terms of reference for its
Committees
• Received presentations from the Group’s 30% Club
and ESG working groups and a presentation on
Communications and Investor Relations
Shareholders
• Considered the Company’s ability to return cash to
shareholders and available routes to do so
• Discussed the Company’s share price performance
Updates from the Business and Portfolio
Companies
• 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 their focus portfolio companies
• Received bi-annual updates from the Managing
Directors of the US and Australia businesses
• Received bi-annual updates from the leadership team
at Parkwalk
Board Effectiveness
• Oversaw the implementation of the recommendations
from the 2019 Board evaluation (for further detail, see
page 104 of the Nomination Committee report)
• Reviewed plans for the internal Board effectiveness
review that was carried out in relation to 2020
Schedule of matters
Committees and Oversight
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 its senior management team. 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, along with the
terms of reference for each of the Audit & Risk, Remuneration
and Nomination Committees can be found within the
Corporate Governance section of the Group’s website at
www.ipgroupplc.com and are also available from the Group’s
Company Secretary. This schedule was reviewed in 2020 and
all recommended changes were accepted by the Board. The
schedule will be reviewed again in 2021.
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 &
Risk, Remuneration and Nomination) 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.
Separate reports on the role, composition, responsibilities
and operation of each of the Nomination, Remuneration and
8 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
8 9
Corporate Governance Statement continued
Board activities during 2020
Principal Decisions
• Approved the phased disposal of shares in Ceres Power
Holdings plc (please see page 12 for further details)
• Approved other portfolio company investments
and divestments required in line with the Group’s
delegated investment and realisation authorities
• Debated in detail the Board’s risk appetite regarding
the Group’s principal risks
• Agreed the Group’s approach to capital allocation
after engaging with key stakeholders (please see page
75 for further detail on this engagement)
• Discussed the evolution of the shareholder base
Corporate Governance
• Approved the Group’s capital allocation policy
• Reviewed and updated processes and procedures to
(please see page 77 for further details including
ensure compliance with the Code
• Approved the Group’s ESG Policy and Ethical
Investment Framework (please see page 58 for
Committees
s172 considerations)
further details)
• Approved updated terms of reference for its
Board and Committee Composition
and Conduct
• Agreed the succession approach to the position of
Senior Independent Director
• Refreshed succession planning for the future
Executive leadership of the Group
Strategy and Risk
• Discussed and considered the impact of COVID-19 as
a principal risk to fulfilment of the Company’s strategy
and those of the Group’s portfolio companies (for
further detail on the Group’s response to COVID-19
please refer to page 22)
• Discussed and considered the implications of the
expansion of the Group’s largest portfolio company,
Oxford Nanopore into COVID testing
• Received presentations from the Group’s 30% Club
and ESG working groups and a presentation on
Communications and Investor Relations
Shareholders
• Considered the Company’s ability to return cash to
shareholders and available routes to do so
• Discussed the Company’s share price performance
Updates from the Business and Portfolio
Companies
• 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 their focus portfolio companies
• Received bi-annual updates from the Managing
Directors of the US and Australia businesses
• Received bi-annual updates from the leadership team
• Reviewed the pipeline of potential M&A and IPO
activity within the Group’s portfolio and considered
at Parkwalk
the implications thereof
Board Effectiveness
• Assessed various strategic options including, in
particular, the Group’s geographic footprint, its access
to capital and its funding model
• Considered the Group’s short, medium and long-term
strategy and objectives
• Oversaw the implementation of the recommendations
from the 2019 Board evaluation (for further detail, see
page 104 of the Nomination Committee report)
• Reviewed plans for the internal Board effectiveness
review that was carried out in relation to 2020
Schedule of matters
Committees and Oversight
Except for a formal schedule of matters which are reserved
In addition to the Executive Directors, the Board delegates
for decision and approval by the Board, the Board has
specific responsibilities to certain committees that assist the
delegated the day-to-day management of the Group’s
Board in carrying out its functions and ensure independent
operations to the Executive Directors, supported closely
oversight of internal control and risk management.
by its senior management team. 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, along with the
terms of reference for each of the Audit & Risk, Remuneration
and Nomination Committees can be found within the
Corporate Governance section of the Group’s website at
www.ipgroupplc.com and are also available from the Group’s
Company Secretary. This schedule was reviewed in 2020 and
The three principal Committees of the Board (Audit &
Risk, Remuneration and Nomination) 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.
all recommended changes were accepted by the Board. The
Separate reports on the role, composition, responsibilities
schedule will be reviewed again in 2021.
and operation of each of the Nomination, Remuneration and
Audit & Risk Committees are set out on page 100 to 106,
pages 107 to 127 and pages 128 to 131 respectively.
The composition of the three principal Committees of the
Board and a record of the attendance of the members
throughout the year is set out in the table on page 91.
A new Executive Committee has recently been established,
which currently comprises the Group’s Executive Directors,
the Managing Partners of Tech and Life Sciences, the
General Counsel and the Director of Communications.
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 which are expressly reserved to the Board or its
committees. The Executive Committee is a decision making
body which will report into the Board, primarily through the
CEO and the other Executive Directors. Additional roles are
in the process of being added to the Executive Committee,
including the Group People Director and two Employee
Executives. Further details around the new Executive
Committee and the Employee Executive roles can be found
on page 71.
The Disclosure Committee assists the Group to make 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 arising from its listing on the
London Stock Exchange. It also enables the Group to meet
its obligations under the Market Abuse Regulation and
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 Chief Executive Officer, the Chief
Financial Officer, the General Counsel, the Head of Comms
& IR and a minimum of one non-executive director.
The Group has investment committees for each of its
Technology and Life Sciences Partnerships, as well
as in each of the Australia and New Zealand and the
US businesses. 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.
the Board meeting in June 2021 and will not be offering
himself for re-election at the 2021 Annual General Meeting.
Aedhmar Hynes will succeed Professor Begg as the Senior
Independent Director upon his retirement. This appointment
will take effect from the conclusion of the 2021 AGM,
subject to Aedhmar Hynes’ re-election as a director at that
meeting.
In accordance with the provisions of the Code, all of the
Directors (other than Professor Begg), will be offering
themselves for re-election at the 2021 Annual General
Meeting. The Board unanimously recommends to
shareholders the reappointment of all the Directors that are
offering themselves for re-election, on the basis that the
results of the annual Board evaluation and the annual one-
to-one performance appraisal process demonstrated that
they are all effective directors of the Company and continue
to display the appropriate level of commitment in their
respective roles.
Diversity
The disclosure required by DTR 7.2.8 relating to the Group’s
diversity policy is presented in the Nomination Committee
Report on page 101.
Board observers
Dr Sam Williams and Dr Mark Reilly, the Group’s Managing
Partners of Life Sciences and Technology respectively,
attended the Group’s Board meetings as observers during
2020. The Board considers it is important for the Managing
Partners of the Life Sciences and Technology Partnerships
to have a degree of direct representation at Board meetings
and to be available to report to, and respond directly to
questions and challenge from, the Board on the assets
they manage.
The attendance of observers is, at all times, at the
Chairman’s discretion and any observers are required to
disclose and manage any conflicts of interest (which may
require the relevant observer to be excluded from all or part
of future Board meetings). The observers are able to speak
and participate in the discussions of the Board, but not vote
on any decisions made by the Board.
Board size and composition
Company Secretary
As at 31 December 2020, there were ten Directors on the
Board: the Chairman, four Executive Directors and five
Non-executive Directors. The biographies of all directors are
provided on pages 82 to 84.
Jonathan Brooks, who served on the Board for nearly
nine years, retired from the Board in March 2020 upon
finalisation of the 2019 Annual Report and Accounts. No
other changes were made to the Board during 2020.
Professor David Begg, who has served on the boards of
Touchstone Innovations plc and subsequently IP Group
for nearly nine years, intends to retire from the Board
and his role as Senior Independent Director at the end of
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 Chairman 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 Chairman 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.
9 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Corporate Governance Statement continued
Non-executive Directors
The Non-executive Directors provide a wide range of unique
skills and experience to the Group as detailed on page 103. By
virtue of such a diverse mix of skills and experience, the non-
executive directors are well placed to constructively challenge
and scrutinise the performance of executive management at
both Board and Committee meetings.
Since 2009, the Board’s policy has been to prohibit personal
investments by non-executive directors in any of the Group’s
portfolio companies. Accordingly, none of the Non-executive
Directors presenting themselves for re-election at the Annual
General Meeting in 2021 have holdings in any of the Group’s
portfolio companies.
Directors are required to obtain the formal written approval
of the Chairman before taking on any further directorial
appointments or other engagements with an organisation
that competes with the Group (whether directly or indirectly),
and the Chairman requires the approval of the Board before
adding to his commitments. In all cases, directors must ensure
that their external appointments do not involve excessive time
commitments. Details of key external appointments of the
directors can be found on page 82 to 84.
Board meetings, provision of
information and decisions
The Board meets regularly during 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 six scheduled Board meetings and two
strategy sessions in 2020; six Board meetings and a
two-day strategy session are scheduled for 2021. The
requirement for additional scheduled meetings is kept
under review by the Chairman and the Company Secretary.
Due to COVID-19, only one Board meeting was held
physically at the Group’s offices in London in 2020 with the
remainder of the meetings and the strategy sessions taking
place remotely via video conference. Meetings between the
Chairman and the Non-executive Directors, both with and
without the presence of the Chief Executive Officer, are also
held throughout the year. In 2020, such meetings were held
remotely via video conference.
The Board held two strategy sessions in November and
December 2020. The strategy sessions provided an
opportunity for all Directors, and particularly the Non-
executive Directors, to discuss in detail the current strategy
of the Group and its funding model, and whether any
action or changes are required in the short to medium
term to bring the Group to a more sustainable position;
to discuss the Group’s capital allocation policy and agree
the approach to capital allocations for 2021 and the longer
term having received presentations from each of the key
business units and the relevant Executives on the various
proposals; to discuss medium and longer term strategic
objectives and the key drivers underpinning these; and to
discuss the Human Relations and People strategy and key
priorities for 2021. The Board also reviewed the Group’s
risk framework and risk appetite, including considering the
principal risks facing the Group and its strategy, its appetite
towards these risks, how to assess, manage, mitigate and/or
monitor these risks and desired level of associated control
investment. The Board also considered the longer-term
emerging risks for the Group. Further details in relation to
the Group’s approach to the management of its key risks
and uncertainties, as well as the relevant mitigations, are set
out on pages 49 to 57.
The schedule of Board and Committee meetings each year
is, so far as possible, determined before the commencement
of that year, and all Directors are expected to attend each
meeting. Board and Committee meetings are often split
over two days to ensure sufficient time is allocated for the
business of the committees and the Board and that full
engagement is possible from those in attendance. Such
scheduling also seeks to enable more in-depth engagement
between the Non-executive Directors, Executive Directors
and Managing Partners and other staff of the Group outside
of the scheduled meetings, primarily through Board and
observer dinners and social drinks with staff around the
Board meetings. The Board met for one dinner in March
2020 and also had a virtual drinks session. In addition, the
Chairman and the Non-executive Directors had calls without
the presence of the Executive Directors at least seven times
during the year, both around and between Board meetings.
To enable further engagement with staff during the
COVID-19 pandemic, the Board held three “Meet the Board”
sessions, during which Aedhmar Hynes interviewed Sir
Douglas Flint, Heejae Chae and Dr Caroline Brown via Zoom
and offered employees the opportunity to ask questions.
Every member of the Board receives detailed Board packs
three to five business days prior to each scheduled Board
meeting, which include an agenda based upon the schedule
of matters reserved for its approval along with appropriate
reports and briefing papers, save in respect of meetings
called on short notice or where late papers are permitted to
be included with the consent of the Chairman.
The Chairman, Chief Executive Officer, Chief Financial
Officer, Company Secretary and Managing Partners of the
Life Sciences and Technology Partnerships 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, IP Capital (including Hong Kong and
China) and Parkwalk. Additional information is provided
as appropriate or if requested. At each Board meeting,
the Board receives information, reports and presentations
from the Chief Executive Officer, the other Executive
Directors, the Managing Partners of the Life Sciences and
Technology Partnerships and, by invitation, other members
9 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
9 1
Corporate Governance Statement continued
Non-executive Directors
The Non-executive Directors provide a wide range of unique
skills and experience to the Group as detailed on page 103. By
virtue of such a diverse mix of skills and experience, the non-
executive directors are well placed to constructively challenge
and scrutinise the performance of executive management at
both Board and Committee meetings.
Since 2009, the Board’s policy has been to prohibit personal
investments by non-executive directors in any of the Group’s
portfolio companies. Accordingly, none of the Non-executive
Directors presenting themselves for re-election at the Annual
General Meeting in 2021 have holdings in any of the Group’s
portfolio companies.
Directors are required to obtain the formal written approval
of the Chairman before taking on any further directorial
appointments or other engagements with an organisation
that competes with the Group (whether directly or indirectly),
and the Chairman requires the approval of the Board before
adding to his commitments. In all cases, directors must ensure
that their external appointments do not involve excessive time
commitments. Details of key external appointments of the
directors can be found on page 82 to 84.
Board meetings, provision of
information and decisions
discuss the Human Relations and People strategy and key
priorities for 2021. The Board also reviewed the Group’s
risk framework and risk appetite, including considering the
principal risks facing the Group and its strategy, its appetite
towards these risks, how to assess, manage, mitigate and/or
monitor these risks and desired level of associated control
investment. The Board also considered the longer-term
emerging risks for the Group. Further details in relation to
the Group’s approach to the management of its key risks
and uncertainties, as well as the relevant mitigations, are set
out on pages 49 to 57.
The schedule of Board and Committee meetings each year
is, so far as possible, determined before the commencement
of that year, and all Directors are expected to attend each
meeting. Board and Committee meetings are often split
over two days to ensure sufficient time is allocated for the
business of the committees and the Board and that full
engagement is possible from those in attendance. Such
scheduling also seeks to enable more in-depth engagement
between the Non-executive Directors, Executive Directors
and Managing Partners and other staff of the Group outside
of the scheduled meetings, primarily through Board and
observer dinners and social drinks with staff around the
Board meetings. The Board met for one dinner in March
2020 and also had a virtual drinks session. In addition, the
Chairman and the Non-executive Directors had calls without
the presence of the Executive Directors at least seven times
The Board meets regularly during the year as well as on an
during the year, both around and between Board meetings.
ad hoc basis, as required in response to the needs of the
To enable further engagement with staff during the
Group’s business.
The Board had six scheduled Board meetings and two
strategy sessions in 2020; six Board meetings and a
two-day strategy session are scheduled for 2021. The
COVID-19 pandemic, the Board held three “Meet the Board”
sessions, during which Aedhmar Hynes interviewed Sir
Douglas Flint, Heejae Chae and Dr Caroline Brown via Zoom
and offered employees the opportunity to ask questions.
requirement for additional scheduled meetings is kept
Every member of the Board receives detailed Board packs
under review by the Chairman and the Company Secretary.
three to five business days prior to each scheduled Board
Due to COVID-19, only one Board meeting was held
physically at the Group’s offices in London in 2020 with the
remainder of the meetings and the strategy sessions taking
place remotely via video conference. Meetings between the
Chairman and the Non-executive Directors, both with and
meeting, which include an agenda based upon the schedule
of matters reserved for its approval along with appropriate
reports and briefing papers, save in respect of meetings
called on short notice or where late papers are permitted to
be included with the consent of the Chairman.
without the presence of the Chief Executive Officer, are also
The Chairman, Chief Executive Officer, Chief Financial
held throughout the year. In 2020, such meetings were held
Officer, Company Secretary and Managing Partners of the
remotely via video conference.
The Board held two strategy sessions in November and
December 2020. The strategy sessions provided an
opportunity for all Directors, and particularly the Non-
executive Directors, to discuss in detail the current strategy
of the Group and its funding model, and whether any
action or changes are required in the short to medium
term to bring the Group to a more sustainable position;
to discuss the Group’s capital allocation policy and agree
the approach to capital allocations for 2021 and the longer
term having received presentations from each of the key
business units and the relevant Executives on the various
proposals; to discuss medium and longer term strategic
objectives and the key drivers underpinning these; and to
Life Sciences and Technology Partnerships 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, IP Capital (including Hong Kong and
China) and Parkwalk. Additional information is provided
as appropriate or if requested. At each Board meeting,
the Board receives information, reports and presentations
from the Chief Executive Officer, the other Executive
Directors, the Managing Partners of the Life Sciences and
Technology Partnerships and, by invitation, other members
of senior management. This includes bi-annual presentations from the US and Australian business unit and presentations
from Parkwalk, the Group People Director, Head of Comms and IR and a representative of the ESG working group. These
presentations ensure that all Directors are aware of, and are in a position to monitor effectively, the overall performance of
the Group, its development and implementation of strategy and its management of risk.
Board and committee attendance
The following table shows the attendance of directors at scheduled Board and Committee meetings during the year:
Board Meetings1
Audit and Risk Committee
Nomination Committee
Remuneration Committee
Sir Douglas Flint
Alan Aubrey
Mike Townend
Greg Smith
David Baynes
Dr Elaine Sullivan
Prof. David Begg
Heejae Chae
Dr Caroline Brown
Aedhmar Hynes
Jonathan Brooks2
–
–
–
–
–
–
–
–
–
–
–
–
–
1. Five meetings were held remotely via video conference due to COVID-19.
2. Jonathan Brooks retired from the Board on 10 March 2020.
Directors’ conflicts of interest
Each director has a statutory duty under the CA 2006 to
avoid a situation in which he or she has, 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 he or she is interested. The Company’s Articles of
Association permit the Board to authorise conflicts or
potential conflicts of interest.
every Board meeting any actual or potential conflict of
interests that they may have on the matters to be discussed
or to update the Board on any change to a previous conflict
of interest already declared. Furthermore, where it feels it
needs more information to properly consider the conflicts
or potential conflicts which may present themselves,
the Board requests a detailed analysis to be carried out
by the Executives, the Company Secretary and/or the
in-house legal team, and to take external advice where
appropriate, with the results of the same being presented
with a recommendation as to how to manage any potential
conflicts present effectively.
In deciding whether to authorise any conflict, the directors
must have regard to their general duties under the CA 2006
and their overriding obligation to act in a way they consider,
in good faith, will be most likely to promote the Company’s
success. In addition, the directors can impose limits or
conditions when authorising a conflict or potential conflict
of interest if they think it appropriate
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
the directors the opportunity to raise at the beginning of
The authorisation of any conflict matter, and the terms of
any authorisation, may be reviewed by the Board at any
time. The Board believes that the procedures established
to deal with conflicts of interest are operating effectively.
Notwithstanding this, the Board considers it prudent to
conduct a detailed review of the Group’s conflict policies
and procedures during 2021 and has mandated the
Company Secretary to progress this matter.
The Board’s policy previously permitted personal
investments by the executive directors in the Group’s
portfolio companies, both into new opportunities and to
follow pre-emption rights where such Executive Directors
Induction meetings with Executive Directors and managementOverview of business, structure, functions, aims, risks and remuneration Meeting with the Group’s brokers and other advisers Meeting with the Group’s auditors and internal audit functionSite visits to key portfolio companiesListing Rules and Market Abuse RegulationCorporate governance policies and Board procedures Training requirements assessed and provided Access to external advisors Detailed presentations and meetings with managementCorporate Governance Statement continuedalready had a holding. These personal investments are tightly controlled by the Group’s internal policy relating to ‘Holdings in Portfolio Companies’ which includes, amongst other restrictions, maximum levels of investment by executive directors and staff in portfolio company financing rounds, requires that all interests of executive Directors in portfolio companies are fully disclosed and regulates and manages any potential conflicts that could arise. Through 2020, the Board reviewed this policy insofar as it applied to executive directors and concluded that executive directors should no longer be permitted to personally invest in financing opportunities in new portfolio companies. Executive directors are still permitted to follow their pre-emption rights in financings undertaken in portfolio companies in which they already have an interest, subject to the restrictions contained with the ‘Holdings in Portfolio Companies’ policy, including full disclosure to ensure all conflicts or potential conflicts of interest are effectively managed.Board supportThere is an agreed procedure for directors 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 any 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.InductionTrainingInduction, awareness and development A comprehensive induction process is in place for new directors. The programme is tailored to the needs of the individual Director and agreed with him or her in advance and monitored throughout the process to ensure that he or she can gain a better understanding of the Group and its businesses.This process includes:• an overview of the Group and its businesses, structure, functions, strategic aims, risk management framework and remuneration policies;• meetings/calls with all Executive Directors, the Company Secretary, the managing partners of the Life Sciences and Technology Partnerships, heads of the US and Australian businesses, heads of the various internal functions and Parkwalk executives;• a meeting with both the Group’s auditor and internal audit function;• training on key legal and governance matters relevant to the Group and its policies; • site visits to a number of the Group’s portfolio companies, including, where possible, at least one or more within the Group’s top ten holdings (by value), which will include meeting with such companies’ management and a presentation from them on their businesses; and • sessions as appropriate with the Group’s advisers, as well as with appropriate external governance specialists, to ensure full awareness and understand of their responsibilities and obligations as a Director of a FTSE 250 company, and of the governance and legislative framework within which they must operate.IP Group plc Annual Report and Accounts for the year ended 31 December 202092Stock Code: IPO The content of the induction process is regularly re-evaluated by the Board 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 ongoing basis for all Directors, the Company Secretary arranges for an external governance specialist to attend one Board meeting annually to present on the key corporate governance changes over the previous twelve months and to signpost expected developments going forwards. In addition, the Board is kept updated on key legislative and governance changes and sentiment affecting the Group and how the Group is ensuring its compliance.The Chairman and Non-executive Directors are encouraged to continue to visit a number of the Group’s portfolio companies, as well as to attend portfolio company events both at the Group’s head office and off-site. The Chair of the Audit & Risk Committee, the Senior Independent Director and the Chief Financial Officer visited Oxford Nanopore in February 2020, however given the impact of the COVID-19 pandemic through much of 2020 and into 2021, no further in-person meetings or site visits were possible. It is hoped that in-person meetings and site visits will resume in line with the easing of Government restrictions during 2021. The Board continues to be exposed to the Group’s portfolio through presentations at Board meetings by relevant members of the Group’s staff and also via the new Portfolio Company Update Programme launched in 2020. This Programme has, on an almost weekly basis, showcased a significant number of the Group’s portfolio companies across all three territories via bitesize Zoom sessions given by members of the Group’s Investment or Executive teams, or by members of the relevant portfolio company management teams and is intended to continue into 2021. Recordings of these sessions are also available on the intranet to which all of the Non-executive Directors have access.In 2021, it is intended that presentations will continue to be provided to the Board on a rolling basis by members of the Group’s different business units and working groups, in order to continue to update the Board on the Group’s progress and to enhance the awareness of the Board as to how the Group operates on a day-to-day basis. As a further aspect of their ongoing development, each Director also receives feedback on his or her performance following the Board’s performance evaluation in each year and the Chairman reviews and agrees 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 page 104.Director rotation and independenceThe Nomination Committee and the Company Secretary have agreed a standardised rotation schedule for each of the Non-executive Directors (including the Chairman). Each Non-executive Director is appointed for an initial three-year term pursuant to the terms of their respective letters of appointment. This initial term is then subject to renewal for subsequent three-year term(s) and, other than the Chairman, to a maximum of three consecutive three-year terms in order to maintain his or her independence from a governance perspective, in accordance with the Code. Provision 19 of the Code applies to the maximum term for the Chairman’s appointment, and the Nomination Committee is responsible for ensuring compliance with this provision. The Chairman was considered by the Board to be independent on appointment.Statement of Non-executive Directors’ independenceThe 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 has concluded this year 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 & 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 2020, were reviewed by the Board, with no significant failings or weaknesses being identified in respect of the year ended 31 December 2020 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 page 46.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 page 49.Business Overview93Strategic ReportOur FinancialsOur GovernanceInduction meetings with Executive Directors and managementOverview of business, structure, functions, aims, risks and remuneration Meeting with the Group’s brokers and other advisers Meeting with the Group’s auditors and internal audit functionSite visits to key portfolio companiesListing Rules and Market Abuse RegulationCorporate governance policies and Board procedures Training requirements assessed and provided Access to external advisors Detailed presentations and meetings with managementCorporate Governance Statement continuedalready had a holding. These personal investments are tightly controlled by the Group’s internal policy relating to ‘Holdings in Portfolio Companies’ which includes, amongst other restrictions, maximum levels of investment by executive directors and staff in portfolio company financing rounds, requires that all interests of executive Directors in portfolio companies are fully disclosed and regulates and manages any potential conflicts that could arise. Through 2020, the Board reviewed this policy insofar as it applied to executive directors and concluded that executive directors should no longer be permitted to personally invest in financing opportunities in new portfolio companies. Executive directors are still permitted to follow their pre-emption rights in financings undertaken in portfolio companies in which they already have an interest, subject to the restrictions contained with the ‘Holdings in Portfolio Companies’ policy, including full disclosure to ensure all conflicts or potential conflicts of interest are effectively managed.Board supportThere is an agreed procedure for directors 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 any 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.InductionTrainingInduction, awareness and development A comprehensive induction process is in place for new directors. The programme is tailored to the needs of the individual Director and agreed with him or her in advance and monitored throughout the process to ensure that he or she can gain a better understanding of the Group and its businesses.This process includes:• an overview of the Group and its businesses, structure, functions, strategic aims, risk management framework and remuneration policies;• meetings/calls with all Executive Directors, the Company Secretary, the managing partners of the Life Sciences and Technology Partnerships, heads of the US and Australian businesses, heads of the various internal functions and Parkwalk executives;• a meeting with both the Group’s auditor and internal audit function;• training on key legal and governance matters relevant to the Group and its policies; • site visits to a number of the Group’s portfolio companies, including, where possible, at least one or more within the Group’s top ten holdings (by value), which will include meeting with such companies’ management and a presentation from them on their businesses; and • sessions as appropriate with the Group’s advisers, as well as with appropriate external governance specialists, to ensure full awareness and understand of their responsibilities and obligations as a Director of a FTSE 250 company, and of the governance and legislative framework within which they must operate.IP Group plc Annual Report and Accounts for the year ended 31 December 202092Stock Code: IPO 9 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Corporate Governance Statement continued
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. It adopts the
highest values surrounding quality, integrity and ethics and
these values are documented and communicated clearly
throughout the whole organisation. An overview of the
Group’s risk management framework is set out on page 47.
The Group outsources its internal audit function to PwC.
Details of the internal audit activity during 2020, including
internal audit reviews, are on page 140.
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 & 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
and strategic acquisitions and disposals entered into by the
Group are reserved for the Board’s review and approval.
The Board regularly reviews any significant fair value
movements in individual portfolio companies, the Group’s
investments in its strategic assets and the top 20 most
valuable portfolio company holdings. For details on the
activities of the Group’s Valuation Committee see page
129. In addition, the managing partners of the Life Sciences
and Technology Partnerships attend Board meetings
as observers and present updates on their respective
portfolios during each Board meeting.
As described on page 46, 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 50 to 57.
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 page 46 and on pages 129 to 130.
9 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Corporate Governance Statement continued
The key elements of the Group’s internal control system, all
The Board regularly reviews any significant fair value
of which have been in place during the financial year and up
movements in individual portfolio companies, the Group’s
to the date of approval of the Annual Report and Accounts,
investments in its strategic assets and the top 20 most
are as follows:
Control environment and procedures
The Group has a clear organisational structure with
defined responsibilities and accountabilities. It adopts the
highest values surrounding quality, integrity and ethics and
these values are documented and communicated clearly
throughout the whole organisation. An overview of the
Group’s risk management framework is set out on page 47.
The Group outsources its internal audit function to PwC.
Details of the internal audit activity during 2020, including
internal audit reviews, are on page 140.
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 & Risk Committee.
Identification and evaluation of
principal risks and uncertainties
valuable portfolio company holdings. For details on the
activities of the Group’s Valuation Committee see page
129. In addition, the managing partners of the Life Sciences
and Technology Partnerships attend Board meetings
as observers and present updates on their respective
portfolios during each Board meeting.
As described on page 46, 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 50 to 57.
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
The operations of the Group and the implementation of
receives details of actual performance measured against the
its objectives and strategy are subject to a number of key
budget at each meeting.
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
and strategic acquisitions and disposals entered into by the
Group are reserved for the Board’s review and approval.
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 page 46 and on pages 129 to 130.
Engaging with key stakeholders Engaging with stakeholders is an integral part of the Group’s business and decision-making and critical to ensuring the future success of the business. During 2020, the Group re-mapped its key stakeholders and identified no changes to its key stakeholders during the past year. This process will be completed again in 2021. Due to the impact of the COVID-19 pandemic, there has been an increased prevalence of remote engagement with the Company’s stakeholders, including its employees. Processes to ensure a high level of stakeholder engagement will continue to be reviewed during 2021. The table below sets out the Group’s focus on the key relationships with stakeholders which enable the Group to discuss the potential impact of its decisions on the stakeholders affected by or relevant to the issue in question.ShareholdersRegulatorsThe environment and wider communityUniversities and other research partnersPortfolio companiesThe European Investment Fund and the European Investment BankCo-investorsEmployeesGovernance bodies including proxy advisorsAnalystsName of stakeholderWhy we engageHow we engageIssues that matter to this stakeholder groupTo ensure that: • shareholders have a strong understanding of and confidence in the Group’s strategy, performance, purpose and culture; • the Group fosters and maintains strong relationships with its shareholders; and • the Board understands the issues that are important to the shareholders.• Direct meetings/calls, primarily with the Executive Directors and senior management and consultation on various key issues for the Group with the Chairman and Senior Independent Director• Results announcements, presentations and roadshows• The Group’s website• Meeting with analysts and feedback from the Group’s brokers• Annual General Meeting/other General Meetings• Annual Report and Accounts• RNS and RNS Reach announcements• Shareholder circulars• Group capital markets events • Financial performance • Strategy• The Group’s funding model• Capital allocation• Long-term growth• ESG factors• Culture• Significant changes to the Board• Remuneration of directors• Capital allocation• Matters affecting the share capital• Diversity• Compliance and governanceShareholdersBusiness Overview95Strategic ReportOur FinancialsOur Governance 9 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Corporate Governance Statement continued
Name of
stakeholder
Why we engage
How we engage
Issues that matter
to this stakeholder group
Employees
To attract, develop,
incentivise and retain
the best people,
which is critical to
achieving the Group’s
strategy and vision.
Meaningful
engagement with
employees also helps
to create a strong and
supportive culture.
•
IP Connect employee forum
• Appointment of Designated NED for
• Strategy
• Culture
• Transparency of
decision making
• Opportunities for
development and
progression
• Talent management
• Diversity and inclusion
• Employee/workplace
policies
• Strong communication
• Remuneration and
benefits
• Wellbeing
employees
• Regular all-staff meetings (held remotely
with increased frequency throughout the
COVID-19 pandemic)
• Annual all-staff off-site (held remotely
during 2020 over three days to encourage
maximum participation and engagement)
• Weekly all-staff emails from the CEO
• Staff intranet
• Speaking up hotline and web reporting tool
• Culture and engagement survey and other
more regular pulse surveys
• Regular all-staff social events
• Portfolio Company Update Programme
•
Internal training sessions
• During the COVID-19 pandemic, virtual
games and quizzes, fitness and wellbeing
sessions, coffee catch-up sessions and
regular email updates and check-in calls
from HR
Portfolio
companies
To develop and
support opportunities
into a diversified
portfolio of robust
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
• Strategy
• Financial performance
• 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 inhouse IP
specialist
• Regular portfolio company events
• Facilitating access to co-investors
• Group capital markets events
• Updates on Government support measures
during the COVID-19 pandemic circulated to
portfolio companies
• ESG factors
• Fundraising
• Building strong boards
• The Group’s funding
model
• Capital allocation
• Culture
•
Investment Committee
decision-making
process
9 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
9 7
Corporate Governance Statement continued
Why we engage
How we engage
To attract, develop,
•
IP Connect employee forum
• Appointment of Designated NED for
employees
• Regular all-staff meetings (held remotely
decision making
with increased frequency throughout the
COVID-19 pandemic)
• Opportunities for
development and
• Annual all-staff off-site (held remotely
progression
Name of
stakeholder
Employees
incentivise and retain
the best people,
which is critical to
achieving the Group’s
strategy and vision.
Meaningful
engagement with
employees also helps
to create a strong and
supportive culture.
Issues that matter
to this stakeholder group
• Strategy
• Culture
• Transparency of
• Talent management
• Diversity and inclusion
• Employee/workplace
policies
• Strong communication
• Remuneration and
benefits
• Wellbeing
during 2020 over three days to encourage
maximum participation and engagement)
• Weekly all-staff emails from the CEO
• Staff intranet
• Speaking up hotline and web reporting tool
• Culture and engagement survey and other
more regular pulse surveys
• Regular all-staff social events
• Portfolio Company Update Programme
•
Internal training sessions
• During the COVID-19 pandemic, virtual
games and quizzes, fitness and wellbeing
sessions, coffee catch-up sessions and
regular email updates and check-in calls
from HR
Portfolio
companies
To develop and
• Hands-on approach via portfolio company
• Strategy
support opportunities
boards as investor directors/observers
• Financial performance
into a diversified
portfolio of robust
businesses which
address some of the
world’s most pressing
challenges.
Part of the Group’s
purpose is to build
businesses that have
and environmental
impact, and this
forms an element
of the Board’s
consideration of the
long-term impact of
its decisions.
• Offering fundraising and capital markets
expertise via IP Capital (the Group’s fund
management and corporate advisory
business), executive search services to help
• ESG factors
• Fundraising
• Building strong boards
build strong boards via IP Exec (in-house
• The Group’s funding
executive search function) and commercial
model
advice and support on IP strategy and
due diligence via the Group’s inhouse IP
specialist
• Facilitating access to co-investors
• Group capital markets events
• Updates on Government support measures
during the COVID-19 pandemic circulated to
portfolio companies
• Capital allocation
• Culture
•
Investment Committee
decision-making
process
a positive social
• Regular portfolio company events
Name of
stakeholder
Why we engage
How we engage
•
Interacting with IP Capital, the Group’s
specialist fund management and corporate
advisory business
• Via portfolio company boards where several
investors have a Board seat
• Attending conferences and sector events
• Group capital markets events
Issues that matter
to this stakeholder group
• Strategy
• Financial performance
• Realisations
• ESG factors
•
Investment evaluation
and decision-making
process
• Culture
To build an
investment network
to support the
Group’s portfolio
companies and to
co-invest in portfolio
companies.
This helps to ensure
that the Group’s
portfolio companies
are adequately
supported, both
financially and in
other areas such
as board support,
corporate governance
and strategy.
To build, develop and
maintain relationships
with universities to
identify promising
research and create
and build businesses
around such research.
This builds into one of
the Group’s strategic
aims, which is to
create and maintain a
pipeline of compelling
intellectual property-
based opportunities.
To generate social
and environmental
impact, which is part
of the Group’s core
purpose.
Co-investors
Universities and
other research
partners
The
environment
and wider
community
• Regular interaction with investment teams in
• Strategy
the UK, the US and Australia
• Regular review meetings in US
• Annual relationship review in Australia
• Financial performance
• ESG factors
• Culture
• Realisations
• The Group’s funding
model
• Capital allocation
• Via the Group’s portfolio companies
• ESG factors
• Supporting UK woodland creation via
• Capital allocation
Woodland Carbon Code
• Three-year partnership with Generating
• Strategy
• Diversity and inclusion
Genius charity
• Website
• Member of UN Global Compact
9 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Corporate Governance Statement continued
Name of
stakeholder
Why we engage
How we engage
Issues that matter
to this stakeholder group
To maintain strong
partnerships with the
EIB, as lender to the
Group, and the EIF, a
significant investor in
the Group’s managed/
co-invest funds.
To maintain strong
relationships with
regulators.
The European
Investment Fund
and the European
Investment
Bank
Regulators1
Industry
Analysts
Governance
bodies
To ensure analysts
have a strong
understanding of
the Group’s strategy,
performance, purpose
and culture and
to ensure that the
Group has strong
relationships with its
analysts.
To maintain strong
relationship with
proxy advisers,
the Investment
Association, the
Financial Reporting
Council and other
governance bodies.
• Regular reporting requirements
• Strategy
• Direct conversations and consultation on
• Financial performance
matters relevant to them
• The Group’s funding
• Attendance and presentation at EIB and EIF
model
conferences
• Realisations
• Compliance and
governance
• ESG factors
• Direct correspondence on matters as
• Strategy
necessary
• Correspondence with the Takeover Panel on
concert party matters
• Regular reporting to the Financial Conduct
Authority, and incorporation of any
feedback received
• Regular reporting to the Australian
Securities and Investment Commission,
Australian Prudential Regulation Authority
and the Australian Transaction Reports
Analysis Centre
• Financial performance
• Compliance and
governance
• The Group’s funding
model
• Portfolio liquidity
• ESG factors
• Business continuity
and longevity
• Regular dialogue and correspondence
• Strategy
with the Executive Directors and senior
management team, led by the CFO
• Financial performance
• The Group’s funding
model
• Capital allocation
• Compliance and
governance
• ESG factors
• Direct correspondence on matters as
• Compliance and
necessary
• Correspondence with proxy bodies in
relation to the Group’s Annual General
Meeting and any other general meetings
governance
• Remuneration Policy
• ESG factors
• Diversity and inclusion
1.
Including the Financial Conduct Authority, Takeover Panel and the Australian Securities and Investment Commission.
9 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Corporate Governance Statement continued
Name of
stakeholder
Why we engage
How we engage
Issues that matter
to this stakeholder group
To maintain strong
• Regular reporting requirements
• Strategy
partnerships with the
EIB, as lender to the
Group, and the EIF, a
significant investor in
the Group’s managed/
co-invest funds.
The European
Investment Fund
and the European
Investment
Bank
• Direct conversations and consultation on
• Financial performance
matters relevant to them
• The Group’s funding
• Attendance and presentation at EIB and EIF
model
conferences
To maintain strong
• Direct correspondence on matters as
• Strategy
relationships with
necessary
regulators.
• Correspondence with the Takeover Panel on
Regulators1
concert party matters
• Regular reporting to the Financial Conduct
Authority, and incorporation of any
feedback received
• Regular reporting to the Australian
Securities and Investment Commission,
Australian Prudential Regulation Authority
and the Australian Transaction Reports
Analysis Centre
To ensure analysts
• Regular dialogue and correspondence
• Strategy
have a strong
with the Executive Directors and senior
understanding of
management team, led by the CFO
Industry
Analysts
the Group’s strategy,
performance, purpose
and culture and
to ensure that the
Group has strong
relationships with its
analysts.
relationship with
proxy advisers,
the Investment
Association, the
Financial Reporting
Council and other
governance bodies.
To maintain strong
• Direct correspondence on matters as
• Compliance and
necessary
governance
Governance
bodies
• Correspondence with proxy bodies in
• Remuneration Policy
relation to the Group’s Annual General
Meeting and any other general meetings
• ESG factors
• Diversity and inclusion
1.
Including the Financial Conduct Authority, Takeover Panel and the Australian Securities and Investment Commission.
• Realisations
• Compliance and
governance
• ESG factors
• Financial performance
• Compliance and
governance
• The Group’s funding
model
• Portfolio liquidity
• ESG factors
• Business continuity
and longevity
• Financial performance
• The Group’s funding
model
• Capital allocation
• Compliance and
governance
• ESG factors
Engagement with employees during the COVID-19 pandemic / IP ConnectThe Group recognised the importance of increased engagement with employees during the COVID-19 pandemic and has launched various initiatives aimed at fostering a culture of enhanced employee engagement through the work undertaken by the Group’s HR team and IP Connect, the Group’s employee forum. For further information on IP Connect please refer to pages 74 to 75 and for the ways in which the Group has engaged with employees during the COVID-19 pandemic please refer to pages 70 to 71.Share capital and related mattersDetails 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. Details of the Directors’ authority in relation to the issuing or buying back by the Company of its shares are set out in pages 132 to 133 of the Directors’ Report. Articles of AssociationThe Company’s Articles of Association may be amended by a special resolution of the shareholders.Substantial shareholdersDetails of persons who hold a significant direct or indirect holding of securities in the Company are set out on page 133 of the Directors’ report.Annual General MeetingNotice of the Annual General Meeting, which will be held on 9 June 2021 at IP Group plc, The Walbrook Building, 25 Walbrook, London, EC4N 8AF, 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. Subject to restrictions relating to COVID-19 and public gatherings in force at the time of the Annual General Meeting, 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 boardSir Douglas FlintChairman9 March 2021Business Overview99Strategic ReportOur FinancialsOur Governance 1 0 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Nomination Committee Report
With an eye to the future, the Committee spent the majority of our time in 2020 updating
succession planning for the leadership of the Group and working with the CEO to re-
design the executive decision making framework of the Company to expand employee
engagement and improve diversity and inclusion therein
Purpose
The role of the Nomination Committee is to ensure that there is a formal, rigorous and transparent procedure for the
appointment of new Directors to the Board, to lead the process for Board appointments and the re-election and succession
of Directors and the Chairman, to ensure that plans are in place for orderly succession to the Board and senior management
positions, to oversee the development of a diverse pipeline for succession and to make recommendations to the Board
in connection with the same. Its key objective is to ensure that the Board comprises individuals with the necessary skills,
knowledge, experience, independence and diversity to ensure that the Board is effective in discharging its duties and is
independent for the purposes of the Code.
The contribution of each Board member to the Group is set out in the ‘Board of Directors’ skills section in the Directors’
Report on page 82.
Key responsibilities
• Regularly reviews the size, composition and skills
of the Board and makes recommendations on any
changes considered necessary in the identification
and nomination of new Directors, the reappointment
of existing Directors and the appointment of
members to the Board’s Committees
• Leads the process for appointments 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 the marketplace
• Advises the Board on succession planning
for Directors and other senior management
appointments, although the Board as a whole is
responsible for succession generally
Membership and meetings
The Nomination Committee is chaired by Sir Douglas Flint. Its
other members, as at 31 December 2020, were all the other
Non-Executive Directors ensuring a majority of independent
Non-Executive Directors as prescribed by the Code.
The Nomination Committee meets as and when required,
or as requested by the Board, and had three scheduled
meetings and nine ad hoc meetings during 2020. The
attendance by each member of the Nomination Committee
at the scheduled meetings during 2020 is set out on page 91.
Committee activities during 2020
Board composition
• Reviewed the size and diversity of the Board,
including the matrix of skills present amongst the
current members and where any gaps may be
Succession planning
• Oversees a diverse pipeline for succession
• Continued to monitor the tenure of the Non-
• Considers the setting of diversity and inclusion
policies, objectives, targets and strategies,
alongside the Group’s HR team and 30% Club
working group, 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 Director
and senior management conflicts and potential
conflicts of interest, including disclosure,
authorisation and management of the same as may
be appropriate or otherwise required by law or
regulation
• Assists the Chairman 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
executive Directors and, in connection with this,
agreed the succession approach to the position of
Senior Independent Director (see page 89)
• Agreed an Executive Leadership succession plan
(see page 102)
• Reviewed the current progress of senior
management and below Board succession planning
and the development of the internal talent pipeline
Governance
• Reviewed the terms of reference for the Nomination
Committee
• Reviewed corporate governance trends
• Reviewed and agreed a proposal presented by
the Executive Directors for the formation of a new
Executive Committee.
1 0 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 0 1
Evaluation
• Oversaw the 2020 internal evaluation of the
Board and its Committees, including a review of
the progress against the actions arising from the
2019 external Board evaluation and agreement of
priorities and action points for 2021
Terms of reference
The terms of reference for the Nomination Committee
were updated and adopted by the Board in May 2019 and,
following a subsequent review in December 2020, it was
concluded that no further substantive updates were required
at this time. The Nomination Committee will review its terms
of reference at least annually and will propose updates where
necessary and to reflect current market practice.
Appointments
In making future appointments to the Board, the Nomination
Committee will continue to adopt a formal, rigorous and
transparent procedure. It will give 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, as well as
the future challenges facing the business, any emerging
trends which may affect the Group’s long-term success
and any specific technical skills and knowledge which may
be required on the various Committees. In addition, for
appointments to the Board, the Nomination Committee will
always assess whether identified candidates have sufficient
time available to devote to the role and meet what is
expected of them effectively.
No new Directors or senior management were appointed
during 2020.
The appointment process for future appointments is as follows:
Step 5
Step 3
Step 1
Step 4
Step 2
Step 6
Nomination Committee
works with both
the Group People
Director and IP Exec,
the Group’s in-house
executive search
function, to conduct a
mapping exercise of the
Board’s existing skills,
experience, knowledge
and balance and to
identify any gaps which
it may wish to fill.
Nomination
Committee
considers
whether the
services of an
external search
consultancy
are required in
addition to the
Group’s in-house
capabilities
and whether
to use public
advertising.
Nomination
Committee
reviews and
prepares a
detailed job
specification.
A diverse list of
candidates is created
and, following review
by the Nomination
Committee, is distilled
into a shortlist. All
future shortlists will be
gender balanced (an
equal number of male
and female candidates
will be presented for
interview), and we will
always seek to include
at least one candidate
from another under-
represented group in
the final shortlist.
Interviews with
shortlisted
candidates are
carried out by
the Chairman
and certain
other directors.
The Nomination
Committee makes
a recommendation
to the Board and,
if in agreement
with the
recommendation,
the Board
approves the
chosen candidate.
Diversity and inclusion
The Board is committed to a culture that attracts and
retains talented people to deliver outstanding performance
and further 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 while recognising that diversity, in all its forms, is
key to introducing different perspectives into Board debate
and decision making and creating optimal board balance
and composition. A genuinely diverse and inclusive Board
and senior management team comprises individuals with a
range of personal attributes, perspectives, skills, knowledge
and experiences, as well as representing differences in
nationality, age, gender, social, educational and ethnic
backgrounds, and cognitive and personal strengths.
The Nomination Committee applies the Board’s diversity
strategy and policy in accordance with its terms of reference,
under which the Nomination Committee considers diversity
in the wider sense including, but not limited to, gender,
nationality and ethnicity in evaluating the composition of
the Board and the senior management team, in identifying
suitable candidates for Board and senior management
appointments and in overseeing a diverse pipeline for
succession. While the Group continues to endorse the
Hampton-Alexander target of 33% women in FTSE 350
Board and senior management teams, it continues to believe
that it is not appropriate nor in the Group’s best interests
to include either Board, senior management or Group-
wide fixed gender targets in its policies at this stage. It
did however set itself an aspirational target of at least 30%
female representation at Board level and is pleased to note
that, following the various board changes through 2019
and 2020, this target has now been achieved. The Board’s
intention is to maintain female representation of at least
the current level but will continue to consider all aspects of
Nomination Committee Report
With an eye to the future, the Committee spent the majority of our time in 2020 updating
succession planning for the leadership of the Group and working with the CEO to re-
design the executive decision making framework of the Company to expand employee
engagement and improve diversity and inclusion therein
Purpose
The role of the Nomination Committee is to ensure that there is a formal, rigorous and transparent procedure for the
appointment of new Directors to the Board, to lead the process for Board appointments and the re-election and succession
of Directors and the Chairman, to ensure that plans are in place for orderly succession to the Board and senior management
positions, to oversee the development of a diverse pipeline for succession and to make recommendations to the Board
in connection with the same. Its key objective is to ensure that the Board comprises individuals with the necessary skills,
knowledge, experience, independence and diversity to ensure that the Board is effective in discharging its duties and is
independent for the purposes of the Code.
The contribution of each Board member to the Group is set out in the ‘Board of Directors’ skills section in the Directors’
Report on page 82.
Key responsibilities
• Regularly reviews the size, composition and skills
of the Board and makes recommendations on any
changes considered necessary in the identification
and nomination of new Directors, the reappointment
of existing Directors and the appointment of
members to the Board’s Committees
• Leads the process for appointments 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 the marketplace
• Advises the Board on succession planning
for Directors and other senior management
appointments, although the Board as a whole is
responsible for succession generally
Membership and meetings
The Nomination Committee is chaired by Sir Douglas Flint. Its
other members, as at 31 December 2020, were all the other
Non-Executive Directors ensuring a majority of independent
Non-Executive Directors as prescribed by the Code.
The Nomination Committee meets as and when required,
or as requested by the Board, and had three scheduled
meetings and nine ad hoc meetings during 2020. The
attendance by each member of the Nomination Committee
at the scheduled meetings during 2020 is set out on page 91.
Committee activities during 2020
Board composition
• Reviewed the size and diversity of the Board,
including the matrix of skills present amongst the
current members and where any gaps may be
Succession planning
• Oversees a diverse pipeline for succession
• Continued to monitor the tenure of the Non-
• Considers the setting of diversity and inclusion
policies, objectives, targets and strategies,
alongside the Group’s HR team and 30% Club
working group, 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
executive Directors and, in connection with this,
agreed the succession approach to the position of
Senior Independent Director (see page 89)
• Agreed an Executive Leadership succession plan
(see page 102)
• Reviewed the current progress of senior
management and below Board succession planning
• Oversees the Group’s controls over Director
and the development of the internal talent pipeline
and senior management conflicts and potential
conflicts of interest, including disclosure,
authorisation and management of the same as may
be appropriate or otherwise required by law or
regulation
Governance
Committee
• Assists the Chairman 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
• Reviewed the terms of reference for the Nomination
• Reviewed corporate governance trends
• Reviewed and agreed a proposal presented by
the Executive Directors for the formation of a new
Executive Committee.
1 0 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Nomination Committee Report continued
diversity in the wider sense when assessing the overall Board
and senior management composition and in making new
appointments going forward.
In relation to ethnic diversity, the Nomination Committee
acknowledges the recommendation from the Parker Review
Committee Report on the ethnic diversity of boards issued
in October 2017 and the Parker Review update issued in
2020 that each FTSE 250 board should have at least one
qualifying Director by 2024. The Nomination Committee
confirms that the Company currently complies with such
recommendation. Consistent with the approach adopted
by the Nomination Committee to gender diversity, the
Nomination Committee does not consider it appropriate
to include Board, senior management or Group-wide fixed
ethnicity targets in its policies at this stage and will continue
to consider all aspects of diversity in the wider sense when
making further appointments.
Even though it has elected not to set fixed targets at this
stage, the Nomination Committee remains committed to
ensuring that the Group is able to attract and retain as
diverse a range of employees as possible. The Nomination
Committee is pleased to note the development of group
policies and the range of initiatives being undertaken by
the Executive team to improve in this area (see page 71),
together with the increased diversity on the newly formed
Executive Committee (see below and page 71) and looks
forward to significant continued progress in increasing both
diversity and inclusion during 2021.
When Board or senior management vacancies arise,
the Nomination Committee will engage the Group’s in-
house executive search function and/or external search
consultants (as appropriate) and will require them to
identify and present qualified people from a range of
diverse backgrounds, gender, nationality, age and ethnicity
to be considered for appointment.
Composition of the Board
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
Two of the key actions arising from the 2019 externally
facilitated board evaluation exercise were for the Board to:
• bring more formality to the succession plans in place for
senior management, including the Executive Directors;
and
• review the construct and composition of the forum
through which the Board’s delegated authority to the
executive is intended to be conducted, taking into
account the Group’s commitment to diversity in all its
forms and specifically gender.
In response and as outlined on page 70, the Executive
Directors had intended to finalise the creation of a new
Executive Committee by the end of 2020. The start of
this process was delayed by the reprioritisation of internal
senior resource in response to COVID-19 through 2020.
During the intervening period, the Nomination Committee
took the opportunity to broaden the scope of its succession
planning project to review, with the objective of simplifying,
the overall Board structure.
GENDER BALANCE
BOARD TENURE
EXECUTIVE/NON-EXECUTIVE SPLIT
3
4
4
7
Male
Female
2
1-2 years
3-5 years
Over 5 years
1
4
5
Executive Director
Non-executive Director
Non-executive Chairman
A breakdown of the Group’s people by gender, including the gender balance of senior management, as at 31 December
2020 can be found on page 71.
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diversity in the wider sense when assessing the overall Board
and senior management composition and in making new
Succession planning
Skills Matrix
8
Finance
4
Tech
Sector
2
Life Sciences
Sector
7
Investor Relations &
Communications
Board Skills,
Knowledge and
Experience
7
Audit & Risk
1
Academia
7
Capital
Markets
5
Investments
& Valuations
Industry knowledge/expertise
Skills/experience of the Board
Number = Board members with
relevant skills
While reviewing the design and shape of the Board,
together with the initial proposals for the composition and
construct of the new Executive Committee, the Nomination
Committee reflected on the longer-term management of
the Group, particularly in light of the growing maturity of
the portfolio and the strong pipeline of portfolio realisations
reasonably likely to occur in the coming years; some of
these have now taken place as discussed in the CEO’s
operational review. Given that building companies from
inception to scale is a multi-year task which has to be
conducted alongside prioritising and managing portfolio
realisations within an agreed long term strategic framework,
the CEO invited the Nomination Committee to initiate
a process to refresh succession planning for the future
Executive Leadership of the Group.
The Nomination Committee therefore embarked upon a
more comprehensive Executive Leadership succession
planning exercise than had originally been planned
for 2020. The Committee’s objectives were to assess
objectively the future needs of the Board in terms of
delivering on the Group’s strategy and to benchmark
existing leadership resources against those needs and to
consider external recruitment or internal development
plans so that the Group would be in a position to manage a
smooth transition, as and when applicable.
In undertaking this exercise, the Nomination Committee
utilised the services of an external executive search and
leadership consultancy firm, Spencer Stuart (i) to assist
the Nomination Committee in identifying and assessing
leadership potential, both from within the internal pool
of candidates and externally, and (ii) once identified, to
interview and evaluate the same using their internally
developed evaluation tools, and to report the results of this
exercise back to the Nomination Committee to assist it in
assessing and ranking such candidates’ suitability.
The process was undertaken primarily through virtual
interviews and meetings throughout the second half of
2020. The process required several ad hoc meetings of the
Nomination Committee to discuss the assessments and
the various options that were presented. Towards the end
of 2020, the Nomination Committee had concluded its
own process, with agreement on an Executive Leadership
succession plan. Due to the desire to ensure continued
stability for the Group, its staff and its portfolio companies
during the current circumstances, together with expected
portfolio events in the near term, the Committee concluded
it should defer finalising its recommendation to the Board
in respect of such plan until such time as there was greater
stability in the wider environment and expected portfolio
events had occurred.
Nomination Committee Report continued
appointments going forward.
In relation to ethnic diversity, the Nomination Committee
acknowledges the recommendation from the Parker Review
Committee Report on the ethnic diversity of boards issued
in October 2017 and the Parker Review update issued in
2020 that each FTSE 250 board should have at least one
qualifying Director by 2024. The Nomination Committee
confirms that the Company currently complies with such
recommendation. Consistent with the approach adopted
by the Nomination Committee to gender diversity, the
Nomination Committee does not consider it appropriate
to include Board, senior management or Group-wide fixed
ethnicity targets in its policies at this stage and will continue
to consider all aspects of diversity in the wider sense when
making further appointments.
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
Two of the key actions arising from the 2019 externally
facilitated board evaluation exercise were for the Board to:
• bring more formality to the succession plans in place for
senior management, including the Executive Directors;
Even though it has elected not to set fixed targets at this
stage, the Nomination Committee remains committed to
ensuring that the Group is able to attract and retain as
and
diverse a range of employees as possible. The Nomination
• review the construct and composition of the forum
Committee is pleased to note the development of group
through which the Board’s delegated authority to the
policies and the range of initiatives being undertaken by
executive is intended to be conducted, taking into
the Executive team to improve in this area (see page 71),
account the Group’s commitment to diversity in all its
together with the increased diversity on the newly formed
forms and specifically gender.
Executive Committee (see below and page 71) and looks
forward to significant continued progress in increasing both
diversity and inclusion during 2021.
In response and as outlined on page 70, the Executive
Directors had intended to finalise the creation of a new
Executive Committee by the end of 2020. The start of
When Board or senior management vacancies arise,
this process was delayed by the reprioritisation of internal
the Nomination Committee will engage the Group’s in-
senior resource in response to COVID-19 through 2020.
house executive search function and/or external search
During the intervening period, the Nomination Committee
consultants (as appropriate) and will require them to
identify and present qualified people from a range of
took the opportunity to broaden the scope of its succession
planning project to review, with the objective of simplifying,
diverse backgrounds, gender, nationality, age and ethnicity
the overall Board structure.
to be considered for appointment.
Composition of the Board
GENDER BALANCE
BOARD TENURE
EXECUTIVE/NON-EXECUTIVE SPLIT
3
4
4
7
Male
Female
2
1-2 years
3-5 years
Over 5 years
1
4
5
Executive Director
Non-executive Director
Non-executive Chairman
A breakdown of the Group’s people by gender, including the gender balance of senior management, as at 31 December
2020 can be found on page 71.
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Nomination Committee Report continued
Having considered how any such future succession process
might impact upon the planned Executive Committee
structure and Board simplification, the Nomination
Committee asked the Executive Directors to prioritise the
formation of the new Executive Committee.
Progress has already been made on this front in the first
few months of 2021, with the initial stages of the formation
process having been accomplished. The Committee is
pleased to note that the commitment made by the CEO
last year to make diversity a key consideration in the
formation process has been achieved. Two Employee
Executive roles are in the process of being added to the
Executive Committee to bring further diversity of thought,
ensuring the team is a high-performing one. In addition, in
the first instance, there will be female representation of 25%
(previously 0%). Further details around the new Executive
Committee and the Employee Executive roles are set out on
page 71.
Non-executive Directors
Following the appointments of Dr Caroline Brown and
Aedhmar Hynes in 2019, the Board did not make any non-
executive appointments during 2020.
The Nomination Committee specifically considered the
tenure of each of its Non-executive Directors at its meeting
in December. It was noted that Professor David Begg, the
Senior Independent Director, will reach nine years’ tenure
during 2021 and will therefore stand down as a director at
the AGM in 2021. After consideration of an appropriate
candidate to succeed Professor Begg as Senior Independent
Director, the Nomination Committee noted at its meeting in
March 2021 that Aedhmar Hynes has accepted the invitation
to do so, with the unanimous support from her Non-
executive colleagues. It is expected that this appointment
will take effect from the conclusion of the 2021 AGM, subject
to Aedhmar Hynes’ re-election as a director at that meeting.
Below Board
In addition to succession planning at Board level,
developing internal talent at all levels within the Group
remains a continuous process. The Nomination Committee
is responsible for ensuring that suitable leadership and
talent development plans and processes 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
Nomination Committee intends to work closely with the
Group People Director, as he and his team drives forward
the development of internal talent in 2021. This will include
putting in place the structures to identify, support and
develop future leadership talent from within the Group,
with the aim of ensuring the development of a diverse and
robust succession pipeline for the senior management and
their direct reports.
See page 100 for further commentary on the anticipated
approach to succession planning below board for 2021.
Board effectiveness and performance
evaluation
The Board carries out a review of the effectiveness of its
performance and that of its committees and directors every
year. The evaluation is externally facilitated every three
years. The next external evaluation will be in respect of the
2022 financial year.
Following the external Board effectiveness review last year,
it was agreed that an internal review be conducted this year.
2020 evaluation process
The 2020 internal evaluation process was led by the
Chairman, with the support of the Company Secretary.
The evaluation was carefully structured, but pragmatic,
designed to bring about genuine engagement with the
process, to check on progress against actions identified
in the 2019 evaluation, and to assist in identifying any
potential areas for improvement and/or prioritisation for
the Board for the year ahead. The process itself involved a
detailed analysis of the progress made against the actions
agreed as part of the 2019 external evaluation, applying
a RAG rating against each action. Each of the Board
members and the Observers were invited to comment on
this analysis during one-to-one video conference sessions
with the Company Secretary. During the same sessions, the
Company Secretary also discussed areas for improvement
for the Board and its Committees during 2021, as well
as reflections on how the Board and its Committees had
operated remotely, as it had been required to do for the
large part of 2020, what had been learnt about working
together in this way, any practices that should be retained
and what the Board and Chairman’s priorities should be for
2021. In addition, the process also involved a slighter deeper
dive into the operation and effectiveness of each of the
Committees during the year in review.
The internal review identified some opportunities for the
Board and the resulting areas of focus for the year ahead
are summarised below:
• To further refine the Group’s capital planning framework
to address disposition strategies for material portfolio
liquidity events.
• To review and approve an updated Group strategy,
including portfolio investment over the next 5 to 10
years, and to include impact and ESG priorities.
• To champion and monitor greater diversity and inclusion
and employee engagement across the Group.
• To ensure the newly formed Executive Committee
operates effectively.
• To oversee the smooth implementation of the Executive
Leadership succession plan as and when finalised.
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Board effectiveness and performance
Progress against 2019 actions
Set out below is the progress made against actions identified through the 2019 external Board effectiveness review:
Action
Progress
To bring more formality to the succession plans in
place for senior management, including the executive
directors.
Executive Leadership succession plan agreed during the year
(see page 102); further succession planning work for the next
level down to be led by the Group People Director in 2021.
To hold dedicated Board session to agree alignment of
the role and objectives of the Board and its committees
with the Group’s s172 responsibilities
To review the construct and composition of the forum
through which the Board’s delegated authority to the
executive is to be conducted, taking into account the
Group’s commitment to diversity
To continue to build on and strengthen the work
carried out in 2019 to ensure that the views of the
Group’s stakeholders are considered by the Board in its
deliberations and decisions
For the Executive Directors and Company Secretary
to ensure there is greater clarification in Board and
committee papers of the actions and input required
by the Board and committee members in response to
each agenda item
Building on the appointment of Aedhmar Hynes as
the Designated NED for workforce engagement, to
formalise how the outcomes of Board and Committee
meetings are communicated to the wider workforce
to ensure, amongst other things, consistency of
messaging
To continue to build on the Board’s strategic dialogue
and to further define the strategy development process
ahead of the Board’s strategy days in 2020.
Whilst the Board and each of its Committees and Directors
continue to consider the s172 responsibilities on an ongoing
basis in the conduct of its business and decision making, no
dedicated session was held in 2020. Carried over to 2021,
following completion of Executive Committee formation (see
below arising from the 2020 evaluation and page 104).
The Board has overseen the initial stages of the formation
process of the new Executive Committee. Female
representation increased to 25%, from 0%, in the first instance.
Two Employee Executive roles are in the process of being
added to bring further diversity of thought (see more on pages
70 and 71).
The Board oversaw and participated, as appropriate, in an
exercise to improve and formalise the data collection around
the ongoing and/or specific engagement it has with the
Group’s identified key stakeholders (see page 95) during 2020,
including to ensure record-keeping of the communication of
the Board’s decisions and outcomes to interested stakeholders
and how their views have been taken into account.
Significant effort went into setting clear agendas for all Board
and Committee meetings to ensure that the action and input
required from the Board or respective Committee members
in respect of each was clear, and that appropriate time was
dedicated to priority topics. All Board members agreed that
these had improved the efficiency and operation of meetings,
particularly important when operating remotely.
Significant progress was made on the communication of Board
outcomes during 2020, in part due to the increased frequency
and breadth of employee communications as part of the Board
and Executive team’s pandemic response. Communication
occurred via several methods including through Aedhmar
Hynes’ attendance at IP Connect, the weekly CEO email and
regular all-staff calls immediately following the Board and
Committee meetings (for further information on both the
two-way dialogue facilitated by IP Connect and the Group’s
employee communications, see pages 71 and 72).
Good progress was made during the year in further developing
and refining the Group’s approach to capital allocation,
culminating in the adoption of a formal capital allocation policy
in July 2020. The application of this for 2021 and beyond was
then considered at the Board’s strategy sessions in November
and December in order to balance the shorter- and longer-
term capital needs of the Group’s various business units. See
pages 75 and 76 for more detail.
Nomination Committee Report continued
Having considered how any such future succession process
might impact upon the planned Executive Committee
structure and Board simplification, the Nomination
Committee asked the Executive Directors to prioritise the
formation of the new Executive Committee.
Progress has already been made on this front in the first
few months of 2021, with the initial stages of the formation
process having been accomplished. The Committee is
pleased to note that the commitment made by the CEO
last year to make diversity a key consideration in the
formation process has been achieved. Two Employee
Executive roles are in the process of being added to the
Executive Committee to bring further diversity of thought,
ensuring the team is a high-performing one. In addition, in
the first instance, there will be female representation of 25%
(previously 0%). Further details around the new Executive
Committee and the Employee Executive roles are set out on
page 71.
Non-executive Directors
Following the appointments of Dr Caroline Brown and
Aedhmar Hynes in 2019, the Board did not make any non-
executive appointments during 2020.
The Nomination Committee specifically considered the
tenure of each of its Non-executive Directors at its meeting
in December. It was noted that Professor David Begg, the
Senior Independent Director, will reach nine years’ tenure
during 2021 and will therefore stand down as a director at
the AGM in 2021. After consideration of an appropriate
candidate to succeed Professor Begg as Senior Independent
Director, the Nomination Committee noted at its meeting in
March 2021 that Aedhmar Hynes has accepted the invitation
to do so, with the unanimous support from her Non-
executive colleagues. It is expected that this appointment
will take effect from the conclusion of the 2021 AGM, subject
to Aedhmar Hynes’ re-election as a director at that meeting.
Below Board
In addition to succession planning at Board level,
developing internal talent at all levels within the Group
remains a continuous process. The Nomination Committee
is responsible for ensuring that suitable leadership and
talent development plans and processes 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
Nomination Committee intends to work closely with the
Group People Director, as he and his team drives forward
develop future leadership talent from within the Group,
with the aim of ensuring the development of a diverse and
robust succession pipeline for the senior management and
their direct reports.
See page 100 for further commentary on the anticipated
approach to succession planning below board for 2021.
evaluation
The Board carries out a review of the effectiveness of its
performance and that of its committees and directors every
year. The evaluation is externally facilitated every three
years. The next external evaluation will be in respect of the
2022 financial year.
Following the external Board effectiveness review last year,
it was agreed that an internal review be conducted this year.
2020 evaluation process
The 2020 internal evaluation process was led by the
Chairman, with the support of the Company Secretary.
The evaluation was carefully structured, but pragmatic,
designed to bring about genuine engagement with the
process, to check on progress against actions identified
in the 2019 evaluation, and to assist in identifying any
potential areas for improvement and/or prioritisation for
the Board for the year ahead. The process itself involved a
detailed analysis of the progress made against the actions
agreed as part of the 2019 external evaluation, applying
a RAG rating against each action. Each of the Board
members and the Observers were invited to comment on
this analysis during one-to-one video conference sessions
with the Company Secretary. During the same sessions, the
Company Secretary also discussed areas for improvement
for the Board and its Committees during 2021, as well
as reflections on how the Board and its Committees had
operated remotely, as it had been required to do for the
large part of 2020, what had been learnt about working
together in this way, any practices that should be retained
and what the Board and Chairman’s priorities should be for
2021. In addition, the process also involved a slighter deeper
dive into the operation and effectiveness of each of the
Committees during the year in review.
The internal review identified some opportunities for the
Board and the resulting areas of focus for the year ahead
are summarised below:
• To further refine the Group’s capital planning framework
to address disposition strategies for material portfolio
liquidity events.
• To review and approve an updated Group strategy,
including portfolio investment over the next 5 to 10
years, and to include impact and ESG priorities.
• To champion and monitor greater diversity and inclusion
and employee engagement across the Group.
• To oversee the smooth implementation of the Executive
Leadership succession plan as and when finalised.
the development of internal talent in 2021. This will include
• To ensure the newly formed Executive Committee
putting in place the structures to identify, support and
operates effectively.
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Annual Report and Accounts for the year ended 31 December 2020
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IPO
Nomination Committee Report continued
Conclusion of the 2020 review
The internal evaluation concluded that the Board, its
Committees, and each of its Directors continue to be
effective, with good progress being made against the
majority of key actions identified from the 2019 external
review, unanimous agreement that the Board and its
Committees had operated well remotely through 2020, with
some positive learnings and behaviours to take forward
from this, and with clear priorities and actions having
been identified for 2021. The effective stewardship and
management of Board meetings by the Chairman, and his
cohesive, collegiate and inclusive style, was commented
on, creating a conducive environment at Board meetings
for participation and challenge. Furthermore, each of the
Board Committees have an agreed set of clear priorities for
the year ahead.
Director performance assessment and
review
The performance of each of the Non-Executive Directors is
reviewed by the Chairman with support from the Company
Secretary, the performance of the CEO is reviewed
by the Chairman and the operational performance of
the other Executive Directors 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
individual from the Board evaluation process and individual
development plans arising from these meeting are now in
the process of being put in place for the year ahead.
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Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Nomination Committee Report continued
Conclusion of the 2020 review
Director performance assessment and
The internal evaluation concluded that the Board, its
Committees, and each of its Directors continue to be
effective, with good progress being made against the
majority of key actions identified from the 2019 external
review, unanimous agreement that the Board and its
Committees had operated well remotely through 2020, with
some positive learnings and behaviours to take forward
from this, and with clear priorities and actions having
been identified for 2021. The effective stewardship and
management of Board meetings by the Chairman, and his
cohesive, collegiate and inclusive style, was commented
on, creating a conducive environment at Board meetings
for participation and challenge. Furthermore, each of the
Board Committees have an agreed set of clear priorities for
the year ahead.
review
The performance of each of the Non-Executive Directors is
reviewed by the Chairman with support from the Company
Secretary, the performance of the CEO is reviewed
by the Chairman and the operational performance of
the other Executive Directors 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
individual from the Board evaluation process and individual
development plans arising from these meeting are now in
the process of being put in place for the year ahead.
Directors’ Remuneration ReportRemuneration StatementDear fellow shareholder, I am pleased to present the Directors Remuneration Report (“DRR”) for the year ended 31 December 2020. This DRR is prepared on behalf of the Board.Overview 2020 was an exceptional year for IP Group, with record Return on Hard NAV and cash realisations combined with a strong recovery in our share price. The strong performance of our share price has also continued into 2021. The shareholder-aligned nature of our incentive schemes means that remuneration outcomes for both executives and wider staff are strongly aligned to Group financial performance over both the short and long term. I am confident that the calculated remuneration outcomes for 2020 are reasonable in the context of overall performance of the Group, without any requirement for discretionary adjustment. I elaborate further on both of these points below.That being the case, and as we continue to endure a period of unprecedented challenge and change as a result of COVID-19, we intend to take a largely consistent approach to executive reward for 2021.Before publication of our 2021 report we will undertake our triennial review of our Remuneration Policy. The focus of the review will be to ensure that our remuneration structures align with our maturing approach to patient capital investment, stewardship of our portfolio for the long-term and an alignment of interests between our executive group and a wider range of stakeholders.As a result of this broad focus, we are anticipating that the review might result in a change to our remuneration structures, with a particular focus on our Long-Term Incentive Plan. I look forward to engaging positively with our shareholders later in the year.2020 Performance and Incentive OutcomesAs outlined in the Strategic Report, Group performance in 2020 was exceptional. This is a testament to the increasing relevance of IP Group and our portfolio companies in a changing world, and both the quality and resilience of our team. Return on Hard NAV was a record £196m and realisations a record £191m, both well in excess of the stretching targets set at the start of the year and before the onset of the COVID-19 pandemic. We didn’t meet our net overheads target for 2020. This was primarily due to the reduction in revenues from our fee generating business units, largely as a result of the pandemic. While the Group managed its costs appropriately, ensuring these were below budget, management chose not to make any significant short-term reductions, believing this to be in the best long-term interests of the Group. Indeed, across the Group, no redundancies were made, nor did we place any team members on furlough.Progress against our employee-focused non-financial objectives (outlined on page 20) was also strong, with the significant improvements in employee engagement and reduction in attrition over a very challenging year particularly noteworthy. During the course of the year significant resource was deployed to ensure all of our people were (and remain) supported, protected and productive during a period of significant disruption.Our assessment of the weighted quantitative targets indicated a bonus out-turn of 93.3% of target, with Hard NAV performance and realisations contributing the vast majority of this. The Committee members and I discussed the output of the quantitative process at length. We considered whether this out-turn appropriately reflected the balance of both quantitative and qualitative performance during 2020, especially considering the impact of external market factors (including the impact of COVID-19). We also considered the anticipated total remuneration Heejae ChaeChair of the Remuneration CommitteeExceptional performance reflected in strong incentive outcomes across the business.”Business Overview107Strategic ReportOur FinancialsOur Governance outturns for the executives, including the fact that our stretching long-term incentive scheme targets are not anticipated to be achieved again this year.We concluded that delivery of such positive in-year performance from our portfolio, combined with our commitment to our employees and the many positive impacts that our portfolio companies have had on wider society, delivered against a challenging backdrop is deserving of significant reward. As part of this review, we noted that whilst some of our portfolio companies have accessed COVID-19-related support, including convertible loans from the Future Fund in the UK and loans under the CARES Act in the US at the IP Group level we did not furlough any of our team, nor access any of the UK Government support schemes Our results were not materially impacted by any government support. We also noted progress against engagement, retention and diversty metrics, and plans for continued improvement. Overall, we determined that the formulaic AIS outcome of 93.3% was appropriate. Consistent with our Remuneration Policy, a significant proportion of this AIS award will again be deferred into IP Group plc equity.A key principle of our philosophy is the strong alignment between the incentive structures which apply to our executives and the wider business. As a result, the AIS extends to all employees throughout the Group, and part of every bonus is based on Group performance measures. This year, these Group aligned AIS elements will be paid at 95% of maximum – slightly above the out-turn for Executives - meaning that this positive outcome was shared by all those who helped to contribute to it.Whilst in-year performance was strong, it was delivered against a backdrop of weaker performance in the two preceding years. As a result, the cumulative three-year return on the Group’s Hard NAV did not meet the 8% per annum threshold target for the 2018 LTIP awards. And whilst the absolute Total Shareholder Return (“TSR”) performance period of the 2018 awards runs to 31 March, at this stage we do not anticipate that the minimum 8% annualised return will be met on this measure. As a result, we expect that the vesting of LTIP awards in 2021 will once again be zero.The Committee considers that the combination of these outcomes resulted in an appropriate overall outcome for the Executive Directors, reflective of our ‘pay for performance’ principles, and the stretching incentive targets which are aligned with the interests of our shareholders and other stakeholders.Executive Directors’ remuneration for 2021 As set out above, later this year we will undertake our regular triennial review of Remuneration Policy. As part of this review, we intend to undertake a more fundamental review of director salary benchmarks, targets and levels. As such, for 2021 the Committee has determined that an approach of restrained, incremental salary progression would be prudent for all positions. Base salary increases for all Executive Directors will therefore be aligned with the baseline increase (excluding promotional increases and/or reactions to market changes) of 2% for our wider employees.Consistent with the Group’s approved Remuneration Policy, there will be no change in structure of or maximum AIS or LTIP opportunities for 2021.For 2021, the Committee will continue to base the same proportion (60%) of the AIS outcome for directors on the Return on Hard NAV, and an increased proportion (10%, 2020 5%) on our combined non-financial KPI measure, which is contingent upon improvements in both employee engagement and workforce diversity measures.Once again, performance and vesting of LTIP awards to be made during 2021 will be determined by growth in Hard NAV and TSR, with the stretching performance targets unchanged. In 2020, award levels were adjusted downward from maximum levels to reflect the fall in Group share price during 2019. For 2021, and given the positive performance of the Group’s share price during 2020 and 2021 to date, we anticipate that LTIP awards will return to the level in our Remuneration Policy, being 300% of basic salary for CEO and 200% of basic salary for other Executive Directors, although, as in previous years and in line with good practice, the Remuneration Committee will consider the position at the time of the 2021 awards.Directors’ Remuneration Report continuedRemuneration StatementIP Group plc Annual Report and Accounts for the year ended 31 December 2020108Stock Code: IPO Business Overview
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Our Financials
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Summary of our reward framework
Our reward framework for Executive Directors, which continues unchanged, is
summarised below:
Salary
Pension
• Typically, salaries approach the bottom end of a market
competitive range for similar sized companies
• 10% of salary contribution to Company defined
contribution plan, personal pension plan or cash
equivalent
• The pension level is in line with the wider workforce for all
AIS
Executive Directors
• Maximum 100% of salary
• Based on stretching return on Hard NAV targets disclosed
retrospectively and prospectively and other relevant
‘leading indicators’ of performance as determined by the
Committee each year
• Formulaic outcomes may be adjusted at the discretion
of the Committee to reflect overall business or individual
performance
• Half of any bonus above a minimum amount deferred into
equity over two-year period
• AIS arrangements cascade to all employees in the
business, with components based on team and/or
individual objectives for non-director employees
LTIP
• Annual awards of 275% of salary (CEO) and 185% of salary
(other Executive Directors)
• Based on stretching Hard NAV and TSR growth targets
(with a discretionary relative TSR underpin)
• Formulaic outcomes may be adjusted at the discretion
of the Committee to reflect overall business or individual
performance
•
Includes a two-year post-vesting holding period
• LTIP arrangements reserved for senior managerial levels
and roles which are expected to have a material financial
impact on the Group’s outcomes
• 200% of salary (CEO) and 150% (other Executive
Directors)
• Post-employment shareholding policy in place
• Comprehensive malus and clawback provisions on all
variable elements
Shareholding
guidelines
Malus and
clawback
Employee Engagement and Feedback
In January 2021, we engaged with our employee consultation group ‘IP Connect’
on the subject of executive remuneration. Our aim in doing so was to ascertain
whether our employees feel the level of salary and overall remuneration available
to our executive directors is well understood, and considered to be fair, equitable
and reasonable in the context of the rewards we offer elsewhere in the business.
We were pleased to find that the employees we consulted had a good
understanding of our approach to executive remuneration. We believe this is
direct result of the strong alignment between our executive structures and
outcomes and those for the rest of the business. Further, the representatives did
not indicate any issue with the level of remuneration offered to our executive
directors, either base salary or total opportunity.
Whilst overall we were pleased
with the positive feedback on our
approach, we note that IP Connect did
comment on the level of complexity
and volatility of outcome inherent in
our existing Long Term Incentive Plan,
both in terms of Executive Director
remuneration and (as a result of the
alignment in our approach across the
business) the impact on our other
senior managerial roles. This feedback
will be considered as part of our
planned review later on in 2021.
Shareholder support
and engagement
Our 2019 Remuneration Report
received 98.9% of the votes cast in
favour at our AGM in June 2020.
Whilst we are pleased to maintain this
high level of shareholder support and
engagement, we are also committed
to maintaining open and transparent
remuneration principles and practices.
In conversation with our major
shareholders, we agreed to reduce
the 400% limit on LTIP awards in
the Plan Rules to 300%, aligning our
Plan Rules with our Remuneration
Policy, and removing the discretion
to make excess awards in exceptional
circumstances.
I welcome the opportunity to further
discuss the Group’s remuneration with
any shareholder at any time during the
year, and I look forward to proactively
instigating such discussions as part
of our triennial review process later in
2021.
Structure of this Report
The following pages contain an
extract of our Remuneration Policy
(as approved by shareholders in
2018), a summary of how we intend
to implement the policy during 2021
and detailed disclosure of outcomes in
respect to 2020.
ON BEHALF OF THE BOARD
Heejae Chae
Chairman of the Remuneration
Committee
10 March 2021
outturns for the executives, including the fact that our stretching long-term incentive scheme targets are not anticipated to be achieved again this year.We concluded that delivery of such positive in-year performance from our portfolio, combined with our commitment to our employees and the many positive impacts that our portfolio companies have had on wider society, delivered against a challenging backdrop is deserving of significant reward. As part of this review, we noted that whilst some of our portfolio companies have accessed COVID-19-related support, including convertible loans from the Future Fund in the UK and loans under the CARES Act in the US at the IP Group level we did not furlough any of our team, nor access any of the UK Government support schemes Our results were not materially impacted by any government support. We also noted progress against engagement, retention and diversty metrics, and plans for continued improvement. Overall, we determined that the formulaic AIS outcome of 93.3% was appropriate. Consistent with our Remuneration Policy, a significant proportion of this AIS award will again be deferred into IP Group plc equity.A key principle of our philosophy is the strong alignment between the incentive structures which apply to our executives and the wider business. As a result, the AIS extends to all employees throughout the Group, and part of every bonus is based on Group performance measures. This year, these Group aligned AIS elements will be paid at 95% of maximum – slightly above the out-turn for Executives - meaning that this positive outcome was shared by all those who helped to contribute to it.Whilst in-year performance was strong, it was delivered against a backdrop of weaker performance in the two preceding years. As a result, the cumulative three-year return on the Group’s Hard NAV did not meet the 8% per annum threshold target for the 2018 LTIP awards. And whilst the absolute Total Shareholder Return (“TSR”) performance period of the 2018 awards runs to 31 March, at this stage we do not anticipate that the minimum 8% annualised return will be met on this measure. As a result, we expect that the vesting of LTIP awards in 2021 will once again be zero.The Committee considers that the combination of these outcomes resulted in an appropriate overall outcome for the Executive Directors, reflective of our ‘pay for performance’ principles, and the stretching incentive targets which are aligned with the interests of our shareholders and other stakeholders.Executive Directors’ remuneration for 2021 As set out above, later this year we will undertake our regular triennial review of Remuneration Policy. As part of this review, we intend to undertake a more fundamental review of director salary benchmarks, targets and levels. As such, for 2021 the Committee has determined that an approach of restrained, incremental salary progression would be prudent for all positions. Base salary increases for all Executive Directors will therefore be aligned with the baseline increase (excluding promotional increases and/or reactions to market changes) of 2% for our wider employees.Consistent with the Group’s approved Remuneration Policy, there will be no change in structure of or maximum AIS or LTIP opportunities for 2021.For 2021, the Committee will continue to base the same proportion (60%) of the AIS outcome for directors on the Return on Hard NAV, and an increased proportion (10%, 2020 5%) on our combined non-financial KPI measure, which is contingent upon improvements in both employee engagement and workforce diversity measures.Once again, performance and vesting of LTIP awards to be made during 2021 will be determined by growth in Hard NAV and TSR, with the stretching performance targets unchanged. In 2020, award levels were adjusted downward from maximum levels to reflect the fall in Group share price during 2019. For 2021, and given the positive performance of the Group’s share price during 2020 and 2021 to date, we anticipate that LTIP awards will return to the level in our Remuneration Policy, being 300% of basic salary for CEO and 200% of basic salary for other Executive Directors, although, as in previous years and in line with good practice, the Remuneration Committee will consider the position at the time of the 2021 awards.Directors’ Remuneration Report continuedRemuneration StatementIP Group plc Annual Report and Accounts for the year ended 31 December 2020108Stock Code: IPO 1 1 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Directors’ Remuneration Report continued
Annual Remuneration Statement
Remuneration policy
The Remuneration Policy was approved at the AGM held on 28 May 2019 and was effective as of that date. An extract of the
policy table for executive directors contained in that policy is re-produced below for information only. The full Remuneration
Policy is contained on pages 93 to 101 of the 2018 Annual Report and Accounts which is available in the investor relations
section of the Group’s website.
Remuneration Policy table
The table below sets out the key components of the Policy for Executive Directors’ remuneration.
Component Purpose and
link to strategy
How this component of
remuneration operates
Maximum
opportunity
Performance
metrics
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.
None, although
performance of the
individual is considered
by the Committee when
setting and reviewing
salaries annually.
Generally reviewed annually with
increases currently effective from 1
April.
Base salaries will be set by the
Committee taking into account a
range of factors, including but not
limited to:
• scale, scope and responsibility of
the role;
• skills and experience of the
individual;
•
retention risk;
• pay and conditions across the
Company;
• base salary of individuals
undertaking similar roles in
companies of comparable size
and complexity;
• performance of the individual
and IP Group;
•
impact of salary increases
on total remuneration of the
package; and
• appropriate market benchmarks
There is no prescribed
maximum annual salary.
Annual salary increases for
executive directors will not
normally exceed the average
increase awarded to other
UK-based employees.
Increases may be above this
level in circumstances where
the Committee considers it
appropriate, for example if
there is an increase in the
scale, scope or responsibility
of the role or to allow the
base salary of recently
appointed executives who
are appointed on initially
lower levels of base salary to
move towards market norms
as their experience and
contribution increase.
Where a significant
discrepancy exists between
an executive director’s
current salary and market
levels, the Committee
will normally phase any
increases over a number of
years.
Pension
To provide a competitive
post-retirement benefit
in a way that manages
the overall cost to the
Group in order to retain
individuals with the
personal attributes, skills
and experience required
to deliver the Group’s
strategy
Contribution to Group Pension Plan
(defined contribution scheme) or
to personal pension plan of the
relevant executive’s choosing or an
equivalent cash alternative.
No element other than base salary is
pensionable.
Maximum pension is 10% of
base salary.
Not applicable.
1 1 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Directors’ Remuneration Report continued
Annual Remuneration Statement
The Remuneration Policy was approved at the AGM held on 28 May 2019 and was effective as of that date. An extract of the
policy table for executive directors contained in that policy is re-produced below for information only. The full Remuneration
Policy is contained on pages 93 to 101 of the 2018 Annual Report and Accounts which is available in the investor relations
Remuneration policy
section of the Group’s website.
Remuneration Policy table
The table below sets out the key components of the Policy for Executive Directors’ remuneration.
Component Purpose and
link to strategy
How this component of
remuneration operates
Maximum
opportunity
Performance
metrics
Salary
To provide an
Generally reviewed annually with
There is no prescribed
None, although
appropriate level of fixed
increases currently effective from 1
maximum annual salary.
performance of the
cash income to attract
April.
and retain individuals
with the personal
attributes, skills and
experience required
to deliver the Group’s
strategy.
Base salaries will be set by the
Committee taking into account a
normally exceed the average
range of factors, including but not
increase awarded to other
Annual salary increases for
executive directors will not
individual is considered
by the Committee when
setting and reviewing
salaries annually.
• skills and experience of the
the Committee considers it
• scale, scope and responsibility of
limited to:
the role;
individual;
•
retention risk;
• pay and conditions across the
Company;
• base salary of individuals
undertaking similar roles in
companies of comparable size
and complexity;
• performance of the individual
and IP Group;
UK-based employees.
Increases may be above this
level in circumstances where
appropriate, for example if
there is an increase in the
scale, scope or responsibility
of the role or to allow the
base salary of recently
appointed executives who
are appointed on initially
lower levels of base salary to
move towards market norms
as their experience and
contribution increase.
•
impact of salary increases
Where a significant
on total remuneration of the
discrepancy exists between
package; and
• appropriate market benchmarks
an executive director’s
current salary and market
levels, the Committee
will normally phase any
increases over a number of
years.
Pension
To provide a competitive
Contribution to Group Pension Plan
Maximum pension is 10% of
Not applicable.
post-retirement benefit
(defined contribution scheme) or
base salary.
in a way that manages
to personal pension plan of the
the overall cost to the
relevant executive’s choosing or an
Group in order to retain
equivalent cash alternative.
No element other than base salary is
pensionable.
individuals with the
personal attributes, skills
and experience required
to deliver the Group’s
strategy
ComponentPurpose and link to strategyHow this component of remuneration operatesMaximum opportunityPerformance metricsBenefitsTo 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 required to deliver the Group’s strategy.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) and telecommunications such as broadband.The Group also offers certain salary sacrifice schemes including childcare vouchers, purchase of additional holiday and Ride to Work.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.Additional benefits, which may include relocation or expatriation benefits, housing allowance or other benefits-in-kind, may be provided in certain circumstances if considered appropriate and reasonable by the Committee, including as may be required on recruitment.The cost of benefits provided changes in accordance with market conditions and will, therefore, determine the maximum amount that would be paid in the form of benefits under the Policy. There is therefore no overall maximum opportunity under this component of the Policy.One-off benefits, e.g. relocation, shall not ordinarily exceed 25% of base salary other than in exceptional circumstances at the discretion of the Committee.Maximum awards under all-employee share plans would be subject to prevailing statutory limit.Not applicable.Business Overview111Strategic ReportOur FinancialsOur Governance 1 1 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Directors’ Remuneration Report continued
Annual Remuneration Statement
Component Purpose and
link to strategy
How this component of
remuneration operates
Maximum
opportunity
Performance
metrics
Annual
Incentive
Scheme
(“AIS”)
To provide a
simple, competitive,
performance-linked
annual incentive
mechanism that will:
• attract, retain and
motivate individuals
with the required
personal attributes,
skills and experience;
• provide a real
incentive to achieve
our strategic
objectives; and
• align the interests
of management and
shareholders.
The maximum annual level
of award is 100% of salary.
Given the Group’s salary
year currently runs from 1
April to 31 March, the base
salary used will normally be
that which is in effect at the
end of the annual financial
year to which the award
relates.
Specific targets and
weightings will vary from
year to year in accordance
with strategic priorities
but may include targets
relating to:
•
relative or absolute
TSR;
• Hard net assets;
• Financial performance;
• appropriate non-
financial measures; and
• attainment of personal
objectives.
Weighting will be primarily
towards Group financial
performance.
Performance will typically
be measured over one
year.
The AIS is a discretionary
plan and the Committee
retains the discretion
to adjust any formulaic
outcome to reflect overall
business or individual
performance or any
other reason considered
appropriate.
The AIS is reviewed annually prior
to the start of each financial year
to ensure the detailed performance
measures and weightings are
appropriate and continue to support
the business strategy. Financial and/
or non-financial performance targets
are set at or around the start of each
financial year.
Actual AIS amounts are determined
via a two-stage process. Firstly,
performance against the agreed
metrics is assessed. Secondly, the
Committee reviews these results in
the context of underlying business
performance and the Group’s
financial position and may adjust the
stage one outcome at its discretion.
Above a suitable minimum cash
amount, set by the Committee at
the start of each year, awards will
typically be payable 50% in cash and
50% in IP Group shares. The share
element is in the form of conditional
awards of shares or nil-cost options
(or equivalent at the Committee’s
discretion) and is subject to further
time-based vesting over two years
(50% after year 1 and 50% after year
2) although the Committee may
adjust the percentage split between
cash and shares based on the
financial position of the Group.
In certain circumstances, including,
but not limited to:
• serious misconduct by a
participant;
• material misstatement of financial
results;
• payments based on erroneous or
misleading data;
• serious reputational damage; or
• material corporate failure.
The Company will be entitled to claw
back the value of any cash amount
paid under the AIS for that year and
to cancel the vesting of any deferred
share element, for a period of up
to three years following the date of
award or payment.
1 1 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 1 3
Directors’ Remuneration Report continued
Annual Remuneration Statement
Component Purpose and
link to strategy
How this component of
remuneration operates
Maximum
opportunity
Performance
metrics
Component Purpose and
link to strategy
How this component of
remuneration operates
Maximum
opportunity
Performance
metrics
Annual
Incentive
Scheme
(“AIS”)
To provide a
simple, competitive,
performance-linked
annual incentive
mechanism that will:
appropriate and continue to support
The AIS is reviewed annually prior
The maximum annual level
Specific targets and
to the start of each financial year
of award is 100% of salary.
weightings will vary from
to ensure the detailed performance
measures and weightings are
the business strategy. Financial and/
or non-financial performance targets
are set at or around the start of each
financial year.
Given the Group’s salary
year currently runs from 1
April to 31 March, the base
salary used will normally be
that which is in effect at the
end of the annual financial
year to year in accordance
with strategic priorities
but may include targets
relating to:
•
relative or absolute
TSR;
year to which the award
• Hard net assets;
• provide a real
via a two-stage process. Firstly,
incentive to achieve
performance against the agreed
Actual AIS amounts are determined
relates.
• attract, retain and
motivate individuals
with the required
personal attributes,
skills and experience;
our strategic
objectives; and
• align the interests
of management and
shareholders.
Long-
Term
Incentive
Plan
(“LTIP”)
To provide a competitive,
performance-linked
long-term incentive
mechanism that will:
• attract, retain and
motivate individuals
with the required
personal attributes,
skills and experience;
• provide a real
incentive to achieve
our strategic
objectives; and
• align the interests
of management and
shareholders
The maximum annual level
of award is:
• 300% of salary for the
Chief Executive Officer;
and
• a lower percentage for
other executive directors.
Each year the Committee
determines the annual
award for each executive
director within the above
Policy limits.
Specific targets may
vary from year to year in
accordance with strategic
priorities but shall be
based on:
•
relative or absolute
TSR; and
• Hard net assets.
These performance
criteria shall normally
be presented in a matrix
format similar to that
set out in the Annual
Remuneration Report.
The level of vesting for
threshold performance is
25% of the maximum.
Performance will ordinarily
be measured based on
a performance period of
three years.
The Committee retains
the discretion to adjust
any formulaic outcome
to reflect overall business
or individual performance
or any other reason
considered appropriate
The LTIP is reviewed annually prior
to the start of each financial year
to ensure the detailed performance
measures and weightings are
appropriate and continue to support
the business strategy. Financial and/
or non-financial performance targets
are set at or around the start of each
financial year.
Awards under the LTIP typically
comprise conditional awards
of shares in IP Group (although
instruments with similar economic
effect may be used if considered
appropriate).
Any share awards that vest, net
of any tax and NICs liabilities, are
subject to a further two-year holding
period.
In certain circumstances, including,
but not limited to:
• serious misconduct by a
participant;
• material misstatement of financial
results;
• payments based on erroneous or
misleading data;
• serious reputational damage; or
• material corporate failure
•
the Company will be entitled to
reduce the number of shares in
respect of an unvested award
and/or claw back any shares
within the two-year period post
vesting.
Calculations of the achievement of
the vesting targets are reviewed and
approved by the Committee.
Statement of implementation of
remuneration policy in the following
financial year
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. We
have continued to apply our performance-based philosophy
with a focus on the long term and consistent with a ‘lower
base/higher variable’ approach.
Salary
With effect from 1 April 2021, the base salaries of the
executive directors will be:
2020/21
base salary
2021/22
base salary
Increase
%
Alan Aubrey (CEO)
£432,000
£441,000
Mike Townend (CIO)
£286,000
£292,000
Greg Smith (CFO)
£297,000
£303,000
David Baynes (COO)
£286,000
£292,000
2%
2%
2%
2%
• Financial performance;
• appropriate non-
financial measures; and
• attainment of personal
objectives.
Weighting will be primarily
towards Group financial
performance.
Performance will typically
be measured over one
year.
The AIS is a discretionary
plan and the Committee
retains the discretion
to adjust any formulaic
outcome to reflect overall
business or individual
performance or any
other reason considered
appropriate.
metrics is assessed. Secondly, the
Committee reviews these results in
the context of underlying business
performance and the Group’s
financial position and may adjust the
stage one outcome at its discretion.
Above a suitable minimum cash
amount, set by the Committee at
the start of each year, awards will
typically be payable 50% in cash and
50% in IP Group shares. The share
element is in the form of conditional
awards of shares or nil-cost options
(or equivalent at the Committee’s
discretion) and is subject to further
time-based vesting over two years
(50% after year 1 and 50% after year
2) although the Committee may
adjust the percentage split between
cash and shares based on the
financial position of the Group.
In certain circumstances, including,
but not limited to:
• serious misconduct by a
participant;
• material misstatement of financial
results;
• payments based on erroneous or
misleading data;
• serious reputational damage; or
• material corporate failure.
The Company will be entitled to claw
back the value of any cash amount
paid under the AIS for that year and
to cancel the vesting of any deferred
share element, for a period of up
to three years following the date of
award or payment.
1 1 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Directors’ Remuneration Report continued
Annual Remuneration Statement
As has been the case for a number of years, the Committee
considers that, as part of a competitive overall package,
base salaries should be within a market-competitive range.
Given IP Group’s business model and stage of development,
this has been at around the lower quartile of companies
of a similar size and complexity. The Committee will
complete the triennial review of the Remuneration Policy
this year, with any changes to be implemented in 2022. As
part of this, we will consider appropriate salary levels for
each Executive Director in the context of external market
benchmarks and total variable pay opportunity .
For 2021, the like-for-like base salary increase for UK
employees will be around 5.0%, well above the level
proposed for the Executive Directors, which is aligned to
the baseline increase (excluding promotional increases and/
or reactions to market changes) of 2%.
Pension and benefits
Pension and benefits will continue to be in line with the
levels stated in the policy table. Pension levels for all
Executive Directors are in line with those for the wider
workforce, at up to 10% of salary.
AIS
The maximum AIS opportunity will remain at 100% of base
salary for all Executive Directors, in line with the policy. The
majority of the 2021 AIS will continue to be based on the
Group’s Hard NAV performance. This is unchanged from
2020. The remaining 40% will be based on a small number
of strategic objectives (30%), which will be set each year
based on commercial priorities, and for which objectives,
targets and performance will be disclosed retrospectively.
In recognition of the importance of our people in the
long-term success of our business, from 2020 we will be
doubling the proportion of bonus attributable to employee
engagement and culture, as follows:
• 60% on annual return achieved on the Group’s Hard NAV;
• 30% on performance against a number of strategic
targets; and
• 10% employee engagement and culture.
These measures are considered appropriate leading
indicators of underlying business performance, including
one that explicitly takes into account the engagement of
our most valuable asset, our people. This latter objective will
be measured using the new non-Financial KPI (introduced
on page 16), with the calibration of any calculated outcome
then led by the Group’s Designated NED, Aedhmar Hynes,
who in this regard has Board responsibility for bringing the
voice of our employees into the Boardroom.
As in prior years, the Committee has determined the
performance metrics that are required to be achieved. In
terms of the Return on Hard NAV target, as before, the
Committee has taken into consideration the blend of assets
that constitute the Group Hard NAV, including the level of
cash. Reflecting our commitment to transparency, we are
again disclosing this AIS target on a prospective basis.
For 2021 the Committee has determined that threshold
vesting of 25% of this element of the award will be available
provided a minimum return of 5% is achieved while the
maximum amount of this element will be available should
a return of 15% or greater be achieved. In absolute terms,
this requires the achievement of a return on Hard NAV in
excess of £67m before any of the AIS component relating
to return on Hard NAV may be awarded and a return in
excess of £201m in order for this component to be awarded
in full. The targets relating to the other measures outlined
above, as well as the performance against these targets, will
be disclosed in the 2021 Directors’ Remuneration Report.
Overall, the targets are considered by the Committee to be
appropriately stretching, especially in light of the current
economic climate and 2020 performance out-turns.
The AIS operates as a discretionary plan and as has
historically been the case, in line with best practice and the
provisions of the policy, the Committee may adjust any 2021
outcome to take into account overall business or individual
performance or any other factors it considers appropriate.
LTIP
Consistent with the maximum opportunity for the LTIP
awards under the policy, the Committee intends to make
the 2021 LTIP awards at 300% of base salary for the CEO
and 200% of base salary for all other Executive Directors.
Performance will continue to be assessed against growth in
Hard NAV and TSR as per the vesting table set out below.
Vesting matrix: 2021 LTIP awards
.
)
.
A
P
(
R
S
T
15%
10%
8%
<8%
60%
30%
12.5%
0%
<8%
75%
45%
25%
12.5%
8%
90%
60%
45%
30%
10%
100%
90%
75%
60%
15%
Growth in NAV (p.a.)
Any awards that vest will be subject to a further two-year
holding period (net of any tax and NICs where holding is
not on a gross basis).
Chairman and non-executive directors
The fee for the Group’s chairman will increase by 2% to
£182,000. The fees for the non-executive directors will be
increased from £45,500 to £46,500, reflecting a similar 2%
increase to that applied to both our Executive Directors
and Chairman. These increases are in line with those for
the Executive Directors and the baseline increase for
the employee population. Additional fees for chairing a
Board committee, Designated NED and for being senior
independent director shall remain at £10,000.
1 1 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Directors’ Remuneration Report continued
Annual Remuneration Statement
As has been the case for a number of years, the Committee
For 2021 the Committee has determined that threshold
considers that, as part of a competitive overall package,
vesting of 25% of this element of the award will be available
base salaries should be within a market-competitive range.
provided a minimum return of 5% is achieved while the
Given IP Group’s business model and stage of development,
maximum amount of this element will be available should
this has been at around the lower quartile of companies
a return of 15% or greater be achieved. In absolute terms,
of a similar size and complexity. The Committee will
this requires the achievement of a return on Hard NAV in
complete the triennial review of the Remuneration Policy
excess of £67m before any of the AIS component relating
this year, with any changes to be implemented in 2022. As
to return on Hard NAV may be awarded and a return in
part of this, we will consider appropriate salary levels for
excess of £201m in order for this component to be awarded
each Executive Director in the context of external market
in full. The targets relating to the other measures outlined
benchmarks and total variable pay opportunity .
above, as well as the performance against these targets, will
For 2021, the like-for-like base salary increase for UK
employees will be around 5.0%, well above the level
proposed for the Executive Directors, which is aligned to
the baseline increase (excluding promotional increases and/
be disclosed in the 2021 Directors’ Remuneration Report.
Overall, the targets are considered by the Committee to be
appropriately stretching, especially in light of the current
economic climate and 2020 performance out-turns.
or reactions to market changes) of 2%.
The AIS operates as a discretionary plan and as has
Pension and benefits
Pension and benefits will continue to be in line with the
levels stated in the policy table. Pension levels for all
Executive Directors are in line with those for the wider
workforce, at up to 10% of salary.
LTIP
historically been the case, in line with best practice and the
provisions of the policy, the Committee may adjust any 2021
outcome to take into account overall business or individual
performance or any other factors it considers appropriate.
AIS
The maximum AIS opportunity will remain at 100% of base
salary for all Executive Directors, in line with the policy. The
majority of the 2021 AIS will continue to be based on the
Group’s Hard NAV performance. This is unchanged from
2020. The remaining 40% will be based on a small number
of strategic objectives (30%), which will be set each year
based on commercial priorities, and for which objectives,
targets and performance will be disclosed retrospectively.
In recognition of the importance of our people in the
long-term success of our business, from 2020 we will be
doubling the proportion of bonus attributable to employee
engagement and culture, as follows:
• 60% on annual return achieved on the Group’s Hard NAV;
• 30% on performance against a number of strategic
targets; and
• 10% employee engagement and culture.
These measures are considered appropriate leading
indicators of underlying business performance, including
one that explicitly takes into account the engagement of
our most valuable asset, our people. This latter objective will
be measured using the new non-Financial KPI (introduced
on page 16), with the calibration of any calculated outcome
then led by the Group’s Designated NED, Aedhmar Hynes,
who in this regard has Board responsibility for bringing the
voice of our employees into the Boardroom.
performance metrics that are required to be achieved. In
terms of the Return on Hard NAV target, as before, the
Committee has taken into consideration the blend of assets
that constitute the Group Hard NAV, including the level of
cash. Reflecting our commitment to transparency, we are
again disclosing this AIS target on a prospective basis.
Consistent with the maximum opportunity for the LTIP
awards under the policy, the Committee intends to make
the 2021 LTIP awards at 300% of base salary for the CEO
and 200% of base salary for all other Executive Directors.
Performance will continue to be assessed against growth in
Hard NAV and TSR as per the vesting table set out below.
Vesting matrix: 2021 LTIP awards
)
.
A
.
P
(
R
S
T
15%
10%
8%
<8%
60%
30%
12.5%
0%
<8%
75%
45%
25%
12.5%
8%
90%
60%
45%
30%
10%
100%
90%
75%
60%
15%
Growth in NAV (p.a.)
Any awards that vest will be subject to a further two-year
holding period (net of any tax and NICs where holding is
not on a gross basis).
Chairman and non-executive directors
The fee for the Group’s chairman will increase by 2% to
£182,000. The fees for the non-executive directors will be
increased from £45,500 to £46,500, reflecting a similar 2%
increase to that applied to both our Executive Directors
and Chairman. These increases are in line with those for
the Executive Directors and the baseline increase for
the employee population. Additional fees for chairing a
Board committee, Designated NED and for being senior
As in prior years, the Committee has determined the
independent director shall remain at £10,000.
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 2020 and 2019.Base salary/fees1Fees recovered from Base SalaryBenefits2Pension3Total fixedAnnual bonus (AIS)4LTIPTotal VariableTotalAll £000s 202020192020201920202019202020192020201920202019202020192020201920202019Executive directorsAlan Aubrey5430 421(82)(86)99373639438040311800403118797498Mike Townend285279––662524316309267780026778583387Greg Smith293279––332726323308277780027778600386David Baynes6285279––17232728328330267 780026778596408Non-executive directorsDouglas Flint 178175––-1––178176––––––178176Jonathan Brooks7961––-–––961––––––961Elaine Sullivan4544––11––4645––––––4645David Begg5554––-–––5554––––––5554Caroline Brown5525––-–––5525––––––5525Aedhmar Hynes85519––428––5927––––––5927Heejae Chae5553––-1––5554––––––5554NOTES1. 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. Commuting 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 home-working.3. Pension includes 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’s bonus outturn was 93.3% of maximum for 2020. Consistent with the Remuneration Policy, the first £25,000 will be paid in cash and thereafter 50% paid in cash and 50% deferred in shares over two years.5. Alan Aubrey’s contractual base salary was £432,000 from 1 April 2020. In addition, Mr Aubrey retained board fees in 2020 totalling £81,859 (reduced due to retirement from Avacta in Jan 2019 and Ceres in Sep 2020) from portfolio companies in which the Group is a shareholder, and these fees were deducted from the base salary he is contractually entitled to receive from the company. The total amount received by Mr Aubrey from his salary and retention of portfolio board fees was aligned with his contractual base salary of £432,000. 6. David Baynes receives an annual car allowance or equivalent thereof of £12,000.7. Jonathan Brooks retired on 10th March 2020.8. Aedhmar Hynes joined the Board on 1 August 2019 assumed the role of Designated NED on 18 September 2019 Business Overview115Strategic ReportOur FinancialsOur Governance
1 1 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Directors’ Remuneration Report continued
Annual Remuneration Statement
Additional disclosures for single figure for total remuneration table (audited
information)
Annual Incentive Scheme
The targets for the 2020 Annual Incentive Scheme (AIS) for Executive Directors were predominantly based on the annual
return on Hard NAV, alongside three further leading indicators of underlying business performance. The targets applied for
2020 and the outturn against these are set out below:
Performance condition
(% weighting)
Return on Hard NAV (60%)
Cash realisations from
the portfolio (30%)
Level of net overheads (5%)
Employee engagement
& culture
Vesting criteria
5% return (£57.0m): 25% of maximum
opportunity (‘threshold’)
15% return (£172.0mm): 100% of
maximum opportunity
£nil to £100m (sliding scale)
Net overheads (before AIS costs)
lower than £18m (25%) to £17m
(100%)
Demonstrable improvement in
employee engagement, based
on both objective and subjective
measurements
Actual performance (% of component)
17% return
100% of component
£191m
100% of component
Net overheads (before AIS costs) £18.6m
0% of component
70% score on blended ‘People’ KPI, based
on improved eNPS scores, evidence of steps
taken in response to employee feedback,
progress against diversity targets and turnover
(regretted losses)
70% of component awarded
Total weighted outturn
93.3% of maximum
The Committee members discussed the output of the
quantitative targets and considered that this outturn
appropriately reflected the overall performance of the
business for the period in question. In particular the
Committee noted record absolute return on Hard NAV
performance, record realisations and a significant recovery
in share price over the period. Further, it is recognised that
the in-year performance versus Hard NAV and realisation
targets is the culmination of significant efforts over a
number of years, during which time much lower annual
bonuses have been paid and no long-term incentive
awards have vested. Therefore, no discretion was applied.
The resulting AIS outturn for 2020 for the executive
directors was therefore determined as 93.3% of maximum
opportunity. In accordance with the Group’s Remuneration
Policy, all amounts to individuals above an initial minimum
amount paid in cash, which for the 2020 AIS is £25,000, will
be paid 50% in cash and 50% in shares (deferred over two
years using the Group’s Deferred Bonus Share Plan ‘DBSP’).
Long-term incentive scheme
2018 LTIP awards due to vest in March 2021
The 2018 LTIP awards are based on the performance of
the Group’s Hard NAV (the Group’s net assets excluding
intangibles) for the three financial years ending on 31
December 2020 and Total Shareholder Return (“TSR”)
from March 2018 to the ordinary vesting date, being 31
March 2021, using a one-month average. 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 2018 LTIP outturn
.
)
.
A
P
(
R
S
T
15%
10%
8%
<8%
60%
30%
15%
0%
<8%
75%
45%
30%
15%
8%
90%
60%
45%
30%
10%
100%
90%
75%
60%
15%
Growth in NAV (p.a.)
Performance
condition
Hard NAV
(at 31 Dec 2020)
Annual TSR1
(share price)
Target
Performance
8%: £1.67bn
15%: £2.02bn
Actual/forecast
Performance
1.33bn
(0.1% p.a.)
8%: 168p
15%: 202p
115p
(-5.1% p.a. growth)
Comparative TSR
FTSE 250 +7.1%
IP Group -14.6%
1. TSR performance shown reflects the Group’s one-month average share
price to 8 March 2020. Actual performance period is the one-month average
to 31 March 2021.
The actual performance of the Group in terms of Hard NAV
growth was below threshold and, based on the one-month
average share price to 8 March 2021, was below the lower
TSR target and that of the FTSE 250 TSR performance. On
this basis, the 2018 LTIP award is not expected to meet the
minimum performance criteria required for vesting. The
1 1 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 1 7
Directors’ Remuneration Report continued
Annual Remuneration Statement
Additional disclosures for single figure for total remuneration table (audited
The targets for the 2020 Annual Incentive Scheme (AIS) for Executive Directors were predominantly based on the annual
return on Hard NAV, alongside three further leading indicators of underlying business performance. The targets applied for
information)
Annual Incentive Scheme
2020 and the outturn against these are set out below:
Performance condition
(% weighting)
Vesting criteria
Actual performance (% of component)
Return on Hard NAV (60%)
5% return (£57.0m): 25% of maximum
17% return
opportunity (‘threshold’)
100% of component
15% return (£172.0mm): 100% of
maximum opportunity
Cash realisations from
£nil to £100m (sliding scale)
£191m
the portfolio (30%)
100% of component
Level of net overheads (5%)
Net overheads (before AIS costs)
Net overheads (before AIS costs) £18.6m
lower than £18m (25%) to £17m
0% of component
(100%)
Employee engagement
Demonstrable improvement in
70% score on blended ‘People’ KPI, based
& culture
employee engagement, based
on improved eNPS scores, evidence of steps
on both objective and subjective
taken in response to employee feedback,
measurements
progress against diversity targets and turnover
Total weighted outturn
(regretted losses)
70% of component awarded
93.3% of maximum
The Committee members discussed the output of the
underpin based on the relative performance of the Group’s
quantitative targets and considered that this outturn
TSR to that of the FTSE 250 index, which can reduce the
appropriately reflected the overall performance of the
awards by up to 50%.
business for the period in question. In particular the
Committee noted record absolute return on Hard NAV
performance, record realisations and a significant recovery
in share price over the period. Further, it is recognised that
the in-year performance versus Hard NAV and realisation
targets is the culmination of significant efforts over a
number of years, during which time much lower annual
bonuses have been paid and no long-term incentive
awards have vested. Therefore, no discretion was applied.
The resulting AIS outturn for 2020 for the executive
directors was therefore determined as 93.3% of maximum
opportunity. In accordance with the Group’s Remuneration
Policy, all amounts to individuals above an initial minimum
amount paid in cash, which for the 2020 AIS is £25,000, will
be paid 50% in cash and 50% in shares (deferred over two
years using the Group’s Deferred Bonus Share Plan ‘DBSP’).
Long-term incentive scheme
2018 LTIP awards due to vest in March 2021
The 2018 LTIP awards are based on the performance of
intangibles) for the three financial years ending on 31
December 2020 and Total Shareholder Return (“TSR”)
from March 2018 to the ordinary vesting date, being 31
March 2021, using a one-month average. Both performance
measures are combined into a matrix format as per the
vesting table below. The total award is subject to an
Vesting matrix:
estimated 2018 LTIP outturn
)
.
A
.
P
(
R
S
T
15%
10%
8%
<8%
60%
30%
15%
0%
<8%
75%
45%
30%
15%
8%
90%
60%
45%
30%
10%
100%
90%
75%
60%
15%
Growth in NAV (p.a.)
Performance
condition
Hard NAV
(at 31 Dec 2020)
Annual TSR1
(share price)
Target
Actual/forecast
Performance
Performance
8%: £1.67bn
15%: £2.02bn
8%: 168p
1.33bn
(0.1% p.a.)
115p
15%: 202p
(-5.1% p.a. growth)
Comparative TSR
FTSE 250 +7.1%
IP Group -14.6%
1. TSR performance shown reflects the Group’s one-month average share
price to 8 March 2020. Actual performance period is the one-month average
The actual performance of the Group in terms of Hard NAV
growth was below threshold and, based on the one-month
average share price to 8 March 2021, was below the lower
TSR target and that of the FTSE 250 TSR performance. On
this basis, the 2018 LTIP award is not expected to meet the
minimum performance criteria required for vesting. The
the Group’s Hard NAV (the Group’s net assets excluding
to 31 March 2021.
amounts disclosed above in the single remuneration figure
table are based on this performance and resulting expected
outcome. Actual vesting will be based on TSR performance
to 31 March 2021.
from the normal level (of 300% and 200% respectively) in
recognition of the fall in the Group’s share price in 2019.
Any shares that vest shall be subject to a two-year holding
period.
2017 LTIP awards that were due to
vest in March 2020
As reported last year, the Hard NAV growth target was not
met. TSR measured over the three-year period to 31 March
2020 was negative and therefore the TSR condition was not
met. Consequently, none of the 2017 LTIP awards vested.
2020 LTIP awards
The 2020 LTIP awards were made with a face value of 275%
of salary for the CEO and 185% of salary for other Executive
Directors, based on the share price at date of grant and
vesting subject to performance. These awards were reduced
The performance conditions that apply to this award
follows the same matrix structure with the same vesting
parameters as that set out above for the previous awards.
Hard NAV growth will be measured over the three-year
period to 31 December 2022 (starting point: £1,141.5m at 31
December 2019). TSR shall be measured from 19 June 2020
to 31 March 2023 with a one-month average starting point
of 59.9p (being the 30-day average to 18 June 2020).
The award is subject to an underpin whereby vesting may
be reduced by the Committee by up to 50%, taking into
account a range of performance factors including relative
TSR against the FTSE 250.
Executive director
Alan Aubrey
Mike Townend
Greg Smith
David Baynes
Type of
interest
2020 LTIP
2020 LTIP
2020 LTIP
2020 LTIP
Basis of
award
(% salary)
275%
185%
185%
185%
Face value1
(000s)
£1,180
Threshold
vesting2
25%
£529
£549
£529
25%
25%
25%
End of performance period
31 Dec 2022 (NAV) / 31 Mar 2023 (TSR)
31 Dec 2022 (NAV) / 31 Mar 2023 (TSR)
31 Dec 2022 (NAV) / 31 Mar 2023 (TSR)
31 Dec 2022 (NAV) / 31 Mar 2023 (TSR)
1. The number of shares corresponding to the face value is calculated using the share price of 61.4p for all executive
directors.
2. Represents threshold vesting against both elements of the performance matrix. Lower vesting is possible if only one
element of the matrix is partially met or as a result of the application of the performance underpin.
Loss of office payments or payments to former directors (audited information)
No payments for loss of office were made to past directors during the year nor were any payments made to former
directors for director duties that have not already been included in their historic single figures of remuneration.
Change in remuneration of the directors compared to Group employees
The table below sets out the change in the remuneration of the CEO and that of our UK employees (excluding directors and
new joiners/leavers):
Alan Aubrey
Mike Townend
Greg Smith
David Baynes
Douglas Flint
Elaine Sullivan
David Begg
Caroline Brown
Aedhmar Hynes
Heejae Chae
UK employees
% change in base
salary / fees
2019 to 2020
2.1%
% change in bonus
2019 to 20201
241.1%
% change in benefits
(excluding pensions)
2019 to 2020
8.0%
2.0%
5.9%
2.0%
2.0%
2.2%
1.8%
1.8%
1.8%
1.8%
8.0%
241.0%
254.1%
241.0%
-
-
-
-
-
-
11.1%
5.1%
5.2%
-
-
-
-
-
-
78.7%
4.7%
1.
Increase in Executive Director bonus is primarily driven by increase in Group bonus to 93.3% of maximum (2019 27.9%). Employees benefit from a similar uplift to
Group bonus, but also benefit from elements of bonus based on Team and Individual performance which paid out at a significantly higher level in 2019.
1 1 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Directors’ Remuneration Report continued
Annual Remuneration Statement
Historical executive pay and Group performance
The table and graph below allow comparison of the Total Shareholder Return (“TSR”) of the Group and the Chief Executive
Officer remuneration outcomes over the last ten years.
The chart below shows the Group’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 2020. The Directors have selected these indices as, in their
opinion, these indices comprise the most relevant equity indices of which the Company was a member during a significant
proportion of the period in question and against which total shareholder return of IP Group plc should be measured.
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 nine years.
Chief Executive Officer: Alan Aubrey
CEO single figure of remuneration (£000s)
Annual bonus pay-out (% of maximum)
LTIP vesting (% of maximum)
2011
209
n/a
n/a
2012
3,257
2013
2,231
2014
902
2015
669
n/a
100%
0% 100%
81% 100% 100%
57%
2016
265
0%
0%
2017
2018
552
57%
0%
413
17%
0%
2019 2020
498
797
28%
0%
93%
0%
LTIP vesting is based on the current expectations of the performance against
the 2018 LTIP targets as discussed on page 116.
Directors’ shareholdings and share
interests (audited information)
The Group’s Remuneration Policy contains minimum
shareholding requirements for each of its Executive Directors.
The Committee has set the current requirements at 2.0x
salary for the Chief Executive Officer, and 1.5x salary for all
other Executive Directors. These levels will be reviewed as
part of forthcoming triennial policy review in the context of
external market benchmarks and the context of the total
variable pay opportunity.
This level of shareholding is required to be met within
four years of each director’s date of appointment. If the
guideline is not met by any Executive Director within this
timeframe, or the level of shareholding falls below this level
for any other reason, including share price fluctuations,
then the Committee will discuss with the relevant Executive
Director a plan to ensure that the guideline can be met
within a reasonable timeframe. The Committee will
ordinarily require Executive Directors to retain all shares
received under the DBSP or LTIP, other than as required to
meet tax and NIC liabilities, until the guideline is met.
At the end of the year, Alan Aubrey and Mike Townend
continued to meet this requirement. Both Greg Smith
and David Baynes have previously met this requirement;
1 1 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 1 9
Directors’ Remuneration Report continued
Annual Remuneration Statement
Historical executive pay and Group performance
The table and graph below allow comparison of the Total Shareholder Return (“TSR”) of the Group and the Chief Executive
Officer remuneration outcomes over the last ten years.
The chart below shows the Group’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 2020. The Directors have selected these indices as, in their
opinion, these indices comprise the most relevant equity indices of which the Company was a member during a significant
proportion of the period in question and against which total shareholder return of IP Group plc should be measured.
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 nine years.
Chief Executive Officer: Alan Aubrey
CEO single figure of remuneration (£000s)
Annual bonus pay-out (% of maximum)
LTIP vesting (% of maximum)
2011
209
n/a
n/a
2012
3,257
2013
2,231
2014
902
2015
669
n/a
100%
0% 100%
81% 100% 100%
57%
2016
265
0%
0%
2017
2018
2019 2020
552
57%
0%
413
17%
0%
498
28%
0%
797
93%
0%
LTIP vesting is based on the current expectations of the performance against
This level of shareholding is required to be met within
the 2018 LTIP targets as discussed on page 116.
Directors’ shareholdings and share
interests (audited information)
The Group’s Remuneration Policy contains minimum
shareholding requirements for each of its Executive Directors.
The Committee has set the current requirements at 2.0x
salary for the Chief Executive Officer, and 1.5x salary for all
other Executive Directors. These levels will be reviewed as
part of forthcoming triennial policy review in the context of
external market benchmarks and the context of the total
variable pay opportunity.
four years of each director’s date of appointment. If the
guideline is not met by any Executive Director within this
timeframe, or the level of shareholding falls below this level
for any other reason, including share price fluctuations,
then the Committee will discuss with the relevant Executive
Director a plan to ensure that the guideline can be met
within a reasonable timeframe. The Committee will
ordinarily require Executive Directors to retain all shares
received under the DBSP or LTIP, other than as required to
meet tax and NIC liabilities, until the guideline is met.
At the end of the year, Alan Aubrey and Mike Townend
continued to meet this requirement. Both Greg Smith
and David Baynes have previously met this requirement;
however, despite a recent recovery the reduction in the
Group’s share price during the preceding years has resulted
in this requirement remaining below targeted levels at 9
March 2021. Both directors have agreed with the Committee
that they will, at a minimum, continue to retain all post-
tax shares received under the DBSP or LTIP to ensure that
minimum levels are met and maintained.
Post-cessation shareholding policy
Departing Executive Directors will normally be required
to retain shares following the date of cessation of their
employment under the Group’s post-cessation shareholding
guidelines. This policy came into effect on 1 January 2019
and applies to any shares vesting from Company incentive
plans following this date. The policy operates as follows:
• The post-cessation shareholding shall be 100% of the
guideline that applied at the date of cessation, or, if
lower, the actual holding excluding personal investment.
• The holding determined at the date of leaving shall apply
for a period of 24 months, on a tapered straight-line
basis, reducing to nil over this period.
Interests in shares
• Shares that are no longer subject to performance
conditions, such as deferred shares or holding period
shares, shall count towards the guidelines (on a net of
assumed tax basis).
• The Committee shall have the discretion to operate
the policy flexibly and may waive part or all of
the requirement, for example in compassionate
circumstances.
During the course of 2019, the Committee put in place a
framework to assist it in applying the policy. The Committee
also explored structures to best enforce the requirements
of the policy through 2020 and during 2021 will work with
the Group’s Employee Benefit Trust to finalise a nominee
arrangement whereby any shares vesting under the
Company’s incentive schemes will be held on behalf of the
relevant Executive Director until the required shareholding
amount is met and/or the post-cessation holding period has
expired in respect of such shares .
The directors who held office during 2020 had the following beneficial interests in the ordinary shares of the Company:
As at 31 December 2020
Total interest in shares
Aggregate unvested holdings
(gross)
Vested but
unexercised
options1
Number
(net of tax)
–
Shares
owned number
2,797,171
1,237,704
339,403
305,799
–
50,391
18,500
16,073
–
–
81,826
–
–
–
–
–
–
–
–
–
–
Minimum
Shareholding
requirement
met?2
y
y
n
n
–
–
–
–
–
–
–
Total Interest
2,797,171
1,237,704
339,403
305,799
–
50,391
18,500
16,073
–
–
81,826
LTIP
4,111,288
1,822,935
1,856,078
1,822,935
–
–
–
–
–
–
–
DBSP
87,142
48,719
48,719
48,719
–
–
–
–
–
–
–
Current directors
Alan Aubrey
Mike Townend
Greg Smith
David Baynes
Elaine Sullivan
David Begg
Sir Douglas Flint
Heejae Chae
Caroline Brown
Aedhmar Hynes
Jonathan Brooks3
There have been no changes in the interests of the directors set out above between 31 December 2020 and 9 March 2021.
1. Previously reflected unexercised holdings in DBSP, all of which were exercised during 2020
2. Based on owned/vested shares only
3. Stepped down March 2020, shareholding at date of leaving
1 2 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Directors’ Remuneration Report continued
Annual Remuneration Statement
Long Term Incentive Plan
Directors’ participations in the Group’s LTIP are:
Number
of shares
conditionally
held at
1 January
2020
Conditional
shares
notionally
awarded in
the year
Vested
during
the year
Lapsed
during
the year
Potential
conditional
interest in
shares at
31 December
2020
Share price
at date of
conditional
award (p)
Earliest
vesting
date(s)
Alan Aubrey
2017 LTIP
2018 LTIP
2019 LTIP
2020 LTIP
Mike Townend
2017 LTIP
2018 LTIP
2019 LTIP
2020 LTIP
Greg Smith
2017 LTIP
2018 LTIP
2019 LTIP
2020 LTIP
David Baynes
2017 LTIP
2018 LTIP
2019 LTIP
2020 LTIP
857,142
894,397
1,282,038
–
3,033,577
378,571
395,115
566,094
1,339,780
378,571
395,115
566,094
–
1,339,780
378,571
395,115
566,094
–
1,339,780
–
–
–
1,934,853
1,934,853
–
–
–
861.726
861,726
–
–
–
894,869
894,869
–
–
–
861.726
861,726
–
(378,571)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(857,142)
–
–
–
–
(857,142)
–
–
–
894,397
1,282,038
1,934,853
4,111,288
–
395,115
566,094
861,726
(378,571)
1,822,935
(378,571)
–
–
–
–
395,115
566,094
894,869
(378,571)
1,856,078
(378,571)
–
–
–
–
395,115
566,094
861,726
(378,571)
1,822,935
112.50*
139.20
99.10
61.40
112.50*
139.20
99.10
61.40
112.50*
139.20
99.10
61.40
112.50*
139.20
99.10
61.40
31–Mar–20
31–Mar–21
31–Mar–22
31–Mar–23
31–Mar–20
31–Mar–21
31–Mar–22
31–Mar–23
31–Mar–20
31–Mar–21
31–Mar–22
31–Mar–23
31–Mar–20
31–Mar–21
31–Mar–22
31–Mar–23
* note that the number of conditional LTIP awards made in 2017 was calculated using the Group’s 140p placing price from 2017
1 2 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 2 1
Directors’ Remuneration Report continued
Annual Remuneration Statement
Long Term Incentive Plan
Directors’ participations in the Group’s LTIP are:
Number
of shares
Conditional
conditionally
shares
held at
notionally
1 January
awarded in
2020
the year
857,142
894,397
1,282,038
–
3,033,577
378,571
395,115
566,094
1,339,780
378,571
395,115
566,094
1,339,780
378,571
395,115
566,094
–
–
1,339,780
1,934,853
1,934,853
–
–
–
–
–
–
–
–
–
–
–
–
861.726
861,726
894,869
894,869
861.726
861,726
Alan Aubrey
2017 LTIP
2018 LTIP
2019 LTIP
2020 LTIP
Mike Townend
2017 LTIP
2018 LTIP
2019 LTIP
2020 LTIP
Greg Smith
2017 LTIP
2018 LTIP
2019 LTIP
2020 LTIP
David Baynes
2017 LTIP
2018 LTIP
2019 LTIP
2020 LTIP
Potential
conditional
interest in
Share price
Vested
during
the year
Lapsed
shares at
at date of
during
31 December
conditional
the year
2020
award (p)
Earliest
vesting
date(s)
(857,142)
(857,142)
–
(378,571)
–
–
–
–
894,397
1,282,038
1,934,853
4,111,288
395,115
566,094
861,726
395,115
566,094
894,869
395,115
566,094
861,726
(378,571)
1,822,935
(378,571)
(378,571)
1,856,078
(378,571)
(378,571)
1,822,935
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
112.50*
139.20
99.10
61.40
112.50*
139.20
99.10
61.40
112.50*
139.20
99.10
61.40
112.50*
139.20
99.10
61.40
31–Mar–20
31–Mar–21
31–Mar–22
31–Mar–23
31–Mar–20
31–Mar–21
31–Mar–22
31–Mar–23
31–Mar–20
31–Mar–21
31–Mar–22
31–Mar–23
31–Mar–20
31–Mar–21
31–Mar–22
31–Mar–23
* note that the number of conditional LTIP awards made in 2017 was calculated using the Group’s 140p placing price from 2017
Deferred bonus share plan (“DBSP”)
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
1st January
2020
Option
awarded in
the year
Exercised
during the
Year
Lapsed
during the
year
Options
held at
31 December
2020
Share price
at date of
award (p)
Earliest
vesting
dates
Alan Aubrey
Deferral from 2015 AIS
Deferral from 2017 AIS
Deferral from 2017 AIS
Deferral from 2018 AIS
Deferral from 2018 AIS
Deferral from 2019 AIS
Deferral from 2019 AIS
Mike Townend
Deferral from 2015 AIS
Deferral from 2017 AIS
Deferral from 2017 AIS
Deferral from 2018 AIS
Deferral from 2018 AIS
Deferral from 2019 AIS
Deferral from 2019 AIS
Greg Smith
Deferral from 2015 AIS
Deferral from 2017 AIS
Deferral from 2017 AIS
Deferral from 2018 AIS
Deferral from 2018 AIS
Deferral from 2019 AIS
Deferral from 2019 AIS
David Baynes
Deferral from 2015 AIS
Deferral from 2017 AIS
Deferral from 2017 AIS
Deferral from 2018 AIS
Deferral from 2018 AIS
Deferral from 2019 AIS
Deferral from 2019 AIS
42,710
39,820
39,821
11,282
11,282
–
–
144,915
25,981
24,736
24,736
5,349
5,349
–
–
86,151
22,637
24,736
24,736
5,349
5,349
–
–
82,807
25,981
24,736
24,736
5,349
5,349
–
–
86,151
–
–
–
–
–
37,930
37,930
75,860
–
–
–
–
–
21,685
21,685
43,370
–
–
–
–
–
21,685
21,685
43,370
–
–
–
–
–
21,685
21,685
43,370
42,710
39,820
39,821
11,282
–
–
–
133,633
25,981
24,736
24,736
5,349
–
–
–
80,802
22,637
24,736
24,736
5,349
–
–
–
77,458
25,981
24,736
24,736
5,349
–
–
–
80,802
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11,282
37,930
37,930
87,142
–
–
–
–
5,349
21,685
21,685
48,719
–
–
–
–
5,349
21,685
21,685
48,719
–
–
–
–
5,349
21,685
21,685
48,719
175.60
128.20
31-Mar-18
31-Mar-19
128.20
31-Mar-20
99.10
31-Mar-20
99.10
31-Mar-21
61.40
61.40
31-Mar-21
31-Mar-22
175.60
128.20
31-Mar-18
31-Mar-19
128.20
31-Mar-20
99.10
31-Mar-20
99.10
31-Mar-21
61.40
61.40
31-Mar-21
31-Mar-22
175.60
128.20
31-Mar-18
31-Mar-19
128.20
31-Mar-20
99.10
31-Mar-20
99.10
31/-Mar-21
61.40
61.40
31-Mar-21
31-Mar-22
175.60
128.20
31-Mar-18
31-Mar-19
128.20
31-Mar-20
99.10
31-Mar-20
99.10
31-Mar-21
61.40
61.40
31-Mar-21
31-Mar-22
The aggregate loss was £0.3m (2019: nil) versus the grant value of DBSP awards (as previously reported within single figure
remuneration totals).
1 2 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Directors’ Remuneration Report continued
Annual Remuneration Statement
Save as You Earn (“SAYE”)
The Group operates an HMRC-registered SAYE share save scheme for all UK employees in which three executive directors
are current participants. Their currently outstanding option contracts under the SAYE and the respective maturity dates are
listed in the table below.
Options
held at
1 January
2020
34,816
Greg Smith
2019 SAYE
David Baynes
2019 SAYE
34,816
Mike Townend
2019 SAYE
34,816
Options
awarded in
the year
Exercised
during the
year
Lapsed
during the
year
Options
held at
31 December
2020
Option
exercise
price (p)
Share price
at date of
award (p)
Earliest
vesting
date(s
–
–
–
–
–
–
–
–
–
34,816
51.70
64.60 31-Aug -22
34,816
51.70
64.60
31-Aug-22
34,816
51.70
64.60
31-Aug-22
Other long-term interests – legacy arrangements (audited information)
In addition to the Executive Directors’ remuneration arrangements, the Group also operated co-investment and carried
interest arrangements related to certain venture capital funds that are under its management. Under these co-investment
arrangements, Executive Directors made minority capital and loan commitments to IP Venture Fund (“IPVF”) alongside
the Group. Executives were entitled to participate in a carried interest scheme in respect of IPVF and The North East
Technology Fund LP alongside the Group.
Both of these arrangements closed during the year without any Carried Interest becoming payable, as set out below. As
outlined in the policy, no new allocations of this kind will be made to Executive Directors in future.
IPVF co-investment arrangements
The executive directors’ commitments to, and returns from, IPVF are set out below. The fund has now closed, and no further
distributions will be made:
Limited
partnership
interest of
IPVF
Total capital
contributed
to 1 January
2020
£000
Capital
contributions
during the
year
£000
Total
commitment
£000
Total capital
contributions
at
31 December
2020
£000
Capital
amounts
repaid
during the
year
£000
Total capital
amounts
repaid to
31 December
2020
£000
Executive directors
Alan Aubrey
Mike Townend
Greg Smith
Total
56
56
35
147
0.18%
0.18%
0.11%
0.47%
55
55
35
145
1
1
–
2
56
56
35
147
151
152
113
41
65
65
41
171
1.
capital of £83.24 was repaid to Alan Aubrey during 2020
2. capital of £83.24 was repaid to Mike Townend during 2020
3. capital of £52.43 was repaid to Greg Smith during 2020
Directors’ Remuneration Report continued
Annual Remuneration Statement
listed in the table below.
Options
held at
Greg Smith
2019 SAYE
34,816
David Baynes
2019 SAYE
34,816
Mike Townend
2019 SAYE
34,816
Options
Exercised
Lapsed
Option
Share price
1 January
awarded in
during the
during the
31 December
exercise
at date of
2020
the year
year
year
2020
price (p)
award (p)
Earliest
vesting
date(s
Options
held at
–
–
–
–
–
–
–
–
–
34,816
51.70
64.60 31-Aug -22
34,816
51.70
64.60
31-Aug-22
34,816
51.70
64.60
31-Aug-22
Other long-term interests – legacy arrangements (audited information)
In addition to the Executive Directors’ remuneration arrangements, the Group also operated co-investment and carried
interest arrangements related to certain venture capital funds that are under its management. Under these co-investment
arrangements, Executive Directors made minority capital and loan commitments to IP Venture Fund (“IPVF”) alongside
the Group. Executives were entitled to participate in a carried interest scheme in respect of IPVF and The North East
Technology Fund LP alongside the Group.
Both of these arrangements closed during the year without any Carried Interest becoming payable, as set out below. As
outlined in the policy, no new allocations of this kind will be made to Executive Directors in future.
IPVF co-investment arrangements
The executive directors’ commitments to, and returns from, IPVF are set out below. The fund has now closed, and no further
distributions will be made:
Total capital
Capital
contributions
amounts
Limited
contributed
contributions
at
repaid
amounts
repaid to
Total capital
Capital
Total capital
Total
partnership
to 1 January
during the
31 December
during the
31 December
commitment
interest of
£000
IPVF
2020
£000
year
£000
2020
£000
year
£000
2020
£000
Executive directors
Alan Aubrey
Mike Townend
Greg Smith
Total
56
56
35
147
0.18%
0.18%
0.11%
0.47%
55
55
35
145
1
1
–
2
56
56
35
147
151
152
113
41
65
65
41
171
1.
capital of £83.24 was repaid to Alan Aubrey during 2020
2. capital of £83.24 was repaid to Mike Townend during 2020
3. capital of £52.43 was repaid to Greg Smith during 2020
1 2 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 2 3
Save as You Earn (“SAYE”)
Carried interest arrangements
The Group operates an HMRC-registered SAYE share save scheme for all UK employees in which three executive directors
are current participants. Their currently outstanding option contracts under the SAYE and the respective maturity dates are
The executive directors’ interests in carried interest schemes in both IPVF and NETF lapsed during 2020, as set out in the
table below:
Carried
interest(ii) at
1 January
2020
Awarded
during the
year
Transferred
during the
year
Lapsed
during the
year
Scheme
Interest at
31 December
2020(iii)
Accrued
value of
scheme
interest at
31 December
2020
£000
1.81%
1.55%
1.81%
1.15%
1.14%
0.85%
–
–
–
–
–
–
–
–
–
–
–
–
1.81%
1.55%
1.81%
1.55%
1.14%
0.85%
–
–
–
–
–
–
–
–
–
–
–
–
Executive directors
Alan Aubrey
Mike Townend
Greg Smith
Fund(i)
IPVF
NETF
IPVF
NETF
IPVF
NETF
i. Under the IPVF fund LPA, payments to participants are made when all limited partners have been repaid their contributions together with
a hurdle rate rate of 8% compound interest. Under the North East Technology Fund (“NETF”) scheme, payments to participants are made
when all limited partners have been repaid their contributions together with a hurdle rate of 3.5% compound interest.
ii. Scheme interest represents the percentage of the relevant pool of investments in respect of which the participant is entitled to participate
in the realised profits assuming the relevant hurdle return has been met.
iii. The schemes contain forfeiture provisions over the investment period of the fund which may reduce the scheme interest accruing to any
participant. The table reflects the maximum scheme interest receivable should no forfeiture occur.
Relative spend on pay
The chart below shows the total employee costs, change in
Hard NAV and change in share price from 2019 to 2020.
Returns to shareholders: since the Group has not yet paid
a dividend, returns to shareholders are represented by the
change in the Group’s share price over the period from 31
December 2019 to 31 December 2020.
2020
2019
20.6
19.6
1,331.5
98.9
1,141.5
71.0
Total employee costs
(£m) (+5.1%)
Hard NAV
(£m) (+ 16.7%)
Share price
(p) (+39.3%)
The information shown in this chart is based on the
following:
Total employee pay: total employee costs from note 9 on
page 165 including wages and salaries, social security costs,
pension and share-based payments.
Change in Hard NAV: change in the Group’s net assets
excluding goodwill and intangibles taken from the
statement of financial position on page 149.
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.
Any external appointments (i.e. excluding those companies
in which the Group is a shareholder) held by executive
directors are set out on page 82.
1 2 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Directors’ Remuneration Report continued
Annual Remuneration Statement
Limits on the number of shares used
to satisfy share awards (dilution limits)
As at 9 March 2021, the Company’s headroom position,
which remains within such guidelines, was as shown in the
chart.
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 not exceed 10% 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. No treasury shares were
held or utilised in the year ended 31 December 2020.
0.3%
0.3%
2.1%
0.9%
1.0%
0.3%
Vested LTIP awards in past 10 years – Executives
Vested LTIP awards in past 10 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%)
Service agreements
The Executive Directors have service contracts that
commenced on the dates set out in the chart on page 125
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 a further
three years, and are terminable on three months’ notice by
either party.
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.
1 2 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 2 5
Directors’ Remuneration Report continued
Annual Remuneration Statement
Limits on the number of shares used
to satisfy share awards (dilution limits)
chart.
As at 9 March 2021, the Company’s headroom position,
which remains within such guidelines, was as shown in the
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 not exceed 10% 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. No treasury shares were
held or utilised in the year ended 31 December 2020.
0.3%
0.3%
2.1%
0.9%
1.0%
0.3%
Vested LTIP awards in past 10 years – Executives
Vested LTIP awards in past 10 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%)
Service agreements
The Executive Directors have service contracts that
commenced on the dates set out in the chart on page 125
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 a further
three years, and are terminable on three months’ notice by
either party.
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.
Effective dates of service contracts
of the Executive Directors
Alan Aubrey
20 January 2005
Mike Townend
5 March 2007
Greg Smith
2 June 2011
Terms of Reference and Key
Responsibilities
In line with the 2018 corporate governance code, the
terms of reference for the Remuneration Committee
were reviewed, and adopted by the Board in December
2020. The Committee will continue to review its terms of
reference at least annually, and will propose updated where
necessary. The key responsibilities of the Committee are
unchanged, as follows:
• Determine the policy for Executive Director remuneration
David Baynes
20 March 2014
• Design and set the remuneration for the Chair, Executive
Effective dates of letters of
appointment of the non-executive directors
Directors and senior management
• Review workforce remuneration and related policies to
ensure the Group retains the best talent
Elaine Sullivan
30 July 2015
• Review remuneration practice and overall costs to the
Group
David Begg
18 October 2017
• Consider pension and superannuation arrangements, and
Heejae Chae
03 May 2018
Sir Douglas Flint1
17 September 2018
Dr Caroline Brown
1 July 2019
Aedhmar Hynes
1 August 2019
1. Effective as Chair from November 2018
other employee benefits offered
• Consider the engagement and independence of external
remuneration advisors
The full terms of reference of the Committee, which are
reviewed annually, are available on the Group’s website
at www.ipgroupplc.com. In summary, the Remuneration
Committee has specific responsibility for advising the
Group’s Board on the remuneration and other benefits
of executive directors, an overall policy in respect of
remuneration of other employees of the Group and
establishing the Group’s policy with respect to employee
incentivisation schemes.
1 2 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Directors’ Remuneration Report continued
Annual Remuneration Statement
Consideration by the directors of matters relating to directors’ remuneration
The Remuneration Committee currently comprises the following independent Non-executive Directors whose backgrounds
and experience are summarised on pages 82 to 84.
Heejae Chae (Chair)
Jonathan Brooks (stepped down on 10 March 2020)
Douglas Flint
Elaine Sullivan
David Begg
Caroline Brown
Aedhmar Hynes
Committee meetings are administered and minuted by the Company Secretary. In addition, the Committee received
assistance from the CFO, CEO, COO and Group People Director who attend meetings by invitation, except when matters
relating to their own remuneration are being discussed.
During the year, the key activities carried out by the Committee were:
• Consideration of the Group’s overall remuneration philosophy to ensure it continues to promote the Group’s strategy,
including the blend of fixed and short and longer-term variable pay.
• Consideration of the skills and experience of the executive directors and carrying out of benchmarking in order to
determine base salaries and total remuneration opportunity for the period 1 April 2020 to 31 March 2021, and giving
further consideration to base salaries and total remuneration opportunity with effect from 1 April 2021.
• Review of the Group’s approach to non-director remuneration, including base salaries and incentive scheme targets and
pay-outs, with focus on those employees earning more than £150,000 or local currency equivalent.
• Consideration of LTIP awards and vesting targets for 2020 and 2021 awards and out-turns for the 2019 and 2020 awards.
• Consideration of AIS awards and targets for 2020 and 2021 as well as outturns for 2020.
• Review and consideration of the further evolution of the application of the Group’s Remuneration Policy for non-director
employees with particular consideration given to matters related to the UK, US and Australian basic salary levels, AIS
structure and appropriate medium- and long-term incentivsation, as well as consideration of same for the Group’s
regulated fund management subsidiaries.
• Approval of the Group’s DRR.
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 Hard NAV target range under
the AIS. The Committee encourages open and frequent dialogue on executive director
remuneration with shareholders, including on a formal basis when reviewing the remuneration
policy.
Simplicity
• Our ongoing remuneration arrangements for executive directors, including the AIS and LTIP, are
simple in nature and well understood by both participants and shareholders.
• Our incentive arrangements are cascaded down through the Group to provide alignment and
overall simplicity in our approach to remuneration. All employees participate in the AIS (with
components based on team and/or individual objectives for non-director employees), with
the LTIP extended to senior managerial levels and roles which are expected to have a material
financial impact on the Group’s outcomes.
• The Committee intends to review the Group’s remuneration arrangements again in 2021 to
ensure that this principle continues to be appropriately met.
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IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 2 7
Risk
• Under the AIS and LTIP, discretion may be applied where formulaic outturns are not considered
reflective of overall business or individual performance or any other reason considered
appropriate.
• Deferral of a proportion of AIS awards, the LTIP holding period and our shareholding
requirement, including post-cessation shareholding requirement, provide a clear link to the
ongoing performance of the business and the experience of our shareholders.
• Malus and clawback provisions apply to both AIS and LTIP awards.
Predictability
• Our Remuneration Policy contains details of the maximum opportunities and pre-determined
target ranges under our AIS and LTIP, with actual outcomes dependent on performance
achieved against these targets.
Proportionality • We operate a performance-based philosophy with a ‘lower base/higher variable’ approach and
a focus on the long term.
• Our performance measures and target ranges under the AIS and LTIP, including the use of Hard
NAV, are selected based on their alignment to Company strategy.
• The Committee’s ability to apply discretion ensures appropriate out-turns 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 an LTICS
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.
• Consideration of LTIP awards and vesting targets for 2020 and 2021 awards and out-turns for the 2019 and 2020 awards.
• Strong individual and Company performance is incentivised and recognised through our AIS
and, for our most senior employees, the LTIP.
• For 2020, we have introduced employee engagement and culture as a performance measure
under the AIS, which explicitly takes into account the engagement of our most valuable asset,
our people.
External advisers
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 continued its review of executive remuneration and took into consideration
independent professional advice from Deloitte LLP in respect of the development of the Group’s Remuneration Policy and
its application, and reporting under the Directors’ Remuneration Reporting Regulations. 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 2020 were £46,400. Deloitte LLP also provided advice to the Group in 2020
in connection with projects relating to our Australian and Hong-Kong subsidiary companies.
Statement of shareholder voting
The table below sets out the proxy results of the votes on the Group’s Remuneration Report at the Group’s 2020 AGM.
Approval of LTIP Rules 2020
Remuneration Report
Votes for
Votes against
Number
845,475,651
844,001,565
% of
votes cast
98.7
Number
10,918,448
% of
votes cast
Total votes
cast
1.3 856,394,099
98.9
9,013,064
1.1 853,014,629
Votes
withheld
35,481
3,414,951
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.
Directors’ Remuneration Report continued
Annual Remuneration Statement
Consideration by the directors of matters relating to directors’ remuneration
The Remuneration Committee currently comprises the following independent Non-executive Directors whose backgrounds
and experience are summarised on pages 82 to 84.
Heejae Chae (Chair)
Jonathan Brooks (stepped down on 10 March 2020)
Douglas Flint
Elaine Sullivan
David Begg
Caroline Brown
Aedhmar Hynes
Committee meetings are administered and minuted by the Company Secretary. In addition, the Committee received
assistance from the CFO, CEO, COO and Group People Director who attend meetings by invitation, except when matters
relating to their own remuneration are being discussed.
During the year, the key activities carried out by the Committee were:
• Consideration of the Group’s overall remuneration philosophy to ensure it continues to promote the Group’s strategy,
including the blend of fixed and short and longer-term variable pay.
• Consideration of the skills and experience of the executive directors and carrying out of benchmarking in order to
determine base salaries and total remuneration opportunity for the period 1 April 2020 to 31 March 2021, and giving
further consideration to base salaries and total remuneration opportunity with effect from 1 April 2021.
• Review of the Group’s approach to non-director remuneration, including base salaries and incentive scheme targets and
pay-outs, with focus on those employees earning more than £150,000 or local currency equivalent.
• Consideration of AIS awards and targets for 2020 and 2021 as well as outturns for 2020.
• Review and consideration of the further evolution of the application of the Group’s Remuneration Policy for non-director
employees with particular consideration given to matters related to the UK, US and Australian basic salary levels, AIS
structure and appropriate medium- and long-term incentivsation, as well as consideration of same for the Group’s
regulated fund management subsidiaries.
• Approval of the Group’s DRR.
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 Hard NAV target range under
the AIS. The Committee encourages open and frequent dialogue on executive director
remuneration with shareholders, including on a formal basis when reviewing the remuneration
policy.
Simplicity
• Our ongoing remuneration arrangements for executive directors, including the AIS and LTIP, are
simple in nature and well understood by both participants and shareholders.
• Our incentive arrangements are cascaded down through the Group to provide alignment and
overall simplicity in our approach to remuneration. All employees participate in the AIS (with
components based on team and/or individual objectives for non-director employees), with
the LTIP extended to senior managerial levels and roles which are expected to have a material
financial impact on the Group’s outcomes.
• The Committee intends to review the Group’s remuneration arrangements again in 2021 to
ensure that this principle continues to be appropriately met.
Report of the Audit and Risk CommitteeAudit and Risk Committee (“ARC” or the “Committee”) responsibilitiesThe Committee monitors the integrity of the financial statements of the Group, and reviews all proposed annual and half-yearly results announcements to be made by the Group with consideration being given to any significant financial reporting judgements contained in them. The Committee also advises 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. The Committee takes responsibility on behalf of the Board for the review of internal financial controls, risk management and internal control systems as well as conducting an annual robust assessment of these. The Committee also reviews the Group’s compliance with legal and regulatory requirements.A full copy of the Committee’s Terms of Reference is available from the Group’s website at www.ipgroupplc.com.Terms of ReferenceThe Committee continues to review its terms of reference at least annually and will propose updates where necessary and/or appropriate to reflect current market practice.Committee membership and meetingsAt 31 December 2020, the Committee comprised 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 and having held senior financial positions in my career. The Board is satisfied that for the year under review, and thereafter, the Audit and Risk Committee as a whole has competence relevant to the sector in which the Group operates. Further details of specific relevant experience can be found in the Director’s biographies on pages 82 to 84.The Committee met five times during 2020, see Board and Committee attendance table, page 91. The Group’s Chairman, Chief Financial Officer, Group Financial Controller, Company Secretary, outsourced Head of Internal Audit and the external auditor were also invited to attend all meetings and did so. The 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 were invited to attend for specific subjects. In addition, I also met privately with individual members of management, the external auditor and the outsourced Head of Internal Audit prior to each Committee meeting and attend meetings of the Valuation Committee as an observer. At the end of the annual audit process in March the Committee met with the external auditor without any members of the executive management team being present.Activities of the CommitteeDuring 2020, and early 2021, the Committee has continued its journey to formalise and enhance its oversight of matters it is responsible for and prepare for increasing regulatory requirements. The key areas of focus included the review of valuation updates during the year, oversight of the development and implementation of a capital allocation policy (page 75), development of ESG reporting (page 57)and an ethical investment framework and consideration of the impact of COVID-19 on financial reporting. The Committee reviewed the impact of COVID-19 on the Group’s operational, strategic and principal risks (see risk management report on page 46) including control monitoring in light of the pandemic and shifts The Committee has continued its journey to formalise and enhance its oversight of matters it is responsible for and prepare for increasing regulatory requirements.”Dr Caroline Brown Chair of the Audit and Risk CommitteeIP Group plc Annual Report and Accounts for the year ended 31 December 2020128Stock Code: IPO Business Overview
Strategic Report
Our Governance
Our Financials
1 2 9
in ways of working. During the year the Committee
received four internal audit reviews performed by the
Group’s outsourced internal audit function and continues
to monitor implementation of agreed improvements. The
Committee reviewed new and updated policies and oversaw
preparations for TCFD reporting in 2021 and for the UK
internal controls regime expected to be implemented by 31
December 2023.
Key Accounting Judgements
The valuation of unquoted investments remains the most
material area of judgment in the financial statements and
is the key audit risk for the Group. During the year the
Committee has monitored updated management portfolio
valuations in light of COVID-19, new IPEV special valuation
guidance and the Group’s accounting policy on valuation
(see the full policy on pages 141-142). In depth discussions
took place with management and the external auditor at
half year and full year reporting dates and the Committee
members challenged the approach taken to portfolio
valuations (see pages 22 to 25, 155 to 157, 161 and 168 to 169).
As in previous years, the Committee has paid significant
attention to the valuation of the Group’s holding in Oxford
Nanopore Technologies Limited, the valuation of assets
which have not completed a funding round within the last
nine months, assets which have seen significant positive or
negative developments in the year and assets with active
financings or sale processes on or after the measurement
date. The Group has continued to utilise external valuations
specialists where considered appropriate as part of its
valuation procedures, with external valuation reports being
commissioned on seven of our larger portfolio holdings
during the year (2019: 10).
The Valuation Committee assists in the formalisation and
documentation of management’s valuation judgements
in line with the Group’s accounting policies and industry
valuation guidance from IPEV. During the year, the Valuation
Committee was chaired by the Group CFO and its members
were the Group CEO, COO and CFO. Also in attendance
were the Managing Partners of the Technology and Life
Sciences partnerships, the Group Financial Controller,
external auditors and myself. The Valuation Committee met
four times in 2020 and twice in early 2021 to facilitate the
conclusion of the 2020 year end valuations.
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 2020 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 the
progress made by, and changes in fair value of, its portfolio
companies during the year.
During the year the Committee considered the application
of IFRS10, the analysis of operating segments and the
use of Alternative Performance Measures (“APMs”) and
disclosure updates on COVID-19 and Brexit, subsidiary
investment impairments, IAS7 cashflow disclosures and
climate change disclosures.
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 going concern basis for the
preparation of the Group’s results remains appropriate.
In advance of year end, the Committee reviewed the
Group’s proposed approach to viability reporting, including
its stress testing scenarios. The Committee reviewed
management reports setting out its view of the Group’s
long-term viability, and in line with feedback from the
FRC in its thematic review, 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 cashflows and
dividends. The Committee agreed that a three-year time
horizon remained appropriate.
Management’s assessment included scenarios where
adverse impacts across the Group’s principal risks relating
to insufficient capital, and macro-economic conditions were
considered. Under the severe scenario, a 75% reduction in
realisations and a 50% decline in portfolio fair values were
considered together with a series of mitigating actions,
which resulted in the Group remaining viable over the
three-year horizon. The Committee agreed to recommend
the Viability statement to the Board for approval.
Risk and internal controls
The key elements of the Group’s internal control framework
and procedures are set out on page 46. The principal risks
the Group faces are set out on pages 50 to 57. During the
year, the Committee devoted part of each meeting to items
concerning risk and its management.
One important element of the Group’s risk management
framework is the Risk Council whose permanent members
are the CFO, Company Secretary and Group Financial
Controller, with other executives and management from
across the business attending during the year as necessary.
The purpose of the Risk Council is to co-ordinate the
governance, risk and controls at IP Group prior to reporting
to the Committee and Board.
Report of the Audit and Risk CommitteeAudit and Risk Committee (“ARC” or the “Committee”) responsibilitiesThe Committee monitors the integrity of the financial statements of the Group, and reviews all proposed annual and half-yearly results announcements to be made by the Group with consideration being given to any significant financial reporting judgements contained in them. The Committee also advises 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. The Committee takes responsibility on behalf of the Board for the review of internal financial controls, risk management and internal control systems as well as conducting an annual robust assessment of these. The Committee also reviews the Group’s compliance with legal and regulatory requirements.A full copy of the Committee’s Terms of Reference is available from the Group’s website at www.ipgroupplc.com.Terms of ReferenceThe Committee continues to review its terms of reference at least annually and will propose updates where necessary and/or appropriate to reflect current market practice.Committee membership and meetingsAt 31 December 2020, the Committee comprised 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 and having held senior financial positions in my career. The Board is satisfied that for the year under review, and thereafter, the Audit and Risk Committee as a whole has competence relevant to the sector in which the Group operates. Further details of specific relevant experience can be found in the Director’s biographies on pages 82 to 84.The Committee met five times during 2020, see Board and Committee attendance table, page 91. The Group’s Chairman, Chief Financial Officer, Group Financial Controller, Company Secretary, outsourced Head of Internal Audit and the external auditor were also invited to attend all meetings and did so. The 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 were invited to attend for specific subjects. In addition, I also met privately with individual members of management, the external auditor and the outsourced Head of Internal Audit prior to each Committee meeting and attend meetings of the Valuation Committee as an observer. At the end of the annual audit process in March the Committee met with the external auditor without any members of the executive management team being present.Activities of the CommitteeDuring 2020, and early 2021, the Committee has continued its journey to formalise and enhance its oversight of matters it is responsible for and prepare for increasing regulatory requirements. The key areas of focus included the review of valuation updates during the year, oversight of the development and implementation of a capital allocation policy (page 75), development of ESG reporting (page 57)and an ethical investment framework and consideration of the impact of COVID-19 on financial reporting. The Committee reviewed the impact of COVID-19 on the Group’s operational, strategic and principal risks (see risk management report on page 46) including control monitoring in light of the pandemic and shifts The Committee has continued its journey to formalise and enhance its oversight of matters it is responsible for and prepare for increasing regulatory requirements.”Dr Caroline Brown Chair of the Audit and Risk CommitteeIP Group plc Annual Report and Accounts for the year ended 31 December 2020128Stock Code: IPO 1 3 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Report of the Audit and Risk Committee continued
The Risk Council met six times during the year and
reported to the Committee at each meeting.
Compliance
During 2020 and early 2021, the Committee reviewed
management’s updated risk appetite statements prepared
using input from an executive management workshop
ahead of a Board discussion to approve the Group’s final
risk appetite statements. The Committee reviewed output
from the Risk Council summarising the Group’s strategic
risk profile, and accepted management’s proposal that
Failure of University Relationships should no longer be
considered a principal risk to the Group. The Committee
also considered the Group’s emerging risks, which are
summarised on page 38 and paid special attention to
the Group’s response to the COVID-19. The Committee
also reviewed the output of testing of all 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 agreed with
management. Implementation of the remedial actions
was reviewed by the Risk Council and reported to the
Committee.
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.
Cyber security
The Group has continued its focus on cyber and IT security,
with regular updates to the Committee on the steps being
taken by the Group to mitigate cyber risks including
investment in additional security measures. During the year,
PwC delivered a cyber workshop to assist the Group in its
IT & cyber security response to COVID-19 and a general
industry trend of increasing threats as a result of the mass
move to remote working in 2020 and an increase in the
Group’s principal risk in this area see page 56 for further
details on management’s response and developments in
the year in relation to this risk. The team completed a
cyber maturity assessment internal audit review which
followed on from the 2019 review and the Committee
reviewed the findings of this work and receive regular
updates on the actions arising from both internal audit
reviews. As in prior years, employee awareness training on
cyber security and regular phishing testing was conducted
Group-wide in the year.
Ensuring compliance for FCA regulated businesses
represents an important control risk 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.
During the year the Committee reviewed its assurance
requirements in its central and wider group operations
covering legal, financial, tax, risk, IT & cyber and
employment policies, identified areas where additional
assurance on Group compliance with these policies
and procedures was required and agreed actions with
management to obtain the desired level of assurance.
The Committee also reviewed existing Group policies on
anti-bribery and corruption, speaking-up, related party
transactions and modern slavery statement.
Internal audit
2020 was the second 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 four internal control reviews which were
focussed on compliance with GDPR, the Group’s capital
allocation policy and processes, payments processes and
cyber & IT security. The Committee reviewed the output
of these control reviews and monitored progress against
each action identified in the year. 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 and annual strategy document also
aided by a management assessment of quality in the 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.
External audit
The effectiveness of the external audit process is dependent
on appropriate risk identification. In December, the
Committee discussed the auditor’s plan for the 2020 year-
end audit. This included a summary of the proposed audit
scope and a summary of what the auditor considered to
be the most significant financial reporting risks facing the
Group together with the auditor’s proposed audit approach
to these significant risk areas. The main areas of audit focus
for the year were the valuation of unquoted investments,
notably Oxford Nanopore Technologies Limited, given the
proportion that this company represents of the Group’s
1 3 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 3 1
Report of the Audit and Risk Committee continued
The Risk Council met six times during the year and
reported to the Committee at each meeting.
Compliance
During 2020 and early 2021, the Committee reviewed
management’s updated risk appetite statements prepared
using input from an executive management workshop
ahead of a Board discussion to approve the Group’s final
risk appetite statements. The Committee reviewed output
from the Risk Council summarising the Group’s strategic
risk profile, and accepted management’s proposal that
Failure of University Relationships should no longer be
considered a principal risk to the Group. The Committee
also considered the Group’s emerging risks, which are
summarised on page 38 and paid special attention to
the Group’s response to the COVID-19. The Committee
also reviewed the output of testing of all 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 agreed with
management. Implementation of the remedial actions
was reviewed by the Risk Council and reported to the
Committee.
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.
Cyber security
The Group has continued its focus on cyber and IT security,
with regular updates to the Committee on the steps being
taken by the Group to mitigate cyber risks including
investment in additional security measures. During the year,
PwC delivered a cyber workshop to assist the Group in its
IT & cyber security response to COVID-19 and a general
industry trend of increasing threats as a result of the mass
move to remote working in 2020 and an increase in the
Group’s principal risk in this area see page 56 for further
details on management’s response and developments in
the year in relation to this risk. The team completed a
cyber maturity assessment internal audit review which
followed on from the 2019 review and the Committee
reviewed the findings of this work and receive regular
updates on the actions arising from both internal audit
reviews. As in prior years, employee awareness training on
cyber security and regular phishing testing was conducted
Group-wide in the year.
Ensuring compliance for FCA regulated businesses
represents an important control risk 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.
During the year the Committee reviewed its assurance
requirements in its central and wider group operations
covering legal, financial, tax, risk, IT & cyber and
employment policies, identified areas where additional
assurance on Group compliance with these policies
and procedures was required and agreed actions with
management to obtain the desired level of assurance.
The Committee also reviewed existing Group policies on
anti-bribery and corruption, speaking-up, related party
transactions and modern slavery statement.
Internal audit
2020 was the second 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 four internal control reviews which were
focussed on compliance with GDPR, the Group’s capital
allocation policy and processes, payments processes and
cyber & IT security. The Committee reviewed the output
of these control reviews and monitored progress against
each action identified in the year. 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 and annual strategy document also
aided by a management assessment of quality in the 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.
External audit
The effectiveness of the external audit process is dependent
on appropriate risk identification. In December, the
Committee discussed the auditor’s plan for the 2020 year-
end audit. This included a summary of the proposed audit
scope and a summary of what the auditor considered to
be the most significant financial reporting risks facing the
Group together with the auditor’s proposed audit approach
to these significant risk areas. The main areas of audit focus
for the year were the valuation of unquoted investments,
notably Oxford Nanopore Technologies Limited, given the
proportion that this company represents of the Group’s
the Group’s debt facilities with the EIB. Given the natural
overlap between this work and the financial audit of the
Group’s results, the Committee judged KPMG the most
effective party to perform this work. In other matters,
the Committee prefers to engage other firms to perform
consulting engagements to ensure that the independence
of the auditor is not compromised and during 2020
engaged the services of BDO (tax), PwC (internal audit,
risk and governance), Deloitte (valuations), Duff & Phelps
(valuations) and CFGI (US valuations).
Auditor independence
A formal statement of independence is received from the
auditor each year and the Board and the Audit and Risk
Committee are satisfied that the independence of the
auditor has been maintained.
Auditor effectiveness
In order to assess the effectiveness of the external audit
process, the Committee asked detailed questions of key
members of management and each Committee member
individually via a survey, the results of which were collated
and reviewed by myself and the CFO. 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. KPMG utilised specialist corporate
finance staff to support its audit work on selected portfolio
valuations and, overall, the auditor’s risk-based approach
drew on both his knowledge of the business and the wider
economic and business environment.
Dr Caroline Brown
Chair of the Audit and Risk Committee
9 March 2021
overall Hard NAV. The auditor’s plan included the approach
to the categorisation and testing of unquoted investments
and a detailed audit timetable including completion of
a portion of the Group’s subsidiary statutory account
audits, developed in conjunction with management. The
Committee approved a proposal from management to
engage an alternative auditor Moore Northern Home
Counties Limited on the Group’s simpler trading subsidiaries
which are small in nature and do not hold portfolio
company investments. It is expected that this will allow an
accelerated audit completion timetable and reduced costs.
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 cost-effectiveness and
the independence and objectivity of the external auditor.
Controls in place includes 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. Mr Jonathan Martin became lead audit
partner responsible for the Group’s statutory audit for the
2019 year-end onwards. The Committee has benefited from
Mr Martin’s extensive valuation expertise and continues
to believe he is a suitable audit partner for the Group.
The Committee last undertook a comprehensive tender
process in 2014 for the audit in relation to the year ended 31
December 2014 and has no plans to re-tender the audit at
the present time.
Non-audit work
For the 2021 financial year, the Group’s non-audit services
policy has been updated and approved by the Committee.
The updated policy incorporates the requirements of
the FRC’s revised Ethical Standard that was published in
December 2019. The policy details the nature of the services
that the external auditor may not undertake and specifies
that non-audit services, unless pre-approved, are subject to
prior approval from the CFO, ARC Chair or the Committee.
The policy states that the overall fee for non-audit services
should not exceed 70% of the average audit fee over the
prior three-year period. An analysis of audit and non-audit
fees paid to KPMG is provided in note 6 to the financial
statements on page 151. In addition to the review of the
Group’s half-yearly results, in 2020 the Group’s auditor,
KPMG LLP once again carried out compliance reporting for
1 3 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Directors’ Report
Report of the Directors
Significant events affecting the Group
The Directors present their report together with the audited
financial statements for IP Group plc and its subsidiaries for
the year ended 31 December 2020.
Details of the important events affecting the Group and
future development of the business are described on pages
48 to 49 of the Strategic Report.
Corporate governance statement
Information that fulfils the requirements of the corporate
governance statement can be found in the Corporate
Governance Statement on pages 86 to 99 and is
incorporated into this Directors’ report by reference.
Results and dividends
During the period, the Group made an overall profit after
taxation for the year ended 31 December 2020 of £185.4m
(2019: £78.9m loss). The Board recommends a final dividend
for the year ended 31 December 2020 of 1p per share
(2019: £nil). As set out in the Notice of the Annual General
Meeting to be sent to shareholders with this Annual Report,
the Company will seek authority from its shareholders at
that meeting to offer a scrip dividend alternative to a cash
dividend. More details of that scrip dividend alternative are set
out in the explanatory notes which accompany that Notice.
Directors
The names of directors who currently hold office or did so
during 2020 are as follows:
Executive Directors
Alan Aubrey
David Baynes
Greg Smith
Mike Townend
Non-executive Directors
Sir Douglas Flint (Chairman)
Professor David Begg
Jonathan Brooks (retired on 10 March 2020)
Dr Caroline Brown
Aedhmar Hynes
Heejae Chae
Dr Elaine Sullivan
Details of the interests of directors in the share capital of
the Company are set out in the Directors’ Remuneration
Report on page 107.
Principal risks and uncertainties and
financial instruments
The Group through its operations is exposed to a number of
risks. The Group’s risk management objectives and policies
are described on pages 46 to 49 and in the Corporate
Governance report on page 94. 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 159 to the consolidated
financial statements, along with further information on the
Group’s use of financial instruments.
Branches of the Group outside of the
UK
The Group has branches in the US, Australia and
Hong Kong.
Significant agreements
The Group has entered into various agreements to form
partnerships or collaborations with nine universities in
Australia and New Zealand which contain certain change
of control provisions. In addition, various entities within
the Group have entered into agreements to act as
general partner and investment manager to two limited
partnerships.
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 20 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 of the Company held
on 18 June 2020 (the “2020 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 15 April 2020 at
any time up to the earlier of the conclusion of the next
Annual General Meeting (“AGM”) of the Company and 18
September 2021. In addition, at the 2020 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 15 April 2020 in connection with an offer by way
of a fully pre-emptive rights issue. The Directors propose to
renew both of these authorities at the Company’s next AGM
to be held on 9 June 2021 (“2021 AGM”). The authorities
being sought are in accordance with guidance issued by the
Investment Association.
A further special resolution passed at the 2020 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 5% of the aggregate nominal value of the
shares in issue on 15 April 2020; and (ii) up to a further
maximum of approximately 5% of the aggregate nominal
value of the shares in issue on 15 April 2020 in connection
1 3 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 3 3
Directors’ Report
Report of the Directors
Significant events affecting the Group
The Directors present their report together with the audited
Details of the important events affecting the Group and
financial statements for IP Group plc and its subsidiaries for
future development of the business are described on pages
the year ended 31 December 2020.
48 to 49 of the Strategic Report.
Corporate governance statement
Branches of the Group outside of the
Information that fulfils the requirements of the corporate
governance statement can be found in the Corporate
Governance Statement on pages 86 to 99 and is
incorporated into this Directors’ report by reference.
UK
Hong Kong.
The Group has branches in the US, Australia and
Results and dividends
During the period, the Group made an overall profit after
taxation for the year ended 31 December 2020 of £185.4m
(2019: £78.9m loss). The Board recommends a final dividend
for the year ended 31 December 2020 of 1p per share
(2019: £nil). As set out in the Notice of the Annual General
Meeting to be sent to shareholders with this Annual Report,
the Company will seek authority from its shareholders at
that meeting to offer a scrip dividend alternative to a cash
dividend. More details of that scrip dividend alternative are set
out in the explanatory notes which accompany that Notice.
The names of directors who currently hold office or did so
Directors
during 2020 are as follows:
Executive Directors
Alan Aubrey
David Baynes
Greg Smith
Mike Townend
Non-executive Directors
Sir Douglas Flint (Chairman)
Professor David Begg
Jonathan Brooks (retired on 10 March 2020)
Dr Caroline Brown
Aedhmar Hynes
Heejae Chae
Dr Elaine Sullivan
Details of the interests of directors in the share capital of
the Company are set out in the Directors’ Remuneration
Report on page 107.
Principal risks and uncertainties and
financial instruments
The Group through its operations is exposed to a number of
risks. The Group’s risk management objectives and policies
are described on pages 46 to 49 and in the Corporate
Governance report on page 94. 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 159 to the consolidated
financial statements, along with further information on the
Group’s use of financial instruments.
Significant agreements
The Group has entered into various agreements to form
partnerships or collaborations with nine universities in
Australia and New Zealand which contain certain change
of control provisions. In addition, various entities within
the Group have entered into agreements to act as
general partner and investment manager to two limited
partnerships.
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 20 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 of the Company held
on 18 June 2020 (the “2020 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 15 April 2020 at
any time up to the earlier of the conclusion of the next
Annual General Meeting (“AGM”) of the Company and 18
September 2021. In addition, at the 2020 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 15 April 2020 in connection with an offer by way
of a fully pre-emptive rights issue. The Directors propose to
renew both of these authorities at the Company’s next AGM
to be held on 9 June 2021 (“2021 AGM”). The authorities
being sought are in accordance with guidance issued by the
Investment Association.
A further special resolution passed at the 2020 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 5% of the aggregate nominal value of the
shares in issue on 15 April 2020; and (ii) up to a further
maximum of approximately 5% of the aggregate nominal
value of the shares in issue on 15 April 2020 in connection
with financing an acquisition or other applicable capital
investment, each authority exercisable at any time up to the
earlier of the conclusion of the next AGM of the Company
and 18 September 2021. The Directors will seek to renew
these authorities for a similar period at the 2021 AGM.
Under Part 18, Chapter 5 of the CA 2006, the Company has
the power to purchase its own shares. At the 2020 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 15 April 2020 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 18
September 2021. This authority has not been used during
the year. The Directors will seek to renew the authority
within similar parameters and for a similar period at the
2021 AGM.
Articles of Association
The Company’s Articles may be amended by a special
resolution of the shareholders.
Substantial shareholders
As at 31 December 2020, the following shareholder held
interests of 3% or more in its 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
Railways Pension Scheme
Invesco
Imperial College of Science Technology &
Medicine
Baillie Gifford
Lansdowne Partners
Lombard Odier Investment Managers
BlackRock
Liontrust Sustainable Investments
Odey Asset Management
%
15.2
8.1
5.1
4.8
4.5
4.5
4.1
4.0
3.4
As at 9 March 2021, the Company has been advised of the
following shareholders with interests of 3% or more in its
ordinary share capital. Other than as shown, so far as the
Company (and its Directors) are aware, no other person
holds or is beneficially interested in a disclosable interest in
the Company.
Shareholder
Railways Pension Scheme
Ballie Gifford
Lansdowne Partners
Liontrust Sustainable Investments
BlackRock
Imperial College of Science Technology &
Medicine
Odey Asset Management
Schroder Investment Management
%
15.2
4.9
4.6
4.2
4.1
4.1
3.1
3.0
Corporate and social responsibility
Details on 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
Sustainability section on pages 58 to 70, in the Corporate
Governance Statement on pages 85 to 99 and in the s172(1)
Statement on pages 74 to 79.
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 Limited is authorised
and regulated by the Australian Securities and Investment
Commission.
Post balance sheet events
Material events occurring since the balance sheet date are
disclosed in the Strategic Report (see page 38) and in note
30 to the Group’s financial statements.
1 3 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Directors’ Report continued
Political expenditure
Although it is the Board’s policy not to incur political
expenditure or otherwise make cash contributions to
political parties, and it has no intention of changing that
policy, 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 2020 AGM and as at previous AGMs, the shareholders
passed 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 2020 AGM up to
the conclusion of the 2021 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 2021 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
2020.
Disclosure of information to auditor
Each of the persons who is a 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;
and
• the Director has taken all steps that he/she ought to
have taken as a Director in order to make himself/herself
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 12
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 on page 56.
Appointment of auditor
A resolution to reappoint KPMG LLP, together with a
resolution to authorise the Directors to determine their
remuneration, will be proposed at the Annual General
Meeting to be held on 9 June 2021.
On behalf of the Board
Angela Leach
Company Secretary
9 March 2021
1 3 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 3 5
Directors’ Report continued
Statement of Directors’ Responsibilities
In respect of the Annual Report and the Financial Statements
Political expenditure
Although it is the Board’s policy not to incur political
expenditure or otherwise make cash contributions to
political parties, and it has no intention of changing that
policy, 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 2020 AGM and as at previous AGMs, the shareholders
• the Director has taken all steps that he/she ought to
have taken as a Director in order to make himself/herself
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
passed a resolution on a precautionary basis to authorise
The Directors confirm that they have a reasonable
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 2020 AGM up to
the conclusion of the 2021 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
expectation that the Group will have adequate resources
to continue in operational existence for at least the next 12
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 on page 56.
Company’s 2021 AGM, which the Group might otherwise be
prohibited from making or incurring under the terms of the
Appointment of auditor
Political donations
CA 2006.
2020.
A resolution to reappoint KPMG LLP, together with a
resolution to authorise the Directors to determine their
remuneration, will be proposed at the Annual General
On behalf of the Board
The Group did not make any political donations during
Meeting to be held on 9 June 2021.
Disclosure of information to auditor
Each of the persons who is a 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;
Angela Leach
and
Company Secretary
9 March 2021
The Directors are responsible for preparing the Annual
Report 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 are required to prepare the group
financial statements in accordance with IFRSs as adopted
by the EU and applicable law and have elected to prepare
the parent company financial statements in accordance
with UK Accounting Standards.
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 their 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 and
prudent;
• for the group financial statements, state whether
they have been prepared in accordance with IFRSs as
adopted by the EU;
• 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; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the group
and the parent company will continue in business.
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 CA 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.
Under applicable law and regulations, the Directors are
also responsible for preparing a Strategic Report (which
includes a s.172 statement), Directors’ Report, Directors’
Remuneration Report and Corporate Governance Statement
that complies with that law and those regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Group’s website. Legislation in the UK governing the
preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Responsibility statement of the
Directors in respect of the annual
financial report
In accordance with DTR 4.1.12 we 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 consolidated group taken as a whole; and
• the Directors’ 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 consolidated group taken as a whole, together
with a description of the principal risks and uncertainties
that they face.
We 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
Chairman
9 March 2021
OURFINANCIALSIP Group plc Annual Report and Accounts for the year ended 31 December 2020136Stock Code: IPO Independent auditor’s report 140Consolidated statement of comprehensive income 148Consolidated statement of financial position 149Consolidated statement of cash flows 150Consolidated statement of changes in equity 151Notes to the consolidated financial statements 152Company balance sheet 186Company statement of changes in equity 187Notes to the Company financial statements 188Company information 199Business OverviewStrategic ReportOur GovernanceOur Financials137OURFINANCIALSIP Group plc Annual Report and Accounts for the year ended 31 December 2020136Stock Code: IPO 1 3 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Independent Auditor’s report
to the Members of IP Group plc
We were first appointed as auditor by the shareholders on
13 May 2014. The period of total uninterrupted engagement
is for the seven financial years ended 31 December 2020.
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
£10.5m (2019:£10.4m)
0.7% (2019: 0.8%) of group total assets
Coverage
100% (2019:100%) of total assets
Key audit matters
Recurring risks
vs 2019
Valuation of unquoted
investments (Group & Parent)
Recoverability of investments in
subsidiary undertaking (Parent
Company)
1. Our opinion is unmodified
We have audited the financial statements of IP Group
plc (“the Company”) for the year ended 31 December
2020 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 2020 and of the Group’s profit for
the year then ended;
•
•
•
the Group financial statements have been properly
prepared in accordance with international accounting
standards in conformity with the requirements of the
Companies Act 2006;
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 and, as regards the Group financial statements,
Article 4 of the IAS Regulation to the extent applicable.
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 committee.
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, 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.
1 3 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 3 9
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 Company”) for the year ended 31 December
2020 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 2020 and of the Group’s profit for
the year then ended;
•
the Group financial statements have been properly
prepared in accordance with international accounting
standards in conformity with the requirements of the
Companies Act 2006;
•
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 and, as regards the Group financial statements,
Article 4 of the IAS Regulation to the extent applicable.
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 committee.
We were first appointed as auditor by the shareholders on
13 May 2014. The period of total uninterrupted engagement
is for the seven financial years ended 31 December 2020.
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:
statements as a
whole
Coverage
Key audit matters
group financial
0.7% (2019: 0.8%) of group total assets
£10.5m (2019:£10.4m)
Recurring risks
Valuation of unquoted
100% (2019:100%) of total assets
vs 2019
investments (Group & Parent)
Recoverability of investments in
subsidiary undertaking (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, 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.
Valuation of
unquoted
investments
(£1,079.3 million;
2019: £928.1m)
Refer to page 128
(Audit Committee
Report), page
152 (accounting
policy) and page
168 (financial
disclosures).
The risk
Our response
Subjective Valuation
Our procedures included:
73% (2019: 72%) of the Group’s
total assets (by value) is held in
investments where no quoted market
price is available.
Our sector experience: For a sample of investments, selected using
a combination of specific item and statistical sampling, assessing and
challenging the reasonableness of the valuation approach used and
considering these against the latest IPEV guidelines;
Unquoted investments are measured
at fair value which is estimated by
the directors based on methods
established in accordance with
International Private Equity and
Venture Capital Valuations Guidelines
by using measurements of value
such as recent funding rounds and
discounted cash flows.
Where recent funding rounds are
used, due to the relatively low
number of investors involved, there
is a risk that the prices on which fair
value is based are not sufficiently
at arm’s length to ensure an
independent fair value.
Whether it remains appropriate to
use the price of the recent funding
round depends on the specific
circumstances of the investment, the
involvement of new investors, the
stability of the external environment
and the period since the previous
funding round occurred. There
are a number of assumptions
made by the directors when using
alternative valuation methods such as
discounted cash flows, including the
probability of achieving milestones
and the discount rate used.
There is a concentration risk within
the unquoted valuation of Oxford
Nanopore Technologies (ONT), of
which the Group’s stake is valued at
£340.4 (2019: £263.8.m), comprising
32% of total investments (2019: 25%).
The effect of these matters is that,
as part of our risk assessment,
we determined that the valuation
of 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 15)
disclose the sensitivity estimated by
the Group.
Due to the specific nature of the
valuation process and the lack of
homogeneity we concluded that a
largely substantive audit process
for the valuation of investments was
appropriate.
• For ONT, we reviewed the supporting information for the primary
and secondary share sales in the period, inspected the supporting
information for the pre IPO funding round in Q1 2021, held
discussions with the CEO who is also a board member of ONT and
further as part of the triangulation of the valuation inspected and
re-performed managements revenue multiple assessment;
• For investments valued using a recent funding round as an
appropriate basis for the measurement of the fair value, we
evaluate the independence of the funding round on which this
valuation is based (e.g. presence of new external investors) and
corroborate the price to signed Share Subscription Agreements;
• For those valued based on a funding round aged greater than 9
months, we corroborate judgements through discussions with
the investment team and independent support, such as investee
board minutes. We also inspect the underlying data supporting the
funding round to ensure that there were new third party investors
and further inspect board reports and market research on the
investments to ensure that the development of the investment is in
line with the change in the valuation over the period;
• For those valued using alternative valuation methods, such as a
discounted cash flows, we assessed the key assumptions used
by comparing them to market data and the underlying reported
information of the portfolio company along with agreeing key
inputs back to independent support, such as signed license
agreements. We further assessed the effect of changing one
or more inputs to reasonably possible alternative valuation
assumptions;
• For those investments where management have engaged a third
party valuation expert, we have discussed the methodology with
both management and where appropriate the valuation expert,
re-performed the calculation of fair value and agreed the key
assumptions to supporting documentation;
• Challenging the internal investment manager on key judgements
affecting investee companies valuations, such as events since the
last funding round, probability of achieving milestone achievements
and discount rate used where applicable. We compared key
underlying financial data inputs to external sources such as signed
legal documentation, the investee company audited accounts and
management information. We challenged the assumptions included
in the valuation based on the plans of investee companies.
• Assessing valuer’s credential: Assessing the expertise and
experience of the Group’s external valuation experts used in the
corroboration of management’s valuation and challenging the
appropriateness of the methods used;
• Our valuation and methodology expertise: We utilised a KPMG
valuation specialist to assist us in assessing and challenging the
appropriateness of the valuation methodology. This included
assessing the information used in the valuation model, in the
context of our own industry knowledge and external data;
• Assessing existence: We carried out a site visit to the ONT
manufacturing site in Oxfordshire to confirm existence of their
operation;
• Our findings: We found the resulting valuations in relation to the
unquoted financial investments to be mildly cautious (2019 finding:
balanced).
1 4 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Independent Auditor’s report continued
to the members of IP Group plc
Recoverability
of investment
in subsidiary
undertakings
(Parent Company).
(£313.2 million;
2019: £331.6 million)
Refer to page 128
(Audit Committee
Report), page
152 (accounting
policy) and page
168 (financial
disclosures).
The risk
Our response
Low risk, High value
Our procedures included:
• Test of detail: Comparing the carrying amount of 100% of
investments with the relevant 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 assessing whether those subsidiaries have historically
been profit-making or whether they have a positive net asset value
and therefore coverage of the debt owed.
• Assessing transparency: We consider the appropriateness, in
accordance with relevant accounting standards, of the disclosures
related to parent company’s investment in subsidiaries.
• Our findings: We found the recoverability of the parent company’s
investment in subsidiary undertakings to be balanced (2020
finding: balanced)
The carrying amount of the
parent company’s investments in
subsidiaries and loans to subsidiaries
represents 99% (2019: 99%) of
the 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.
During the year there have been
impairments due to liquidation.
We have assessed that this does
not indicate risk of significant
misstatement in the remaining
investments in subsidiaries.
In the prior year, the uncertainties around Brexit and impact on the Group was identified as a key audit matter. However,
given our risk assessment and understanding of the group as at 31 December 2020 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.
1 4 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 4 1
Independent Auditor’s report continued
to the members of IP Group plc
The risk
Our response
Low risk, High value
Our procedures included:
Recoverability
of investment
in subsidiary
undertakings
(Parent Company).
The carrying amount of the
• Test of detail: Comparing the carrying amount of 100% of
parent company’s investments in
investments with the relevant subsidiaries draft balance sheet to
subsidiaries and loans to subsidiaries
identify whether their net assets, being an approximation of their
represents 99% (2019: 99%) of
minimum recoverable amount, were in excess of their carrying
(£313.2 million;
the company’s total assets. Their
amount and assessing whether those subsidiaries have historically
2019: £331.6 million)
recoverability is not at a high risk of
been profit-making or whether they have a positive net asset value
significant misstatement or subject
and therefore coverage of the debt owed.
Refer to page 128
(Audit Committee
Report), page
152 (accounting
policy) and page
168 (financial
disclosures).
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.
• Assessing transparency: We consider the appropriateness, in
accordance with relevant accounting standards, of the disclosures
related to parent company’s investment in subsidiaries.
• Our findings: We found the recoverability of the parent company’s
investment in subsidiary undertakings to be balanced (2020
finding: balanced)
During the year there have been
impairments due to liquidation.
We have assessed that this does
not indicate risk of significant
misstatement in the remaining
investments in subsidiaries.
In the prior year, the uncertainties around Brexit and impact on the Group was identified as a key audit matter. However,
given our risk assessment and understanding of the group as at 31 December 2020 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.
Total Assets
£1,475.3m (2019: £1,295.7m)
Group Materiality
£10.5m (2019: £10.4m)
£10.5m
Whole financial
statements materiality
(2019: £10.6m)
£7.9m
Whole financial
statements
performance
materiality
(2019: £7.9m)
£2.3m
Range of materiality
at (2019: n/a)
(Cayman materiality)
£520,000
Misstatements
reported to the audit
committee (2019:
£520,000)
n Total assets Group
n Materiality
3. Our application of materiality and
an overview of the scope of our audit
The materiality for the Group financial statements as a
whole was set at £10.5 m (2019: £10.6m), determined with
reference to a benchmark of Group total assets, of which it
represents 0.7% (2019: 0.8%).
Materiality for the parent company financial statements
as a whole was set at £7.8m (2019: £8.4m), determined
with reference to a benchmark of total assets, of which it
represents 0.7% (2019: 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 for the group and parent company
was set at 75% (2019: 75%) of materiality for the financial
statements as a whole, which equates to £7.9m
(2019: £7.9m) for the group and £5.8m (2019: £6.3m) 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 Committee any corrected
or uncorrected identified misstatements exceeding
£500,000 (2019: £520,000), in addition to other identified
misstatements that warranted reporting on qualitative
grounds.
The scope of our work accounted for 100% of the Group
revenue (2019: 100%), 100% of Group profit before tax (2019:
100%) and 100% of the Group’s total assets
(2019: 100%).
1 4 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Independent Auditor’s report continued
to the members of IP Group plc
4. 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 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 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 of
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 135 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.
5. 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 the Audit and Risk Committee and
Executive management as to the Group’s policies and
procedures to prevent and detect fraud as well as
enquiring whether they have knowledge of any actual,
suspected or alleged fraud;
•
reading minutes of meetings of those charged with
governance.
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. On this audit we do not believe there is a fraud risk
related to revenue recognition because revenue streams
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 from
management.
We identified an additional fraud risk over the valuation of
the unquoted assets where there has not been a funding
round for over 9 months from the valuation date.
Our procedures included:-
• Attending the valuation committees to evidence
management challenge of the valuations;
•
Inspection of third party documentation on the investee
companies and their performance in the year;
• Corroboration of funding rounds to third party
documentation; and
•
Identifying journal entries to test based on risk criteria
and comparing the identified entries to supporting
documentation.
We compared a sample of items within all material balances
to supporting documentation to assess the validity of the
entries.
1 4 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 4 3
Independent Auditor’s report continued
to the members of IP Group plc
4. 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 Company’s financial resources
or ability to continue operations over the going concern
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.
5. 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:
period. The risks that we considered most likely to adversely
• enquiring of the Audit and Risk Committee and
affect the Group’s and Company’s available financial
Executive management as to the Group’s policies and
resources and metrics relevant to debt covenants over this
procedures to prevent and detect fraud as well as
period were:
enquiring whether they have knowledge of any actual,
• Significant additional funding being made into current
suspected or alleged fraud;
and future investee companies;
•
reading minutes of meetings of those charged with
•
Reduction in realisations over the period including of
governance.
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 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. On this audit we do not believe there is a fraud risk
related to revenue recognition because revenue streams
are simple in nature with respect to accounting policy
choice, and are easily verifiable to external data sources or
• we consider that the directors’ use of the going concern
agreements with little or no requirement for estimation from
basis of accounting in the preparation of the financial
management.
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
We identified an additional fraud risk over the valuation of
the unquoted assets where there has not been a funding
round for over 9 months from the valuation date.
collectively, may cast significant doubt on the Group’s or
Our procedures included:-
Company’s ability to continue as a going concern for the
• Attending the valuation committees to evidence
going concern period;
management challenge of the valuations;
• we have nothing material to add or draw attention to
•
Inspection of third party documentation on the investee
in relation to the directors’ statement in note 1 to the
companies and their performance in the year;
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 135 is materially consistent with the financial
statements and our audit knowledge.
entries.
• Corroboration of funding rounds to third party
documentation; and
•
Identifying journal entries to test based on risk criteria
and comparing the identified entries to supporting
documentation.
We compared a sample of items within all material balances
to supporting documentation to assess the validity of the
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.
6. We have nothing to report on
the other information in the Annual
Report and accounts
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.
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
those charged with governance (as required by auditing
standards), and discussed with management the policies
and procedures regarding compliance with laws and
regulations. 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: regulatory capital
and 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 evident from relevant correspondence, an audit will not
detect that breach.
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.
1 4 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Independent Auditor’s report continued
to the members of IP Group plc
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
page 56 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 Risk and internal controls on page 48 disclosures
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 56 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.
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 Committee, including the significant issues
that the audit 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, and to report
to you if a corporate governance statement has not been
prepared by the company. We have nothing to report in this
respect.
Based solely on our work on the other information
described above:
• with respect to the Corporate Governance Statement
disclosures about internal control and risk management
systems in relation to financial reporting processes and
about share capital structures:
− we have not identified material misstatements
therein; and
− the information therein is consistent with the
financial statements; and
•
in our opinion, the Corporate Governance Statement
has been prepared in accordance with relevant rules of
the Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority.
1 4 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 4 5
Independent Auditor’s report continued
to the members of IP Group plc
Directors’ remuneration report
Corporate governance disclosures
In our opinion the part of the Directors’ Remuneration
We are required to perform procedures to identify whether
Report to be audited has been properly prepared in
there is a material inconsistency between the directors’
accordance with the Companies Act 2006.
corporate governance disclosures and the financial
Disclosures of emerging and principal risks and
longer-term viability
statements and our audit knowledge.
Based on those procedures, we have concluded that each
We are required to perform procedures to identify whether
of the following is materially consistent with the financial
there is a material inconsistency between the directors’
statements and our audit knowledge:
disclosures in respect of emerging and principal risks and
the viability statement, and 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
Based on those procedures, we have nothing material to
information necessary for shareholders to assess the
add or draw attention to in relation to:
Group’s position and performance, business model and
•
the directors’ confirmation within the viability statement
strategy;
page 56 that they have carried out a robust assessment
•
the section of the annual report describing the work of
of the emerging and principal risks facing the Group,
the Audit Committee, including the significant issues
including those that would threaten its business model,
that the audit committee considered in relation to
future performance, solvency and liquidity;
the financial statements, and how these issues were
•
the Risk and internal controls on page 48 disclosures
addressed; and
describing these risks and how emerging risks are
•
the section of the annual report that describes
identified, and explaining how they are being managed
the review of the effectiveness of the Group’s risk
and mitigated; and
management and internal control systems.
•
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
qualifications or assumptions.
We are also required to review the viability statement, set
out on page 56 under the Listing Rules. Based on the above
procedures, we have concluded that the above disclosures
are materially consistent with the financial statements and
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, and to report
to you if a corporate governance statement has not been
prepared by the company. We have nothing to report in this
respect.
described above:
• with respect to the Corporate Governance Statement
disclosures about internal control and risk management
systems in relation to financial reporting processes and
about share capital structures:
related disclosures drawing attention to any necessary
Based solely on our work on the other information
our audit knowledge.
− we have not identified material misstatements
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.
therein; and
− the information therein is consistent with the
financial statements; and
•
in our opinion, the Corporate Governance Statement
has been prepared in accordance with relevant rules of
the Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority.
7. 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
9. 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
9 March 2021
• we have not received all the information and
explanations we require for our audit.
We have nothing to report in these respects.
8. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page
135, 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.
1 4 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Consolidated statement of comprehensive income
For the year ended 31 December 2020
Portfolio return and revenue
Change in fair value of equity and debt investments
Gain on disposal of equity investments
Gain on deconsolidation of subsidiary
Change in fair value of limited and limited liability partnership interests
Revenue from services and other income
Administrative expenses
Carried interest plan (charge)/release
Share-based payment charge
Amortisation of intangible assets
Other administrative expenses
Operating profit/(loss)
Finance income
Finance costs
Profit/(loss) before taxation
Taxation
Profit(loss) for the year
Other comprehensive income
Exchange differences on translating foreign operations
Total comprehensive profit/(loss) for the year
Attributable to:
Equity holders of the parent
Non-controlling interest
Profit/(loss) per share
Basic (p)
Diluted (p)
The accompanying notes form an integral part of the financial statements.
Note
13
14
15
24
4
23
22
8
7
10
11
11
2020
£m
148.9
82.5
–
(3.4)
6.2
2019
£m
(70.6)
16.1
10.6
(0.7)
8.6
234.2
(36.0)
(14.3)
(2.9)
–
(29.4)
(46.6)
187.6
0.9
(2.4)
186.1
(0.7)
185.4
–
185.4
185.4
–
185.4
17.47
17.36
1.3
(2.3)
(0.3)
(39.1)
(40.4)
(76.4)
1.2
(3.6)
(78.8)
(0.1)
(78.9)
0.1
(78.8)
(75.4)
(3.4)
(78.8)
(7.12)
(7.12)
1 4 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 4 7
Consolidated statement of comprehensive income
For the year ended 31 December 2020
Consolidated statement of financial position
As at 31 December 2020
Portfolio return and revenue
Change in fair value of equity and debt investments
Gain on disposal of equity investments
Gain on deconsolidation of subsidiary
Change in fair value of limited and limited liability partnership interests
Revenue from services and other income
Administrative expenses
Carried interest plan (charge)/release
Share-based payment charge
Amortisation of intangible assets
Other administrative expenses
Operating profit/(loss)
Finance income
Finance costs
Profit/(loss) before taxation
Taxation
Profit(loss) for the year
Other comprehensive income
Exchange differences on translating foreign operations
Total comprehensive profit/(loss) for the year
Attributable to:
Equity holders of the parent
Non-controlling interest
Profit/(loss) per share
Basic (p)
Diluted (p)
The accompanying notes form an integral part of the financial statements.
Note
13
14
15
24
4
23
22
8
7
10
11
11
234.2
(36.0)
2020
£m
148.9
82.5
–
(3.4)
6.2
(14.3)
(2.9)
–
(29.4)
(46.6)
187.6
0.9
(2.4)
186.1
(0.7)
185.4
–
185.4
185.4
–
185.4
17.47
17.36
2019
£m
(70.6)
16.1
10.6
(0.7)
8.6
1.3
(2.3)
(0.3)
(39.1)
(40.4)
(76.4)
1.2
(3.6)
(78.8)
(0.1)
(78.9)
0.1
(78.8)
(75.4)
(3.4)
(78.8)
(7.12)
(7.12)
ASSETS
Non-current assets
Intangible assets:
Goodwill
Property, plant and equipment
Portfolio:
Equity investments
Debt investments
Limited and limited liability partnership interests
Total non-current assets
Current assets
Trade and other receivables
Receivable on sale of debt and equity investments
Deposits
Cash and cash equivalents
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Called up share capital
Share premium account
Retained earnings
Total equity attributable to equity holders
Non-controlling interest
Total equity
Current liabilities
Trade and other payables
EIB debt facility
Non-current liabilities
EIB debt facility
Carried interest plan liability
Loans from limited partners of consolidated funds
Revenue share liability
Total equity and liabilities
Registered number: 4204490
Note
2020
£m
2019
£m
0.4
0.8
1,124.0
38.7
22.2
1,186.1
3.6
15.3
142.7
127.6
289.2
1,475.3
21.3
101.6
1,208.5
1,331.4
0.5
1,331.9
11.0
15.4
51.9
19.3
32.9
12.9
0.4
1.1
1,021.9
23.7
21.4
1,068.5
5.0
27.3
73.0
121.9
227.2
1,295.7
21.2
99.7
1,020.5
1,141.4
0.5
1,141.9
26.0
15.4
67.1
5.5
26.0
13.8
1,475.3
1,295.7
13
13
24
16
14,17
20
18
19
19
22
19
13
The accompanying notes form an integral part of the financial statements. The financial statements on pages 148 to 151 were
approved by the Board of Directors and authorised for issue on 9 March 2021 and were signed on its behalf by:
Alan Aubrey
Chief Executive Officer
Greg Smith
Chief Financial Officer
1 4 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Consolidated statement of cash flows
For the year ended 31 December 2020
Operating activities
Operating profit/(loss) for the period
Adjusted for:
Change in fair value of equity and debt investments
Change in fair value of limited and limited liability partnership interests
Gain on disposal of equity investments
Gain on deconsolidation of subsidiary
Depreciation of property, plant and equipment
Amortisation of intangible non-current assets
Long term incentive carry scheme charge/(release)
IFRS3 charge in respect of acquisition of subsidiary – equity-settled
Fees settled in the form of equity
Share-based payment charge
Changes in working capital
Decrease in trade and other receivables
Increase/ (decrease) in trade and other payables
Drawdowns from limited partners of consolidated funds
Other operating cash flows
Net interest paid
Net cash outflow from operating activities
Investing activities
Purchase of property, plant and equipment
Purchase of equity and debt investments
Investment in limited and limited liability partnership funds
Distribution from limited partnership funds
Cash flow to deposits
Cash flow from deposits
Cash disposed via deconsolidation of subsidiary
Proceeds from sale of equity and debt investments
Net cash inflow from investing activities
Financing activities
Proceeds from the issue of share capital by consolidated portfolio company
Lease principal payment
Repayment of EIB facility
Net cash outflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the year
The accompanying notes form an integral part of the financial statements.
Note
2020
£m
2019
£m
187.6
(76.4)
13
24
14
15
23
22
13
24
24
15
14
15
21
19
(148.9)
3.4
(82.5)
–
1.4
–
14.3
2.0
(0.2)
2.9
2.1
(14.8)
6.8
(1.6)
(27.5)
–
(67.5)
(4.5)
0.3
(240.2)
170.5
–
191.0
49.6
–
(1.1)
(15.3)
(16.4)
5.7
121.9
–
127.6
70.6
0.7
(16.1)
(10.6)
1.2
0.3
(1.3)
–
–
2.3
1.6
9.5
3.0
(2.1)
(17.3)
(0.7)
(64.7)
(6.8)
2.0
(217.5)
234.5
(2.5)
79.5
23.8
2.9
(1.2)
(15.3)
(13.6)
(7.1)
129.0
–
121.9
1 4 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 4 9
Consolidated statement of cash flows
For the year ended 31 December 2020
Consolidated statement of changes in equity
For the year ended 31 December 2020
Operating activities
Operating profit/(loss) for the period
Adjusted for:
Change in fair value of equity and debt investments
Change in fair value of limited and limited liability partnership interests
Gain on disposal of equity investments
Gain on deconsolidation of subsidiary
Depreciation of property, plant and equipment
Amortisation of intangible non-current assets
Long term incentive carry scheme charge/(release)
IFRS3 charge in respect of acquisition of subsidiary – equity-settled
Fees settled in the form of equity
Share-based payment charge
Changes in working capital
Decrease in trade and other receivables
Increase/ (decrease) in trade and other payables
Drawdowns from limited partners of consolidated funds
Other operating cash flows
Net interest paid
Net cash outflow from operating activities
Investing activities
Purchase of property, plant and equipment
Purchase of equity and debt investments
Investment in limited and limited liability partnership funds
Distribution from limited partnership funds
Cash flow to deposits
Cash flow from deposits
Cash disposed via deconsolidation of subsidiary
Proceeds from sale of equity and debt investments
Net cash inflow from investing activities
Financing activities
Lease principal payment
Repayment of EIB facility
Net cash outflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the year
Proceeds from the issue of share capital by consolidated portfolio company
The accompanying notes form an integral part of the financial statements.
Note
2020
£m
2019
£m
187.6
(76.4)
13
24
14
15
23
22
13
24
24
15
14
15
21
19
(148.9)
3.4
(82.5)
1.4
–
–
14.3
2.0
(0.2)
2.9
2.1
(14.8)
6.8
(1.6)
(27.5)
–
(67.5)
(4.5)
0.3
(240.2)
170.5
–
191.0
49.6
–
(1.1)
(15.3)
(16.4)
5.7
121.9
–
127.6
70.6
0.7
(16.1)
(10.6)
1.2
0.3
(1.3)
–
–
2.3
1.6
9.5
3.0
(2.1)
(17.3)
(0.7)
(64.7)
(6.8)
2.0
(217.5)
234.5
(2.5)
79.5
23.8
2.9
(1.2)
(15.3)
(13.6)
(7.1)
129.0
–
121.9
At 1 January 2019
Comprehensive income
Capital reduction(v)
Purchase of treasury
stock(vi)
Equity-settled share-based
payments
Currency translation
At 1 January 2020
Comprehensive income
Issue of shares(vii)
Equity-settled share-based
payments
Currency translation(viii)
Share
capital
£m
21.2
–
–
–
–
–
21.2
–
0.1
–
–
Attributable to equity holders of the parent
Share
premium(i)
£m
684.7
–
Merger
reserve(i)i
£m
372.6
–
(585.0)
(372.6)
Retained
earnings(iii)
£m
135.8
(75.4)
957.6
Total
£m
1,214.3
(75.4)
–
–
–
–
99.7
–
1.9
–
–
(0.2)
(0.2)
2.3
0.4
1,020.5
185.4
–
2.3
0.4
1,141.4
185.4
2.0
2.9
(0.3)
2.9
(0.3)
–
–
–
–
–
–
–
–
–
Non-
controlling
interest(iv)
£m
3.9
(3.4)
–
–
–
–
0.5
–
–
–
–
Total
equity
£m
1,218.2
(78.8)
–
(0.2)
2.3
0.4
1,141.9
185.4
2.0
2.9
(0.3)
At 31 December 2020
21.3
101.6
1,208.5
1,331.4
0.5
1,331.9
(i) Share premium – Amount subscribed for share capital in excess of nominal value, net of directly attributable issue costs.
(ii) Merger reserve – Amount subscribed for share capital in excess of nominal value in relation to the qualifying acquisition of subsidiary
undertakings.
(iii) Retained earnings – Cumulative net gains and losses recognised in the consolidated statement of comprehensive income net of
associated share-based payments credits.
(iv) Non-controlling interest – Share of profits attributable to the Limited Partners of IP Venture Fund II LP and IPG Cayman LP, see note 25.
(v)
In 2019 Group effected a reduction of capital and cancellation of share premium account, which was count approved on 17th December
2019, resulting in the reduction in the share premium and merger reserves, and a corresponding increase in retained earnings.
(vi) Reflects purchase of IP Group equity to settle exercise of options in respect of the Group’s Defined Benefit Share Plan.
(vii) Reflects issue of 3,209,139 new ordinary shares to satisfy the final proportion of the consideration which has become due in respect of
the acquisition of Parkwalk Advisors Limited. The increase in share capital is based on the par value of 2p per ordinary share, while the
increase in share premium is equal to 60.79p per ordinary share issued. This issue of shares relates to costs recognised in relation to
contingent consideration payable to the sellers of Parkwalk Advisors Limited deemed under IFRS 3 to be a payment for post-acquisition
services.
(viii) Reflects currency translation differences on reserves non-GBP functional currency subsidiaries.
The accompanying notes form an integral part of the financial statements.
1 5 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the consolidated financial statements
1. Accounting policies
Basis of preparation
The Annual Report and Accounts of IP Group plc (“IP Group” or the “Company”) and its subsidiary companies (together,
the “Group”) are for the year ended 31 December 2020. 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. These financial statements have been prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
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 3.
Going Concern
The financial statements are prepared on a going concern basis. The directors have considered the impact of the of
COVID-19 pandemic on the Group, and 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. Consideration of the risks arising from the COVID-19 pandemic have been included within this assessment.
At the balance sheet date, the Group had cash and deposits of £270.3m, providing liquidity for in excess of two years’
operating expenses, portfolio investment and debt repayments at recent levels. Furthermore, the group has a portfolio
of investments valued at over £1.1bn, providing further opportunities for liquidity if required. 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 12 months from the date of the accounts. For further details see the
Group’s viability statement on page 56.
Changes in accounting policies
(i) New standards, interpretations and amendments effective from 1 January 2020
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
future financial statements.
Basis of consolidation
(i) Business combinations
The Group accounts for business combinations using the acquisition method from the date that control is transferred to
the Group (see (ii) Subsidiaries below). 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 statement of comprehensive income.
(ii) Subsidiaries
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.
1 5 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 5 1
Notes to the consolidated financial statements
1. Accounting policies
Basis of preparation
The Annual Report and Accounts of IP Group plc (“IP Group” or the “Company”) and its subsidiary companies (together,
the “Group”) are for the year ended 31 December 2020. 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. These financial statements have been prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
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 3.
Going Concern
The financial statements are prepared on a going concern basis. The directors have considered the impact of the of
COVID-19 pandemic on the Group, and 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. Consideration of the risks arising from the COVID-19 pandemic have been included within this assessment.
At the balance sheet date, the Group had cash and deposits of £270.3m, providing liquidity for in excess of two years’
operating expenses, portfolio investment and debt repayments at recent levels. Furthermore, the group has a portfolio
of investments valued at over £1.1bn, providing further opportunities for liquidity if required. 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 12 months from the date of the accounts. For further details see the
(i) New standards, interpretations and amendments effective from 1 January 2020
No new standards, interpretations and amendments effective in the year have had a material effect on the Group’s financial
(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
Group’s viability statement on page 56.
Changes in accounting policies
statements.
future financial statements.
Basis of consolidation
(i) Business combinations
The Group accounts for business combinations using the acquisition method from the date that control is transferred to
the Group (see (ii) Subsidiaries below). 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 statement of comprehensive income.
(ii) Subsidiaries
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.
1. Accounting policies continued
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 consolidated until the date on which control
ceases.
(iii) Associates
Associates are portfolio companies over which the Group has significant influence, but does not control, generally
accompanied by a shareholding of between 20% and 50% of the voting rights.
As permitted under IAS 28, the Group elects to hold such investments 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 business.
The disclosures required by Section 409 of the Companies Act 2006 for associated undertakings are included in note 10 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 disclosure acts are also included in note 10 of the
Company financial statements.
(iv) Limited Partnerships and Limited Liability Partnerships (“Limited Partnerships”)
Group entities act as general partner and investment manager to the following Limited Partnerships:
Name
IPG Cayman LP
IP Venture Fund II LP (“IPVFII”)
Interest
in limited
partnership
%
80.7
33.3
The Group receives compensation for its role as investment manager to these Limited Partnerships, including fixed fees and
performance fees. The directors consider that these amounts are in substance and form “normal market rate” compensation
for its role as investment manager.
1 5 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the consolidated financial statements continued
1. Accounting policies continued
In order to determine whether these Limited Partnerships were required to be consolidated, the presence of the three
elements of control noted in part (ii) was examined. In the case of both Limited Partnerships, the Group has power over
the entity as fund manager, and Group’s significant stake in these funds creates an exposure to variable returns from those
interests, and the Group can use its power to affect those variable returns. As such, both Limited Partnerships meet the
criteria in IFRS 10 Consolidated Financial Statements and are consequently consolidated. Further disclosures in respect of
these subsidiaries are included in Note 25.
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 all managed by third parties:
Name
UCL Technology Fund LP (“UCL Fund”)
Technikos LLP (“Technikos”)
Apollo Therapeutics LLP (“Apollo”)
Interest
in limited
partnership
%
46.4
17.7
8.3
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.
The Group has an 8.3% interest in the total capital commitments of Apollo Therapeutics LLP (“Apollo”), a £40.0m venture
between AstraZeneca, GlaxoSmithKline, Johnson & Johnson and the technology transfer offices of Imperial College London
(via IP2IPO Innovations Limited), University College London (via UCL Business plc) and the University of Cambridge (via
Cambridge Enterprise Limited). The venture supports the translation of academic therapeutic science into innovative new
medicines by combining the skills of the university academics with industry expertise at an early stage.
See note 28 for disclosure of outstanding commitments in respect of Limited Partnerships.
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 judgments 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.
(v) Non-controlling interests
The total comprehensive income, assets and liabilities of non-wholly owned subsidiaries are attributed to owners of the
parent and to the non-controlling interests in proportion to their relative ownership interests. See further disclosure in
note 25.
Portfolio return and revenue
Change in fair value
Change in fair value of equity and debt investments represents revaluation gains and losses on the Group’s portfolio of
investments. Gains on disposal of equity investments represent the difference between the fair value of consideration
received and the carrying value at the start of the accounting period on the disposal of equity investments. Change in fair
value of Limited Partnership investments represents revaluation gains and losses on the Group’s investments in Limited
Partnership funds. Changes in fair values of assets do not constitute revenue.
Revenue from services and other income
All revenue from services 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 and US operations. Revenue is recognised when the Group satisfies
its performance obligations, in line with IFRS 15. Revenue from services and other income comprises:
1 5 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 5 3
1. Accounting policies continued
1. Accounting policies continued
Advisory fees
Fees earned from the provision of business support services including IP Exec 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 price per share as equity issued as part the financing round to which the advisory
fees apply.
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 IP licenses 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 license, which can include sales-
based, usage-based on milestone-based royalties.
Financial assets
In respect of regular way purchases or sales, the Group uses trade date accounting to recognise or derecognise financial
assets.
Financial assets are derecognised when the rights to receive cash flows from the assets have expired or the Group has
transferred substantially all risks and rewards of ownership.
The Group classifies its financial assets into one of the categories listed below, depending on the purpose for which the
asset was acquired. None of the Group’s financial assets are categorised as held to maturity or available for sale.
(i) At fair value through profit or loss
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 they arise.
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 2018).
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.
Notes to the consolidated financial statements continued
In order to determine whether these Limited Partnerships were required to be consolidated, the presence of the three
elements of control noted in part (ii) was examined. In the case of both Limited Partnerships, the Group has power over
the entity as fund manager, and Group’s significant stake in these funds creates an exposure to variable returns from those
interests, and the Group can use its power to affect those variable returns. As such, both Limited Partnerships meet the
criteria in IFRS 10 Consolidated Financial Statements and are consequently consolidated. Further disclosures in respect of
these subsidiaries are included in Note 25.
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 all managed by third parties:
Interest
in limited
partnership
%
46.4
17.7
8.3
Name
UCL Technology Fund LP (“UCL Fund”)
Technikos LLP (“Technikos”)
Apollo Therapeutics LLP (“Apollo”)
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.
The Group has an 8.3% interest in the total capital commitments of Apollo Therapeutics LLP (“Apollo”), a £40.0m venture
between AstraZeneca, GlaxoSmithKline, Johnson & Johnson and the technology transfer offices of Imperial College London
(via IP2IPO Innovations Limited), University College London (via UCL Business plc) and the University of Cambridge (via
Cambridge Enterprise Limited). The venture supports the translation of academic therapeutic science into innovative new
medicines by combining the skills of the university academics with industry expertise at an early stage.
See note 28 for disclosure of outstanding commitments in respect of Limited Partnerships.
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 judgments 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.
(v) Non-controlling interests
The total comprehensive income, assets and liabilities of non-wholly owned subsidiaries are attributed to owners of the
parent and to the non-controlling interests in proportion to their relative ownership interests. See further disclosure in
note 25.
Portfolio return and revenue
Change in fair value
Change in fair value of equity and debt investments represents revaluation gains and losses on the Group’s portfolio of
investments. Gains on disposal of equity investments represent the difference between the fair value of consideration
received and the carrying value at the start of the accounting period on the disposal of equity investments. Change in fair
value of Limited Partnership investments represents revaluation gains and losses on the Group’s investments in Limited
Partnership funds. Changes in fair values of assets do not constitute revenue.
Revenue from services and other income
All revenue from services 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 and US operations. Revenue is recognised when the Group satisfies
its performance obligations, in line with IFRS 15. Revenue from services and other income comprises:
1 5 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the consolidated financial statements continued
1. Accounting policies continued
Valuation techniques used
The fair value of unlisted securities is established using appropriate valuation techniques in line with IPEV guidelines and
including IPEV’s special guidance issued in March 2020 in response to COVID-19. 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. Multiple 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 investments: the fair values of quoted investments are based on bid prices in an active market at the reporting
date.
• Milestone approach: an assessment is made 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.
• Scenario analysis: 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, as well as full scenario analysis vie the use of the probability-weighted expected return method (PWERM).
• Current value method: the estimation and allocation of the equity value to the various equity interests in a business as
though the business were to be sold on the Measurement Date.
• Discounted cash flows: deriving the value of a business by calculating the present value of expected future cash flows.
• Multiples: 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.
The fair value indicated by a recent transaction is used to calibrate inputs used with valuation techniques including those
noted above. 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 recent financing, the group refers to the valuation basis as ‘Recent Financing’.
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.
1 5 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 5 5
Notes to the consolidated financial statements continued
1. Accounting policies continued
Valuation techniques used
The fair value of unlisted securities is established using appropriate valuation techniques in line with IPEV guidelines and
including IPEV’s special guidance issued in March 2020 in response to COVID-19. 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. Multiple 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:
date.
• Quoted investments: the fair values of quoted investments are based on bid prices in an active market at the reporting
• Milestone approach: an assessment is made 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.
• Scenario analysis: 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, as well as full scenario analysis vie the use of the probability-weighted expected return method (PWERM).
• Current value method: the estimation and allocation of the equity value to the various equity interests in a business as
though the business were to be sold on the Measurement Date.
• Discounted cash flows: deriving the value of a business by calculating the present value of expected future cash flows.
• Multiples: 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.
The fair value indicated by a recent transaction is used to calibrate inputs used with valuation techniques including those
noted above. 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 recent financing, the group refers to the valuation basis as ‘Recent Financing’.
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.
1. Accounting policies continued
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.
(ii) At amortised cost
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
provision for impairment.
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 amounts held on
deposit are presented within investing activities in the consolidated statement of cash flows.
Cash and cash equivalents
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.
Financial liabilities
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, carried interest plans liabilities, and revenue share
liabilities arising as a result of the Group’s former Technology Pipeline Agreement with University College London.
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.
The Group consolidates the assets of two managed funds in which it has a significant economic interest, specifically
co-investment fund IP Venture Fund II LP and IPG Cayman LP. Loans from third parties of consolidated funds represent
third-party loans into these partnerships. These loans are repayable only upon these funds generating sufficient realisations
to repay the Limited Partners. Management anticipates that the funds will generate the required returns and consequently
recognises the full associated liabilities.
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 a hurdle rate of 8% per annum compound, scheme participants receive a 20% share of excess returns. 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 judgment (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 comprehensive income.
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 or loss (see note 13 for further details).
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 at
amortised cost.
1 5 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the consolidated financial statements continued
1. Accounting policies continued
Share capital
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, merger reserve and retained earnings.
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”) and as such must ensure that it has sufficient capital to
satisfy these requirements. The Group ensures it remains compliant with these requirements as described in their respective
financial statements.
Employee benefits
(i) 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.
(ii) Share-based payments
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.
See the Directors’ Remuneration Report on pages 107 to 127 and note 22 for further details.
Deferred tax
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 recognised to the extent that it is probable that the deferred tax asset will be recovered in the
future.
Leases
All operating leases in excess of one year, where the Group is the lessee, are included on the Group’s statement of financial
position, and recognised as a right-of-use (“ROU”) asset and a related lease liability representing the obligation to make
lease payments. The ROU asset is amortised on a straight-line basis with the lease liability being amortised using the
effective interest method. Short-term leases (lease terms less than 12 months) and small-value leases are exempt from IFRS
16 and are charged to the statement of comprehensive income on a straight-line basis over the term of the lease.
1 5 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 5 7
Notes to the consolidated financial statements continued
1. Accounting policies continued
Share capital
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, merger reserve and retained earnings.
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”) and as such must ensure that it has sufficient capital to
satisfy these requirements. The Group ensures it remains compliant with these requirements as described in their respective
financial statements.
Employee benefits
(i) 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.
(ii) Share-based payments
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.
See the Directors’ Remuneration Report on pages 107 to 127 and note 22 for further details.
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 recognised to the extent that it is probable that the deferred tax asset will be recovered in the
Deferred tax
future.
Leases
All operating leases in excess of one year, where the Group is the lessee, are included on the Group’s statement of financial
position, and recognised as a right-of-use (“ROU”) asset and a related lease liability representing the obligation to make
lease payments. The ROU asset is amortised on a straight-line basis with the lease liability being amortised using the
effective interest method. Short-term leases (lease terms less than 12 months) and small-value leases are exempt from IFRS
16 and are charged to the statement of comprehensive income on a straight-line basis over the term of the lease.
2. Financial Risk Management
As set out in the principal risks and uncertainties section on pages 46 to 57, 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.
(a) Market risk
(i) 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 categorised 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 investments which are publicly traded on AIM (11 companies, 2019: 13 companies) and investments which
are not traded on an active market.
The net portfolio gain in 2020 of £231.4m represents a 22.1% increase against the opening balance (2019: net loss of £43.9m,
a 4.4% reduction) and a similar increase or decrease in the prices of quoted and unquoted investments is considered to
be reasonably possible. The table below summarises the impact of a 1% increase/decrease in the price of both quoted and
unquoted investments on the Group’s post-tax profit for the year and on equity.
Equity and debt investments and
investments in limited partnerships
Quoted
£m
2020
Unquoted
£m
0.8
11.0
Total
£m
11.8
Quoted
£m
2019
Unquoted
£m
1.2
9.5
Total
£m
10.7
(ii) Interest rate risk
The Group holds three EIB debt facilities with the overall balance as at 31 December 2020 amounting to £67.3m (2019:
£82.7m) with £15.6m being subject to variable rate interest (2019: £20.1m) and £51.7m (2019: £62.6m) being subject to fixed
interest rate averaging 3.1% (2019: 3.2%).
The variable rate consists of two elements. A facility of £9m which includes a fixed element of 1.98% with an additional
variable spread equal to the six-month GBP LIBOR rate as at the first date of each six-month interest period. The average
floating interest rate (including the fixed element) for 2019 was 2.42% (2019: 2.90%). The second facility of £6.6m is based
on a floating interest rate including LIBOR and the average interest in the year was 3.14% (2019: 3.64%). There are no
hedging instruments in place to cover against interest rate fluctuation as exposure is deemed insignificant. For further
details of the Group’s EIB 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.
(iii) 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. The Group is increasing its operations in the US and the determination
of the associated concentrations is determined by the number of investment opportunities that management believes
represent a good investment.
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.
1 5 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the consolidated financial statements continued
2. Financial Risk Management continued
2020
2019
Fixed rate
£m
Floating
rate
Interest
free
£m
Total
£m
Fixed rate
£m
Floating
rate
–
–
–
142.7
–
–
–
–
–
–
–
–
127.6
–
–
–
1,124.0
1,124.0
38.7
38.7
22.2
–
–
1.5
2.1
22.2
142.7
127.6
1.5
2.1
15.3
15.3
–
–
–
73.0
–
–
–
–
–
–
–
–
121.9
–
–
–
Interest
free
£m
Total
1,021.9
23.7
1,021.9
23.7
21.4
–
–
1.4
3.6
21.4
73.0
121.9
1.4
3.6
27.3
27.3
142.7
127.6
1,203.8
1,474.1
73.0
121.9
1,099.3
1,294.2
Financial assets
Equity investments
Debt investments
Limited and limited liability
partnership interests
Deposits
Cash and cash equivalents
Trade receivables
Other receivables
Receivable on sale of debt and
equity investments
Financial liabilities
Trade payables
Other accruals and deferred
income
–
–
–
–
EIB debt facility
(51.7)
(15.6)
Carried interest plan liability
Revenue share liability
Loans from limited partners of
consolidated funds
–
–
–
–
–
–
(51.7)
(15.6)
(0.6)
(0.6)
(10.4)
–
(19.3)
(12.9)
(10.4)
(67.3)
(19.3)
(12.9)
(32.9)
(76.1)
(32.9)
(143.4)
–
–
–
–
(62.6)
(19.9)
–
–
–
–
–
–
(62.6)
(19.9)
(1.4)
(1.4)
(24.5)
–
(5.5)
(13.7)
(24.5)
(82.5)
(5.5)
(13.7)
(26.0)
(71.3)
(26.0)
(153.8)
At 31 December 2020, if interest rates had been 1% higher/lower, post-tax profit for the year, and other components
of equity, would have been £1.3m (2019: £1.6m) higher/lower as a result of higher interest received on floating rate
cash deposits.
(b) Liquidity risk
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 flow forecasts to ensure sufficient cash is available for
anticipated cash requirements.
(c) Credit risk
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.
1 5 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 5 9
Notes to the consolidated financial statements continued
2. Financial Risk Management continued
Financial assets
Equity investments
Debt investments
Limited and limited liability
partnership interests
Trade receivables
Other receivables
Receivable on sale of debt and
equity investments
Financial liabilities
Trade payables
Other accruals and deferred
income
EIB debt facility
Carried interest plan liability
Revenue share liability
Loans from limited partners of
consolidated funds
cash deposits.
(b) Liquidity risk
anticipated cash requirements.
(c) Credit risk
Deposits
142.7
Cash and cash equivalents
127.6
73.0
121.9
Fixed rate
Floating
£m
rate
Total
£m
Fixed rate
Floating
£m
rate
2020
Interest
free
£m
2019
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,124.0
1,124.0
38.7
38.7
22.2
–
–
1.5
2.1
22.2
142.7
127.6
1.5
2.1
(10.4)
–
(19.3)
(12.9)
(10.4)
(67.3)
(19.3)
(12.9)
(32.9)
(76.1)
(32.9)
(143.4)
–
–
–
–
–
–
–
–
–
–
–
–
142.7
127.6
1,203.8
1,474.1
73.0
121.9
1,099.3
1,294.2
15.3
15.3
27.3
27.3
(0.6)
(0.6)
(1.4)
(1.4)
(51.7)
(15.6)
(62.6)
(19.9)
Interest
free
£m
Total
1,021.9
23.7
1,021.9
23.7
21.4
–
–
1.4
3.6
21.4
73.0
121.9
1.4
3.6
(24.5)
–
(5.5)
(13.7)
(24.5)
(82.5)
(5.5)
(13.7)
(26.0)
(71.3)
(26.0)
(153.8)
–
–
–
–
–
–
–
–
–
–
–
–
At 31 December 2020, if interest rates had been 1% higher/lower, post-tax profit for the year, and other components
of equity, would have been £1.3m (2019: £1.6m) higher/lower as a result of higher interest received on floating rate
(51.7)
(15.6)
(62.6)
(19.9)
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 flow forecasts to ensure sufficient cash is available for
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.
2. Financial Risk Management continued
Credit rating
P1
AAAMMF1
Other2
Total deposits and cash and cash equivalents
2020
£m
221.3
43.2
5.8
270.3
2019
£m
176.1
13.2
5.6
194.9
1 The Group holds £43.2m (2019: £13.2m) with JP Morgan GBP liquidity fund, which has a AAAMMF credit rating with Fitch.
2 The Group holds £5.8m (2019 £5.6m) 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 0.2173% (2019: 0.1127%).
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 maximum single counterparty limit for fixed term deposits in excess of 3 months at 31 December 2020
was the greater of 25% of total group cash or £50m (2019: 25%, £50m). In addition, no single institution may hold more
than the higher of 50% of total cash and deposits or £50m. (2019: 50%, £50m)
The Group’s exposure to credit risk on debt investments is managed in a similar way to equity price risk, as described earlier,
through the Group’s investment appraisal processes and asset monitoring procedures which are subject to overall review by
the Board. The maximum exposure to credit risk for debt investments, receivables and other financial assets is represented
by their carrying amount.
3. Significant accounting estimates 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
The group’s accounting policy in respect of the valuation of unquoted equity investments is set out in note 1. In applying
this policy, the key areas over which judgment 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 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.
• Debt investments typically represent convertible debt, in such cases judgment is exercised in respect of the estimated
equity value received on conversion of the loan.
In all cases, 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.
1 6 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the consolidated financial statements continued
4. Revenue from services
Revenue from services is derived from the provision of advisory and venture capital fund management services or from
licensing activities, royalty revenues and patent cost recoveries.
5. Operating segments
For both the year ended 31 December 2020 and the year ended 31 December 2019, the Group’s revenue and profit/(loss)
before taxation were derived largely from its principal activities within the UK.
For management reporting purposes, the Group is currently organised into two operating segments:
i.
the commercialisation of intellectual property via the formation of long-term partner relationships with universities;
ii. the management of venture capital funds focusing on early-stage UK technology companies and the provision of
corporate finance advice;
Within the University Partnerships segment, the Life Sciences, Technology, Strategic, North American and Australia & New
Zealand business units represent discrete operating segments. In line with the quantitative thresholds and aggregation
criteria set out in IFRS 8, we have presented the activities of these busines units as a single reporting segment. The
economic indicators which have been assessed in determining that the aggregated operating segments have similar
economic characteristics include the application of a common business model across the operating segments within the
University Partnerships segment and the global nature of the commercial operations, shareholders and potential acquirers
of the Group’s portfolio companies.
These activities are described in further detail in the strategic report on pages 6 to 11.
Year ended 31 December 2020
STATEMENT OF COMPREHENSIVE INCOME
Portfolio return and revenue
Change in fair value of equity and debt investments
Gain on disposal of equity investments
Change in fair value of limited and limited liability partnership interests
Revenue from services and other income
Administrative expenses
Carried interest plan charge
Share-based payment charge
Administrative expenses
Operating profit
Finance income
Finance costs
Profit before taxation
Taxation
Profit for the year
STATEMENT OF FINANCIAL POSITION
Assets
Liabilities
Net assets
Other segment items
Capital expenditure
Depreciation
University
partnership
business
£m
Venture
capital fund
management
£m
Consolidated
£m
148.9
82.5
(3.4)
1.1
229.1
(14.3)
(2.9)
(25.1)
186.8
0.9
(2.4)
185.3
(0.4)
184.9
1,461.6
(141.8)
1,319.8
–
(1.3)
–
–
–
5.1
5.1
–
–
(4.3)
0.8
–
–
0.8
(0.3)
0.5
13.7
(1.6)
12.1
–
(0.1)
148.9
82.5
(3.4)
6.2
234.2
(14.3)
(2.9)
(29.4)
187.6
0.9
(2.4)
186.1
(0.7)
185.4
1,475.3
(143.4)
1,331.9
–
(1.4)
1 6 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 6 1
Notes to the consolidated financial statements continued
Revenue from services is derived from the provision of advisory and venture capital fund management services or from
licensing activities, royalty revenues and patent cost recoveries.
4. Revenue from services
5. Operating segments
For both the year ended 31 December 2020 and the year ended 31 December 2019, the Group’s revenue and profit/(loss)
before taxation were derived largely from its principal activities within the UK.
For management reporting purposes, the Group is currently organised into two operating segments:
i.
the commercialisation of intellectual property via the formation of long-term partner relationships with universities;
ii. the management of venture capital funds focusing on early-stage UK technology companies and the provision of
corporate finance advice;
Within the University Partnerships segment, the Life Sciences, Technology, Strategic, North American and Australia & New
Zealand business units represent discrete operating segments. In line with the quantitative thresholds and aggregation
criteria set out in IFRS 8, we have presented the activities of these busines units as a single reporting segment. The
economic indicators which have been assessed in determining that the aggregated operating segments have similar
economic characteristics include the application of a common business model across the operating segments within the
University Partnerships segment and the global nature of the commercial operations, shareholders and potential acquirers
of the Group’s portfolio companies.
These activities are described in further detail in the strategic report on pages 6 to 11.
Year ended 31 December 2020
STATEMENT OF COMPREHENSIVE INCOME
Portfolio return and revenue
Change in fair value of equity and debt investments
Gain on disposal of equity investments
Change in fair value of limited and limited liability partnership interests
Revenue from services and other income
Administrative expenses
Carried interest plan charge
Share-based payment charge
Administrative expenses
Operating profit
Finance income
Finance costs
Profit before taxation
Taxation
Profit for the year
Assets
Liabilities
Net assets
Other segment items
Capital expenditure
Depreciation
STATEMENT OF FINANCIAL POSITION
University
Venture
partnership
capital fund
business
management
Consolidated
£m
£m
£m
148.9
82.5
(3.4)
1.1
229.1
(14.3)
(2.9)
(25.1)
186.8
0.9
(2.4)
185.3
(0.4)
184.9
1,461.6
(141.8)
1,319.8
–
(1.3)
5.1
5.1
–
–
–
–
–
–
–
(4.3)
0.8
0.8
(0.3)
0.5
13.7
(1.6)
12.1
–
(0.1)
148.9
82.5
(3.4)
6.2
234.2
(14.3)
(2.9)
(29.4)
187.6
0.9
(2.4)
186.1
(0.7)
185.4
1,475.3
(143.4)
1,331.9
–
(1.4)
5. Operating segments continued
Year ended 31 December 2020
STATEMENT OF COMPREHENSIVE INCOME BY GEOGRAPHY
Portfolio return and revenue
Administrative expenses
Operating profit/ (loss)
Net interest
Profit/(loss) before taxation
Taxation
Profit/(loss) for the year
Year ended 31 December 2020
STATEMENT OF FINANCIAL POSITION BY GEOGRAPHY
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Total equity
Year ended 31 December 2019
STATEMENT OF COMPREHENSIVE INCOME
Portfolio return and revenue
Change in fair value of equity and debt investments
Gain on disposal of equity investments
Gain on deconsolidation of subsidiary
Change in fair value of limited and limited liability partnership interests
Revenue from services and other income
Administrative expenses
Carried interest plan release
Share-based payment charge
Amortisation of intangible assets
Administrative expenses
Operating (loss)/profit
Finance income
Finance costs
(Loss)/profit before taxation
Taxation
(Loss)/profit for the year
UK
£m
Non-UK
£m
Consolidated
£m
230.8
(39.1)
191.7
(1.5)
190.2
(0.7)
189.5
3.4
(7.5)
(4.1)
–
(4.1)
–
(4.1)
234.2
(46.6)
187.6
(1.5)
186.1
(0.7)
185.4
UK
£m
Non-UK
£m
Consolidated
£m
287.1
1,099.7
(26.1)
(101.7)
1,259.0
2.1
86.4
(0.3)
(15.3)
72.9
289.2
1,186.1
(26.4)
(117.0)
1,331.9
University
partnership
business
£m
Venture
capital fund
management
£m
Consolidated
£m
(70.6)
16.1
10.6
(0.7)
3.1
(41.5)
1.3
(2.3)
(0.3)
(35.0)
(77.8)
1.1
(3.6)
(80.3)
(0.1)
(80.4)
–
–
–
–
5.5
5.5
–
–
–
(4.1)
1.4
0.1
–
1.5
–
1.5
(70.6)
16.1
10.6
(0.7)
8.6
(36.0)
1.3
(2.3)
(0.3)
(39.1)
(76.4)
1.2
(3.6)
(78.8)
(0.1)
(78.9)
1 6 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the consolidated financial statements continued
5. Operating segments continued
Year ended 31 December 2019
STATEMENT OF FINANCIAL POSITION
Assets
Liabilities
Net assets
Other segment items
Capital expenditure
Depreciation
Year ended 31 December 2019
STATEMENT OF COMPREHENSIVE INCOME BY GEOGRAPHY
Portfolio return and revenue
Administrative expenses
Operating (loss)/profit
Net interest
(Loss)/profit before taxation
Taxation
(Loss)/profit for the year
Year ended 31 December 2019
STATEMENT OF FINANCIAL POSITION BY GEOGRAPHY
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Total equity
6. Auditor’s remuneration
Details of the auditor’s remuneration are set out below:
University
partnership
business
£m
Venture
capital fund
management
£m
Consolidated
£m
1,276.0
(146.2)
1,129.8
0.5
(1.1)
UK
£m
(47.2)
(29.4)
(76.6)
(2.4)
(79.0)
–
(79.0)
19.7
(7.6)
12.1
0.2
(0.1)
1,295.7
(153.8)
1,141.9
0.7
(1.2)
Non-UK
£m
Consolidated
£m
11.2
(11.0)
0.2
–
0.2
(0.1)
0.1
(36.0)
(40.4)
(76.4)
(2.4)
(78.8)
(0.1)
(78.9)
UK
£m
Non-UK
£m
Consolidated
£m
220.2
1,001.3
(40.0)
(103.0)
1,078.5
7.0
67.2
(1.4)
(9.4)
63.4
227.2
1,068.5
(41.4)
(112.4)
1,141.9
Audit fees in respect of Group and subsidiaries, audited by KPMG LLP
Interim review fee, for review performed by Group auditor KPMG LLP
Audit fees in respect of Funds, audited by KPMG LLP
Audit fees in respect of subsidiary companies, audited by Moore Northern Home Counties Limited
Total assurance services
All other services performed by Group auditor KPMG LLP
Total non-assurance services performed by Group auditor KPMG LLP
2020
£'000s
2019
£'000s
396
53
14
58
521
9
9
323
40
10
–
373
9
9
1 6 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 6 3
Notes to the consolidated financial statements continued
5. Operating segments continued
Year ended 31 December 2019
STATEMENT OF FINANCIAL POSITION
University
Venture
partnership
capital fund
business
management
Consolidated
£m
£m
£m
STATEMENT OF COMPREHENSIVE INCOME BY GEOGRAPHY
Non-UK
Consolidated
£m
£m
Assets
Liabilities
Net assets
Other segment items
Capital expenditure
Depreciation
Year ended 31 December 2019
Portfolio return and revenue
Administrative expenses
Operating (loss)/profit
Net interest
(Loss)/profit before taxation
Taxation
(Loss)/profit for the year
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Total equity
1,276.0
(146.2)
1,129.8
0.5
(1.1)
UK
£m
(47.2)
(29.4)
(76.6)
(2.4)
(79.0)
–
(79.0)
220.2
1,001.3
(40.0)
(103.0)
1,078.5
19.7
(7.6)
12.1
0.2
(0.1)
11.2
(11.0)
0.2
–
0.2
(0.1)
0.1
7.0
67.2
(1.4)
(9.4)
63.4
396
53
14
58
521
9
9
1,295.7
(153.8)
1,141.9
0.7
(1.2)
(36.0)
(40.4)
(76.4)
(2.4)
(78.8)
(0.1)
(78.9)
227.2
1,068.5
(41.4)
(112.4)
1,141.9
323
40
10
373
–
9
9
6. Auditor’s remuneration
Details of the auditor’s remuneration are set out below:
Audit fees in respect of Group and subsidiaries, audited by KPMG LLP
Interim review fee, for review performed by Group auditor KPMG LLP
Audit fees in respect of Funds, audited by KPMG LLP
Total assurance services
All other services performed by Group auditor KPMG LLP
Total non-assurance services performed by Group auditor KPMG LLP
Audit fees in respect of subsidiary companies, audited by Moore Northern Home Counties Limited
7. Operating profit/(loss)
Operating profit/(loss) has been arrived at after (charging) or crediting:
Amortisation of intangible assets
Depreciation of tangible assets
Employee costs (see note 9)
Gain on deconsolidation of subsidiary (see note 15)
8. Other administrative expenses
Other administrative expenses comprise:
Employee costs (see note 9)
IFRS3 charge in respect of acquisition of subsidiary1
Professional Services
Consolidated portfolio company costs
Depreciation of tangible assets
Other expenses
2020
£m
–
(1.4)
(20.6)
–
2020
£m
20.6
1.2
5.4
0.4
1.4
0.4
29.4
2019
£m
(0.3)
(1.2)
(19.6)
10.6
2019
£m
19.6
2.5
5.0
5.4
1.2
5.4
39.1
Year ended 31 December 2019
STATEMENT OF FINANCIAL POSITION BY GEOGRAPHY
UK
£m
Non-UK
Consolidated
£m
£m
9. Employee Costs
Employee costs (including executive directors) comprise:
1 Costs of £1.2m (2019: £2.5m) were recognised in relation to contingent consideration payable to the sellers of Parkwalk Advisors Limited
deemed under IFRS 3 to be a payment for post-acquisition services.
Salaries
Defined contribution pension cost
Share-based payment charge (see note 22)
Other bonuses accrued in the year
Social security
2020
£m
12.0
1.0
2.9
3.4
1.3
20.6
2019
£m
13.0
1.1
2.3
2.0
1.2
19.6
2020
£'000s
2019
£'000s
The average monthly number of persons (including executive directors) employed by the Group during the year was 103, all
of whom were involved in management and administration activities (2019: 130). Details of the Directors’ remuneration can
be found in the Directors’ Remuneration Report on pages 113 to 114.
10. Taxation
Current tax
UK corporation tax on profits for the year
Foreign tax
Deferred tax
Total tax
2020
£m
–
0.1
0.1
0.6
0.7
2019
£m
–
0.1
0.1
–
0.1
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. The directors continue to believe that the Group qualifies
for the Substantial Shareholdings Exemption (“SSE”).
1 6 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the consolidated financial statements continued
10. Taxation continued
The amount for the year can be reconciled to the profit/(loss) per the statement of comprehensive income as follows:
Profit/(loss) before tax
Tax at the UK corporation tax rate of 19% (2019: 19%)
Expenses not deductible for tax purposes
Income not taxable
Amortisation on goodwill arising on consolidation
Non-taxable income on deconsolidation of Mobilion
Fair value movement on investments qualifying for SSE
Movement on share-based payments
Movement in tax losses arising not recognised
Rate change on foreign tax
Total tax charge
2020
£m
186.1
35.4
2.8
(15.7)
–
–
(27.4)
0.5
5.1
–
0.7
2019
£m
(78.8)
(15.0)
4.0
(3.3)
0.1
(2.0)
9.5
0.4
6.3
0.1
0.1
At 31 December 2020, deductible temporary differences and unused tax losses, for which no deferred tax asset has been
recognised, totalled £267.1m (2019: £285.4m). An analysis is shown below:
Accelerated capital allowances
Share-based payment costs and other temporary differences
Unused tax losses
2020
2019
Amount
£m
(0.3)
(8.7)
(258.1)
(267.1)
Deferred
tax
£m
(0.1)
(1.6)
(49.0)
(50.7)
Amount
£m
(0.7)
(13.8)
(270.9)
(285.4)
Deferred
tax
£m
(0.1)
(2.3)
(46.1)
(48.5)
At 31 December 2020, deductible temporary differences and unused tax losses, for which a deferred tax asset/(liability) has
been recognised, totalled £4.0m (2019: £nil). An analysis is shown below:
Temporary timing differences
Unused tax losses
11. Earnings/(loss) per share
2020
2019
Amount
£m
39.5
(35.5)
4.0
Deferred
tax
£m
7.5
(6.8)
0.7
Amount
£m
6.1
(6.1)
–
Deferred
tax
£m
1.0
(1.0)
–
Earnings/(loss)
Earnings/(loss) for the purposes of basic and dilutive earnings per share
Number of shares
2020
£m
185.4
2019
£m
(75.4)
2020
Number of
shares
2019
Number of
shares
Weighted average number of ordinary shares for the purposes of basic earnings per share
1,061,538,297
1,059,144,595
Effect of dilutive potential ordinary shares:
Options or contingently issuable shares
6,664,196
–
Weighted average number of ordinary shares for the purposes of diluted earnings per share
1,068,202,493
1,059,144,595
1 6 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 6 5
10. Taxation continued
11. Earnings/(loss) per Share continued
The amount for the year can be reconciled to the profit/(loss) per the statement of comprehensive income as follows:
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 Annual Incentive Scheme).
Basic
Diluted
12. Categorisation of financial instruments
Financial assets
At 31 December 2020
Equity investments
Debt investments
Limited and limited liability partnership interests
Trade and other receivables
Deferred
Deferred
Receivable on sale of debt and equity investments
Deposits
Cash and cash equivalents
Total
At 31 December 2019
Equity investments
Debt investments
Limited and limited liability partnership interests
Trade and other receivables
Receivable on sale of debt and equity investments
Deposits
Cash and cash equivalents
Total
2020
pence
17.47
17.36
2019
pence
(7.12)
(7.12)
At fair value
through profit
or loss
£m
Amortised
cost
£m
1,124.0
38.7
22.2
–
–
–
–
1,184.9
1,021.9
23.7
21.4
–
–
–
–
1,067.0
–
–
–
3.6
15.3
142.7
127.6
289.2
–
–
–
5.0
27.3
73.0
121.9
227.2
Total
£m
1,124.0
38.7
22.2
3.6
15.3
142.7
127.6
1,474.1
1,021.9
23.7
21.4
5.0
27.3
73.0
121.9
1,294.2
Temporary timing differences
Unused tax losses
11. Earnings/(loss) per share
Earnings/(loss)
Earnings/(loss) for the purposes of basic and dilutive earnings per share
All financial liabilities are categorised as other financial liabilities and recognised at amortised cost.
In light of the credit ratings applicable to the Group’s cash and cash equivalent and deposits, (see note 2 for further details),
we estimate expected credit losses on the Group’s receivables to be under £0.1m and therefore not disclosed further (2019:
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 (2019: all net fair value gains in the year are attributable to financial assets designated at fair value through
profit or loss on initial recognition).
Number of
Number of
All interest income is attributable to financial assets not classified as fair value through profit and loss.
Number of shares
Effect of dilutive potential ordinary shares:
Options or contingently issuable shares
Weighted average number of ordinary shares for the purposes of basic earnings per share
1,061,538,297
1,059,144,595
Weighted average number of ordinary shares for the purposes of diluted earnings per share
1,068,202,493
1,059,144,595
6,664,196
–
Notes to the consolidated financial statements continued
Profit/(loss) before tax
Tax at the UK corporation tax rate of 19% (2019: 19%)
Expenses not deductible for tax purposes
Income not taxable
Amortisation on goodwill arising on consolidation
Non-taxable income on deconsolidation of Mobilion
Fair value movement on investments qualifying for SSE
Movement on share-based payments
Movement in tax losses arising not recognised
Rate change on foreign tax
Total tax charge
At 31 December 2020, deductible temporary differences and unused tax losses, for which no deferred tax asset has been
recognised, totalled £267.1m (2019: £285.4m). An analysis is shown below:
Accelerated capital allowances
Share-based payment costs and other temporary differences
Unused tax losses
At 31 December 2020, deductible temporary differences and unused tax losses, for which a deferred tax asset/(liability) has
been recognised, totalled £4.0m (2019: £nil). An analysis is shown below:
2020
£m
186.1
35.4
2.8
(15.7)
(27.4)
–
–
0.5
5.1
–
0.7
2019
£m
(78.8)
(15.0)
4.0
(3.3)
0.1
(2.0)
9.5
0.4
6.3
0.1
0.1
tax
£m
(0.1)
(2.3)
(46.1)
(48.5)
tax
£m
1.0
(1.0)
–
2019
£m
(75.4)
2019
shares
2020
2019
tax
£m
(0.1)
(1.6)
(49.0)
(50.7)
Amount
£m
(0.7)
(13.8)
(270.9)
(285.4)
2020
2019
Deferred
Deferred
Amount
£m
(0.3)
(8.7)
(258.1)
(267.1)
Amount
£m
39.5
(35.5)
4.0
tax
£m
7.5
(6.8)
0.7
Amount
£m
6.1
(6.1)
–
2020
£m
185.4
2020
shares
1 6 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the consolidated financial statements continued
13. Net investment portfolio
Note 1 includes a description of the fair value hierarchy used.
At 1 January 2020
Investments during the year
Transaction-based reclassifications during the year
Other transfers between hierarchy levels during the year
Disposals
Fees settled via equity
Change in revenue share(i)
Change in fair value in the year(ii)
At 31 December 2020
At 1 January 2019
Investments during the year
Transaction-based reclassifications during the year
Disposals
Other transfers between hierarchy levels during the year
Fair value of investment in Mobilion recognised on
deconsolidation
Fees settled via equity
Change in revenue share(i)
Change in fair value in the year(ii)
At 31 December 2019
(i) For description of revenue share arrangement see description below.
Level 1
Equity
investments
in quoted
spin-out
companies
£m
Level 3
Total £m
Unquoted
debt
investments
in spin-out
companies
£m
Equity
investments
in unquoted
spin-out
companies
£m
117.5
6.0
–
0.4
(80.7)
–
–
40.2
83.4
133.2
6.3
–
(9.0)
–
–
–
(0.6)
(12.4)
117.5
23.7
22.6
(4.9)
(3.6)
(0.9)
–
–
1.8
38.7
33.1
22.2
(10.3)
(0.1)
(1.0)
–
–
–
904.4
38.9
4.9
3.2
(17.0)
0.2
(0.9)
106.9
1,040.6
961.9
36.2
10.3
(81.6)
1.0
11.2
–
3.4
1,045.6
67.5
–
–
(98.6)
0.2
(0.9)
148.9
1,162.7
1,128.2
64.7
–
(90.7)
–
11.2
–
2.8
(20.2)
23.7
(38.0)
904.4
(70.6)
1,045.6
(ii) The change in fair value in the year includes a loss of £4.6m (2019: loss of £1.4m) in exchange differences on translating foreign currency
investments. The total unrealised change in fair value in respect of Level 3 investments was a gain of £108.7m (2019: loss of £58.2m).
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. In addition to recent financing transactions, significant
unobservable inputs used in the fair value measurement include (inter alia) portfolio-company specific milestone analysis,
estimated clinical trial success rates, exit ranges, scenario probabilities and discount factors. Where relevant, multiple
valuation approaches are used in arriving at an estimate of fair value for an individual asset. Unobservable inputs are
typically portfolio-company specific, and therefore cannot be aggregated for the purposes of portfolio-level sensitivity
analysis.
In terms of the valuation techniques used in arriving at our fair value estimate, the following table provides an analysis of the
portfolio by primary valuation basis, with an associated sensitivity analysis by valuation category. Note that in light of the
onset of the COVID-19 pandemic in early 2020, we have amended our analysis of recent financing transactions (formerly 12
months) to reflect the additional judgment required in assessing the continued relevance of financing transactions where
more than 9 months has elapsed.
Quoted
Recent financing (<9 months)
Recent financing (>9 months)
Other valuation methods
Debt
Total portfolio
2020
£m
83.4
286.9
118.1
635.6
38.7
2019
£m
117.7
426.7
279.7
197.8
23.7
1,162.7
1,045.6
1 6 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 6 7
13. Net investment portfolio
Note 1 includes a description of the fair value hierarchy used.
13. Net investment portfolio continued
The table below summarises the impact of a 1% increase/decrease in the price of unquoted investments by primary
valuation basis on the Group’s post-tax profit for the year and on equity.
Recent financing (<9 months)
Recent financing (>9 months)
Other valuation methods
Debt
Total unquoted portfolio
2020
£m
2.9
1.2
6.4
0.4
10.9
2019
£m
4.3
2.8
2.0
0.2
9.3
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
£0.4m (2019: £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 have been no such instances in the current period (2019: no such instances).
Transfers between level 3 debt and level 3 equity occur upon conversion of convertible debt into equity.
Change in fair value in the year
Fair value gains
Fair value losses
2020
£m
224.8
(75.9)
148.9
2019
£m
86.3
(156.9)
(70.6)
The Company’s interests in subsidiary undertakings are listed in note 2 to the Company’s financial statements.
Revenue share arrangement and corresponding liability
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 2020, equity investments
which were subject to revenue sharing obligations totalled £12.9m (2019: £13.8m). A corresponding non-current liability is
recognised in respect of these revenue sharing obligations.
14. Gain on disposal of equity investments
Disposal proceeds
Movement in amounts receivable on sale of debt and equity investments
Carrying value of investments
Profit on disposal
2020
£m
191.0
(9.9)
(98.6)
82.5
2019
£m
79.5
27.3
(90.7)
16.1
Notes to the consolidated financial statements continued
At 1 January 2020
Investments during the year
Transaction-based reclassifications during the year
Other transfers between hierarchy levels during the year
Disposals
Fees settled via equity
Change in revenue share(i)
Change in fair value in the year(ii)
At 31 December 2020
At 1 January 2019
Investments during the year
Transaction-based reclassifications during the year
Disposals
Other transfers between hierarchy levels during the year
Fair value of investment in Mobilion recognised on
deconsolidation
Fees settled via equity
Change in revenue share(i)
Change in fair value in the year(ii)
At 31 December 2019
Level 1
Level 3
Total £m
Equity
Unquoted
Equity
investments
debt
investments
in quoted
investments
in unquoted
spin-out
companies
in spin-out
companies
spin-out
companies
£m
117.5
6.0
0.4
(80.7)
40.2
83.4
133.2
6.3
(9.0)
–
–
–
–
–
–
–
(0.6)
(12.4)
117.5
£m
23.7
22.6
(4.9)
(3.6)
(0.9)
–
–
1.8
38.7
33.1
22.2
(10.3)
(0.1)
(1.0)
–
–
–
£m
904.4
38.9
4.9
3.2
(17.0)
0.2
(0.9)
106.9
1,040.6
961.9
36.2
10.3
(81.6)
1.0
11.2
–
3.4
1,045.6
67.5
–
–
–
–
(98.6)
0.2
(0.9)
148.9
1,162.7
1,128.2
64.7
(90.7)
11.2
–
2.8
(20.2)
23.7
(38.0)
904.4
(70.6)
1,045.6
(i) For description of revenue share arrangement see description below.
(ii) The change in fair value in the year includes a loss of £4.6m (2019: loss of £1.4m) in exchange differences on translating foreign currency
investments. The total unrealised change in fair value in respect of Level 3 investments was a gain of £108.7m (2019: loss of £58.2m).
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. In addition to recent financing transactions, significant
unobservable inputs used in the fair value measurement include (inter alia) portfolio-company specific milestone analysis,
estimated clinical trial success rates, exit ranges, scenario probabilities and discount factors. Where relevant, multiple
valuation approaches are used in arriving at an estimate of fair value for an individual asset. Unobservable inputs are
typically portfolio-company specific, and therefore cannot be aggregated for the purposes of portfolio-level sensitivity
analysis.
In terms of the valuation techniques used in arriving at our fair value estimate, the following table provides an analysis of the
portfolio by primary valuation basis, with an associated sensitivity analysis by valuation category. Note that in light of the
onset of the COVID-19 pandemic in early 2020, we have amended our analysis of recent financing transactions (formerly 12
months) to reflect the additional judgment required in assessing the continued relevance of financing transactions where
more than 9 months has elapsed.
Quoted
Recent financing (<9 months)
Recent financing (>9 months)
Other valuation methods
Debt
Total portfolio
2020
£m
83.4
286.9
118.1
635.6
38.7
2019
£m
117.7
426.7
279.7
197.8
23.7
1,162.7
1,045.6
1 6 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the consolidated financial statements continued
15. Gain on deconsolidation of subsidiary
During the first half of 2019, MOBILion completed a first close of its Series A investment of £2.9m which did not result in a
loss of control by IP Group, and accordingly the proceeds of this issue of equity are disclosed within financing activities in
the Group consolidated cash flows
Following a second close of the Series A fundraise, IP Group lost control of the board of MOBILion, resulting in its
deconsolidation as a subsidiary and recognition as a portfolio company.
As part of this transaction, net assets including £2.5m of cash were deconsolidated from the Group consolidated statement
of financial position, this movement is disclosed within investing activities in the Group consolidated statement of cash
flows. The transaction resulted in a gain on deconsolidation of £10.6m, calculated as follows:
Fair value of equity investment recognised
Fair value of subsidiary net assets disposed:
Cash
Other net liabilities
16. Trade and Other Receivables
Current assets
Trade debtors
Prepayments
Right of use asset
Other receivables
2020
£’000s
–
–
–
–
2020
£m
1.5
0.6
0.8
0.7
3.6
2019
£’000s
11.2
2.5
(3.1)
10.6
2019
£m
1.4
0.6
2.1
0.9
5.0
The directors consider the carrying amount of trade and other receivables to approximate their fair value. All receivables are
interest free, repayable on demand and unsecured.
17. Receivable on sale of debt and equity investments
Deferred consideration
Short-term receivables
2020
£m
15.0
0.3
15.3
2019
£m
5.3
22.0
27.3
Deferred & contingent consideration relates to amounts receivable respect of the sale of Enterprise Therapeutics Limited
(£13.0m) and Dukosi Limited (£2.0m) (2019: Dukosi Limited (£5.0m), Process Systems Enterprise Limited (£0.3m).
The 2019 short-term receivables relates to £22.0m receivable in respect of shares in Oxford Nanopore Technologies Limited
sold on 31 December 2019 and for which payment was received in February 2020.
18. Trade and other payables
Current liabilites
Trade payables
Social security expenses
Bonus accrual
Lease liability
Payable to Imperial College and other third parties under revenue share obligations (short term)
Current tax payable
Other accruals and deferred income
2020
£m
0.6
0.8
2.8
0.9
2.1
–
3.8
11.0
2019
£m
1.4
0.5
2.1
2.1
11.2
0.1
8.6
26.0
The 2019 amounts payable to Imperial College and other third parties to settle revenue share obligations include £9.7m
payable in respect of the disposal proceeds of Process Systems Enterprise Limited, which were settled in January 2020.
1 6 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 6 9
Notes to the consolidated financial statements continued
15. Gain on deconsolidation of subsidiary
19. Borrowings
During the first half of 2019, MOBILion completed a first close of its Series A investment of £2.9m which did not result in a
loss of control by IP Group, and accordingly the proceeds of this issue of equity are disclosed within financing activities in
the Group consolidated cash flows
Following a second close of the Series A fundraise, IP Group lost control of the board of MOBILion, resulting in its
deconsolidation as a subsidiary and recognition as a portfolio company.
As part of this transaction, net assets including £2.5m of cash were deconsolidated from the Group consolidated statement
of financial position, this movement is disclosed within investing activities in the Group consolidated statement of cash
flows. The transaction resulted in a gain on deconsolidation of £10.6m, calculated as follows:
Non-current liabilities
Loans drawn down from the Limited Partners of consolidated funds
EIB debt facility
Current liabilities
EIB debt facility
2020
£m
32.9
51.9
84.8
2020
£m
15.4
15.4
2019
£m
26.0
67.1
93.1
2019
£m
15.4
15.4
Loans drawn down from the Limited Partners of consolidated funds
The loans from Limited Partners of consolidated funds are interest free and repayable only upon the applicable funds
generating sufficient returns to repay the Limited Partners. Management anticipates that the funds will generate the
required returns and consequently recognises the full associated liabilities. 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.
EIB debt facility
The Group has a number of debt facilities with the European Investment Bank which it has used to fund UK university spin-
out companies as they develop and mature. The terms of the facilities are summarised below:
Description
IP Group Facility,
tranche 1
IP Group Facility,
tranche 2
Touchstone Facility A,
tranche 1
Touchstone Facility A,
tranche 2
Touchstone Facility B
Total
Initial
amount
Outstanding
amount Date drawn
Interest rate
Repayment
terms
Repayment
commencement
date
£15.0m
£9.0m
Dec 2015
Floating, linked to LIBOR
5 years
Jan 2019
£15.0m
£9.0m
Dec 2017
Fixed 3.016%
5 years
Jan 2019
£15.0m
£6.6m
Jul 2013
Floating, linked to LIBOR
12 years
Jan 2015
£15.0m
£50.0m
£110.0m
£8.3m
Jul 2015
£34.4m
Feb 2017
£67.3m
Fixed 4.235%
10 years
Fixed 3.026%
9 years
Jan 2017
Jul 2018
Loans totalling £51.7m (2019: £62.6m) are subject to fixed interest rates and are recognised at amortised cost. The fair value
of these loans as at 31 December 2020 is £53.9m (2019 £64.5m).
The IP Group loans contain covenants requiring that the ratio between the value of the portfolio along with the value of
the Group’s cash net of any outstanding liabilities, and the outstanding debt facility does not fall below 6:1. The Group
must maintain that the amount of unencumbered funds freely available to the Group is not less than £15.0m. The Group is
also required to maintain a separate bank account which must at any date maintain a minimum balance equal to that of all
payments due to the EIB in the forthcoming six months.
The Touchstone loans contain a debt covenant requiring that the ratio of the total fair value of investments plus cash and
qualifying liquidity to debt should at no time fall below 4:1. 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.
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.
Fair value of equity investment recognised
Fair value of subsidiary net assets disposed:
Cash
Other net liabilities
16. Trade and Other Receivables
Current assets
Trade debtors
Prepayments
Right of use asset
Other receivables
Deferred consideration
Short-term receivables
The directors consider the carrying amount of trade and other receivables to approximate their fair value. All receivables are
interest free, repayable on demand and unsecured.
17. Receivable on sale of debt and equity investments
Deferred & contingent consideration relates to amounts receivable respect of the sale of Enterprise Therapeutics Limited
(£13.0m) and Dukosi Limited (£2.0m) (2019: Dukosi Limited (£5.0m), Process Systems Enterprise Limited (£0.3m).
The 2019 short-term receivables relates to £22.0m receivable in respect of shares in Oxford Nanopore Technologies Limited
sold on 31 December 2019 and for which payment was received in February 2020.
18. Trade and other payables
Social security expenses
Current liabilites
Trade payables
Bonus accrual
Lease liability
Current tax payable
Other accruals and deferred income
Payable to Imperial College and other third parties under revenue share obligations (short term)
The 2019 amounts payable to Imperial College and other third parties to settle revenue share obligations include £9.7m
payable in respect of the disposal proceeds of Process Systems Enterprise Limited, which were settled in January 2020.
2020
£’000s
–
–
–
–
2020
£m
1.5
0.6
0.8
0.7
3.6
2020
£m
15.0
0.3
15.3
£m
0.6
0.8
2.8
0.9
2.1
–
3.8
11.0
2019
£’000s
11.2
2.5
(3.1)
10.6
2019
£m
1.4
0.6
2.1
0.9
5.0
2019
£m
5.3
22.0
27.3
£m
1.4
0.5
2.1
2.1
11.2
0.1
8.6
26.0
2020
2019
1 7 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the consolidated financial statements continued
19. Borrowings continued
The maturity profile of the borrowings was as follows:
Due within 6 months
Due 6 to 12 months
Due 1 to 5 years
Due after 5 years
Total (i)
A reconciliation in the movement in debt is as follows:
At 1 January
Repayment of debt
At 31 December(i)
2020
£m
7.7
7.7
48.8
3.1
67.3
2020
£m
82.7
(15.4)
67.3
2019
£m
7.7
7.7
64.2
3.1
82.7
2019
£m
98.1
(15.4)
82.7
(i) These are gross amounts repayable and exclude costs of £nil (2019: £0.2m) incurred on obtaining the loans and amortised over the life of
the loans.
There were no non-cash movements in debt.
20. Share capital
Issued and fully paid:
Ordinary shares of 2p each
At 1 January
Issued in respect of post-acquisition services
Issued under employee share plans
2020
2019
Number
£m
Number
1,059,144,595
3,209,139
–
21.2
1,059,144,595
0.1
–
–
–
At 31 December
1,062,353,734
21.3
1,059,144,595
£m
21.2
–
–
21.2
During the year the Company issued 3,209,139 new ordinary shares to satisfy the final proportion of the consideration
which has become due in respect of the acquisition of Parkwalk Advisors Limited. The increase in share capital is based
on the par value of 2p per ordinary share, while the increase in share premium is equal to 60.79p per ordinary share issued.
This issue of shares relates to costs recognised in relation to contingent consideration payable to the sellers of Parkwalk
Advisors Limited deemed under IFRS 3 to be a payment for post-acquisition services.
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.
21. Operating lease arrangements
The Group leases office premises. Information about leases for which the Group is a lessee is presented below.
Right of use asset
At 1 January
Additions
Depreciation charge for right of use asset
At 31 December
2020
£m
2.1
–
(1.2)
0.9
2019
£m
2.7
0.5
(1.1)
2.1
At the reporting date, the Group had outstanding commitments for future minimum lease payments under non-cancellable
operating leases, which fall due as follows:
1 7 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 7 1
Notes to the consolidated financial statements continued
19. Borrowings continued
The maturity profile of the borrowings was as follows:
Due within 6 months
Due 6 to 12 months
Due 1 to 5 years
Due after 5 years
Total (i)
At 1 January
Repayment of debt
At 31 December(i)
the loans.
A reconciliation in the movement in debt is as follows:
There were no non-cash movements in debt.
20. Share capital
Issued and fully paid:
Ordinary shares of 2p each
At 1 January
Issued in respect of post-acquisition services
Issued under employee share plans
(i) These are gross amounts repayable and exclude costs of £nil (2019: £0.2m) incurred on obtaining the loans and amortised over the life of
2020
2019
Number
£m
Number
1,059,144,595
3,209,139
–
21.2
1,059,144,595
0.1
–
–
–
At 31 December
1,062,353,734
21.3
1,059,144,595
During the year the Company issued 3,209,139 new ordinary shares to satisfy the final proportion of the consideration
which has become due in respect of the acquisition of Parkwalk Advisors Limited. The increase in share capital is based
on the par value of 2p per ordinary share, while the increase in share premium is equal to 60.79p per ordinary share issued.
This issue of shares relates to costs recognised in relation to contingent consideration payable to the sellers of Parkwalk
Advisors Limited deemed under IFRS 3 to be a payment for post-acquisition services.
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.
21. Operating lease arrangements
The Group leases office premises. Information about leases for which the Group is a lessee is presented below.
Right of use asset
At 1 January
Additions
At 31 December
Depreciation charge for right of use asset
At the reporting date, the Group had outstanding commitments for future minimum lease payments under non-cancellable
operating leases, which fall due as follows:
2020
£m
7.7
7.7
48.8
3.1
67.3
2020
£m
82.7
(15.4)
67.3
2019
£m
7.7
7.7
64.2
3.1
82.7
2019
£m
98.1
(15.4)
82.7
£m
21.2
–
–
21.2
2020
£m
2.1
–
(1.2)
0.9
2019
£m
2.7
0.5
(1.1)
2.1
21. Operating lease arrangements continued
Lease liabilities
Maturity analysis – contractual undiscounted cash flows
Within one year
In the second to fifth years inclusive
More than five years
Total undiscounted lease liabilities at 31 December
Statement of financial position
Current
Non-current
At 31 December 2020
Statement of comprehensive income
Interest on lease liabilities
Amounts recognised in the statement of cash flows
Total cash outflow for leases
22. Share-based payments
2020
£m
0.8
0.1
–
0.9
2020
£m
0.8
0.1
0.9
2020
£m
0.1
2020
£m
1.1
2019
£m
1.3
0.9
–
2.2
2019
£m
1.2
0.9
2.1
2019
£m
0.1
2019
£m
1.2
In 2020, the Group continued to incentivise employees through its LTIP and AIS. Both are described in more detail in the
Directors’ Remuneration Report on pages 107 to 121.
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:
At 1 January
AIS deferral shares award during the year
Exercised during the year
Lapsed during the year
At 31 December
Exercisable at 31 December
Number of
options
2020
462,440
651,324
(370,275)
–
734,489
8,938
Weighted-
average
exercise price
2020
–
–
–
–
–
–
Number of
options
2019
605,641
192,106
(63,370)
(271,937)
462,440
114,028
Weighted-
average
exercise price
2019
–
–
–
–
–
–
The options outstanding at 31 December 2020 had an exercise price of £nil (2019: £nil) and a weighted-average remaining
contractual life of 0.7 years (2019: 0.5 years).
The weighted average share price at the date of exercise for share options exercised in 2020 was 63.0p (2019: 98.6p).
As the 2020 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 2020.
1 7 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the consolidated financial statements continued
22. Share-based payments continued
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. Further information on the Group’s LTIP is set out in the Directors’ Remuneration
Report on pages 116 to 117.
The 2020 LTIP awards were made on 19 June 2020. The awards will ordinarily vest on 31 March 2023, to the extent that
the performance conditions have been met. The awards are based on the performance of the Group’s Hard 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 2020 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%. The 2020 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 Hard NAV increasing
by 15% per year on a cumulative basis, from 1 January 2020 to 31 December 2022, and TSR increasing by 15% per year
on a cumulative basis from the date of award to 31 March 2023, 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 2019 LTIP awards were made on 26 April 2019. The awards will ordinarily vest on 31 March 2022, to the extent that
the performance conditions have been met. The awards are based on the performance of the Group’s Hard 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 2019
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%. The 2019 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 Hard NAV increasing
by 15% per year on a cumulative basis, from 1 January 2019 to 31 December 2021, and TSR increasing by 15% per year
on a cumulative basis from the date of award to 31 March 2022, 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 2018 LTIP awards were made on 10 May 2018. The awards will ordinarily vest on 31 March 2021, to the extent that the
performance conditions have been met. The awards are based on the performance of the Group’s Hard NAV and TSR
(“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 2018 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%. The 2018 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 Hard NAV increasing by 15% per year
on a cumulative basis, from 1 January 2018 to 31 December 2020, and TSR increasing by 15% per year on a cumulative basis
from the date of award to 31 March 2021, 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 2017 LTIP awards did not meet the threshold performance target and lapsed on 31 March 2020.
1 7 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 7 3
Notes to the consolidated financial statements continued
22. Share-based payments continued
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. Further information on the Group’s LTIP is set out in the Directors’ Remuneration
Report on pages 116 to 117.
The 2020 LTIP awards were made on 19 June 2020. The awards will ordinarily vest on 31 March 2023, to the extent that
the performance conditions have been met. The awards are based on the performance of the Group’s Hard 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 2020 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%. The 2020 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 Hard NAV increasing
by 15% per year on a cumulative basis, from 1 January 2020 to 31 December 2022, and TSR increasing by 15% per year
on a cumulative basis from the date of award to 31 March 2023, 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 2019 LTIP awards were made on 26 April 2019. The awards will ordinarily vest on 31 March 2022, to the extent that
the performance conditions have been met. The awards are based on the performance of the Group’s Hard 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 2019
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%. The 2019 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 Hard NAV increasing
by 15% per year on a cumulative basis, from 1 January 2019 to 31 December 2021, and TSR increasing by 15% per year
on a cumulative basis from the date of award to 31 March 2022, 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 2018 LTIP awards were made on 10 May 2018. The awards will ordinarily vest on 31 March 2021, to the extent that the
performance conditions have been met. The awards are based on the performance of the Group’s Hard NAV and TSR
(“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 2018 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%. The 2018 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 Hard NAV increasing by 15% per year
on a cumulative basis, from 1 January 2018 to 31 December 2020, and TSR increasing by 15% per year on a cumulative basis
from the date of award to 31 March 2021, 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 2017 LTIP awards did not meet the threshold performance target and lapsed on 31 March 2020.
22. Share-based payments continued
The movement in the number of shares conditionally awarded under the LTIP is set out below:
At 1 January
Lapsed during the year
Forfeited during the year
Vested during the year
Notionally awarded during the year
At 31 December
Exercisable at 31 December
Number of
options
2020
15,659,755
(4,372,492)
(357,136)
–
7,923,182
18,853,309
–
Weighted-
average
exercise price
2020
–
–
–
–
–
–
–
Number of
options
2019
12,376,238
(2,971,286)
(764,103)
–
7,018,906
15,659,755
–
Weighted-
average
exercise price
2019
–
–
–
–
–
–
–
The options outstanding at 31 December 2020 had an exercise price in the range of £nil (2019: £nil) and a weighted-average
remaining contractual life of 1.4 years (2019: 1.4 years).
The fair value of LTIP shares notionally awarded during the year was calculated using Monte Carlo pricing models with the
following key assumptions:
Share price at date of award
Exercise price
Fair value at grant date
Expected volatility (median of historical 50-day moving average)
Expected life (years)
Expected dividend yield
Risk-free interest rate
2020
£0.614
£nil
£0.20
38%
3.0
0%
(0.1%)
2019
£0.991
£nil
£0.34
37%
3.0
0%
1.0%
Former Touchstone LTIP
In 2017, as a result of the combination with Touchstone, award holders under existing Touchstone long term incentive share
schemes were entitled to receive 2.2178 new IP Group shares in exchange for each Touchstone share, an exchange ratio set
out in the offer document for the acquisition (the “exchange ratio”).
2016 schemes:
It was proposed that, given the short period of time since grant, awards would not become exercisable in connection with
the Offer and therefore that no progress towards meeting performance targets had been made. Instead award holders were
offered the opportunity to release their awards in exchange for the grant of a replacement award of equivalent value over
shares in IP Group and the exercise price was set at 3.33 pence divided by the exchange ratio. The vesting dates on the
replacement awards remained the same as the original award, being 1 December 2020, 1 December 2021 and 1 December
2022. The replacement awards are subject to performance conditions adjusted from those attaching to the original
Touchstone award as follows: a) the Net Asset Value (“NAV”) condition will be adjusted to reflect Touchstone’s portfolio
being part of the enlarged group following the acquisition and b) the Total Shareholder Return (“TSR”) condition will be
adjusted so that TSR shall be measured by reference to the performance of IP Group shares over the performance period
with the starting share price for such purpose being adjusted by dividing the existing starting share price of 290 pence by
the exchange ratio detailed above. The TTO specific targets remain the same.
At 1 January
Forfeited during the year
Lapsed during the year
Vested during the year
At 31 December
Exercisable at 31 December
Number of
options
2020
740,056
(54,452)
(267,105)
(31,705)
386,794
–
Weighted-
average
exercise price
2020
0.01
0.01
0.01
0.01
0.01
–
Number of
options
2019
1,146,810
(406,754)
–
–
740,056
–
Weighted-
average
exercise price
2019
0.01
0.01
–
–
0.01
–
The options outstanding at 31 December 2020 had an exercise price of 1.366p (2019: 1.366p) and a weighted-average
remaining contractual life of 1.2 years (2019: 1.9 years).
1 74
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the consolidated financial statements continued
22. Share-based payments continued
2006 schemes:
Holders of 2006 Touchstone awards were offered the opportunity to release each of their awards in exchange for the grant
of a replacement award of equivalent value over shares in IP Group. The exercise period and time-based vesting provisions
for the replacement awards remained the same as the original Touchstone awards but the shareholder return performance
condition will be updated by reference to the exchange ratio. Awards under the 2006 scheme were exercisable to some
extent at the time of the grant of replacement awards, subject to meeting the applicable vesting conditions.
At 1 January
Forfeited during the year
At 31 December
Exercisable at 31 December
Number of
options
2020
1,078,099
–
1,078,099
1,078,099
Weighted-
average
exercise price
2020
2.13
–
2.13
2.13
Number of
options
2019
1,278,834
(200,735)
1,078,099
1,078,099
Weighted-
average
exercise price
2019
2.13
2.13
2.13
2.13
The options outstanding at 31 December 2020 had an exercise price of £2.13 (2019: £2.13) and a weighted-average
remaining contractual life of 3.9 years (2019: 4.9 years).
The fair value charge recognised in the statement of comprehensive income during the year in respect of all share-based
payments, including the DBSP, LTIP and Former Touchstone LTIP, was £2.9m (2019: £2.3m).
23. Long-Term incentive carry scheme
At 1 January
Charge for the year
Payments made in the year
At 31 December
2020
£m
5.5
14.3
(0.5)
19.3
2019
£m
6.8
(1.3)
–
5.5
See accounting policies note 1 for further details on the on the Group’s Long Term Incentive Carry Scheme.
1 74
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 7 5
Notes to the consolidated financial statements continued
22. Share-based payments continued
2006 schemes:
Holders of 2006 Touchstone awards were offered the opportunity to release each of their awards in exchange for the grant
of a replacement award of equivalent value over shares in IP Group. The exercise period and time-based vesting provisions
for the replacement awards remained the same as the original Touchstone awards but the shareholder return performance
condition will be updated by reference to the exchange ratio. Awards under the 2006 scheme were exercisable to some
extent at the time of the grant of replacement awards, subject to meeting the applicable vesting conditions.
The options outstanding at 31 December 2020 had an exercise price of £2.13 (2019: £2.13) and a weighted-average
remaining contractual life of 3.9 years (2019: 4.9 years).
The fair value charge recognised in the statement of comprehensive income during the year in respect of all share-based
payments, including the DBSP, LTIP and Former Touchstone LTIP, was £2.9m (2019: £2.3m).
23. Long-Term incentive carry scheme
Number of
average
Number of
options
exercise price
options
exercise price
Weighted-
average
Weighted-
2020
1,078,099
–
1,078,099
1,078,099
2020
2.13
–
2.13
2.13
2019
1,278,834
(200,735)
1,078,099
1,078,099
2019
2.13
2.13
2.13
2.13
2019
£m
6.8
(1.3)
–
5.5
2020
£m
5.5
14.3
(0.5)
19.3
At 1 January
Forfeited during the year
At 31 December
Exercisable at 31 December
At 1 January
Charge for the year
Payments made in the year
At 31 December
See accounting policies note 1 for further details on the on the Group’s Long Term Incentive Carry Scheme.
24. Limited and limited liability partnership interests
At 1 January 2019
Investments during the year
Distributions in the year
Change in fair value during the year
At 1 January 2020
Investments during the year
Distributions in the year
Change in fair value during the year
At 31 December 2020
£m
17.3
6.8
(2.0)
(0.7)
21.4
4.5
(0.3)
(3.4)
22.2
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. If the assumptions used in the valuation techniques for the Group’s holding in each
company are varied by using a range of possible alternatives, there is no material difference to the carrying value of the
respective spin-out company. The effect on the consolidated statement of comprehensive income for the period is also not
expected to be material.
See note 1 for the valuation policy in respect of limited and limited liability partnership interests.
25. Non-controlling interests
As described in Note 1, IPG Cayman LP and IP Venture Fund II LP are funds which are deemed to be controlled by IP Group,
and are accordingly consolidated in the group financial statements. These funds have non-controlling interests of 20%
(2019: 11%) and 67% (2019: 67%) respectively.
The following is summarised financial information for IP Group, prepared in accordance with IFRS and modified for
differences in the Group’s accounting policies. The information is before inter-company eliminations with other companies
in the Group.
Profit/(loss) for the year
Profit attributable to NCI
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Net assets attributable to NCI
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase in cash and cash equivalents
IPG Cayman LP
IP Venture Fund II LP
2020
£m
2.7
0.5
0.7
82.3
(0.1)
(77.8)
5.1
1.0
5.4
(10.6)
–
(5.2)
2019
£m
0.2
–
7.2
63.3
–
(70.7)
(0.2)
–
(4.6)
(5.5)
–
(10.1)
2020
£m
(3.0)
(2.0)
0.1
24.4
(0.3)
(26.4)
(2.2)
(1.5)
0.5
(1.1)
–
(0.6)
2019
£m
(3.2)
(2.2)
0.5
25.9
(0.6)
(25.0)
0.8
0.5
1.0
(2.3)
–
(1.3)
1 7 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the consolidated financial statements continued
26. Related party transactions
The Group has various related parties arising from its key management, subsidiaries, equity stakes in portfolio companies
and management of certain Limited Partnership funds.
a) Limited partnerships
The Group manages a number of investment funds structured as limited partnerships. Group entities have a limited
partnership interest (see note 1) and act as the general partners of these limited partnerships. The Group therefore has
power to exert significant influence over these limited partnerships. The following amounts have been included in respect of
these limited partnerships:
Statement of comprehensive income
Revenue from services
Statement of financial position
Investment in limited partnerships
Amounts due from related parties
2020
£m
–
2020
£m
–
–
2019
£m
0.1
2019
£m
5.6
–
b) Key management transactions
i) Key management personnel transactions
The following key management held shares in the following spin-out companies as at 31 December 2020:
Director/ PDMR
Company name
Alan Aubrey
Accelercomm Limited
Alesi Surgical Limited
Amaethon Limited — A Shares
Amaethon Limited — B Shares
Amaethon Limited — Ordinary shares
Avacta Group plc 2, 6, 7
Boxarr Limited
Crysalin Limited
Deep Matter Group plc
Deepverge plc 4
Ditto AI Limited - Ordinary Shares
Ditto AI Limited - B Shares
Diurnal Group plc
EmDot Limited
Istesso Limited
Itaconix plc
Karus Therapeutics Limited
Microbiotica Limited
Mirriad Advertising plc
Open Orphan plc 2, 3, 6
Oxbotica Limited
Oxford Advanced Surfaces Limited
Oxford Nanopore Technologies Limited
Perachem Holdings plc
Salunda Limited
Surrey Nanosystems Limited
Tissue Regenix Group plc
Xeros Technology Group plc 5
Zeetta Networks Limited
Number of
shares held at
1 January
2020
Number
of shares
acquired/
(disposed of)
in the period
Number of
shares held at
31 December
2020
638
18
104
11,966
21
271,334
1,732
1,447
2,172,809
51,927
1,097,912,028
98,876,568
15,000
15
1,185,150
88,890
223
10,000
33,333
91,785
29
1
92,725
108,350
53,639
453
–
–
–
–
–
–
–
–
–
638
18
104
11,966
21
271,334
1,732
1,447
2,172,809
–
51,927
– 1,097,912,028
–
98,876,568
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15,000
15
1,185,150
88,890
223
10,000
33,333
91,785
29
1
92,725
108,350
53,639
453
2,389,259
9,785,600
12,174,859
228
424
–
–
228
424
%
0.24%
0.14%
3.12%
1.04%
0.32%
<0.1%
0.24%
0.13%
0.30%
0.42%
12.41%
1.12%
<0.1%
0.87%
1.05%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
0.31%
0.29%
<0.1%
0.22%
0.17%
<0.1%
0.13%
1 7 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 7 7
Notes to the consolidated financial statements continued
The Group has various related parties arising from its key management, subsidiaries, equity stakes in portfolio companies
26. Related party transactions
and management of certain Limited Partnership funds.
a) Limited partnerships
The Group manages a number of investment funds structured as limited partnerships. Group entities have a limited
partnership interest (see note 1) and act as the general partners of these limited partnerships. The Group therefore has
power to exert significant influence over these limited partnerships. The following amounts have been included in respect of
these limited partnerships:
Statement of comprehensive income
Revenue from services
Statement of financial position
Investment in limited partnerships
Amounts due from related parties
b) Key management transactions
i) Key management personnel transactions
The following key management held shares in the following spin-out companies as at 31 December 2020:
Director/ PDMR
Company name
Alan Aubrey
Accelercomm Limited
Number of
shares held at
Number
of shares
Number of
acquired/
shares held at
1 January
(disposed of)
31 December
2020
in the period
Alesi Surgical Limited
Amaethon Limited — A Shares
Amaethon Limited — B Shares
Amaethon Limited — Ordinary shares
Avacta Group plc 2, 6, 7
Boxarr Limited
Crysalin Limited
Deep Matter Group plc
Deepverge plc 4
Ditto AI Limited - Ordinary Shares
Ditto AI Limited - B Shares
Diurnal Group plc
EmDot Limited
Istesso Limited
Itaconix plc
Karus Therapeutics Limited
Microbiotica Limited
Mirriad Advertising plc
Open Orphan plc 2, 3, 6
Oxbotica Limited
Oxford Advanced Surfaces Limited
Oxford Nanopore Technologies Limited
Perachem Holdings plc
Salunda Limited
Surrey Nanosystems Limited
Tissue Regenix Group plc
Xeros Technology Group plc 5
Zeetta Networks Limited
638
18
104
11,966
21
271,334
1,732
1,447
15,000
15
1,185,150
88,890
223
10,000
33,333
91,785
29
1
92,725
108,350
53,639
453
228
424
2,172,809
51,927
1,097,912,028
98,876,568
– 1,097,912,028
98,876,568
2,389,259
9,785,600
12,174,859
2020
£m
2020
£m
–
–
–
2019
£m
0.1
2019
£m
5.6
–
2020
638
18
104
11,966
21
271,334
1,732
1,447
2,172,809
51,927
15,000
15
1,185,150
88,890
223
10,000
33,333
91,785
29
1
92,725
108,350
53,639
453
228
424
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
%
0.24%
0.14%
3.12%
1.04%
0.32%
<0.1%
0.24%
0.13%
0.30%
0.42%
12.41%
1.12%
<0.1%
0.87%
1.05%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
0.31%
0.29%
<0.1%
0.22%
0.17%
<0.1%
0.13%
26. Related Party Transactions continued
Director/ PDMR
Mike Townend
Company name
Amaethon Limited — A Shares
Amaethon Limited — B Shares
Amaethon Limited — Ordinary shares
Applied Graphene Materials plc
Avacta Group plc 2, 6
Creavo Medical Technologies Limited
Crysalin Limited
Deep Matter Group plc
Deepverge plc 4
Ditto AI Limited
Diurnal Group plc
EmDot Limited
Istesso Limited
Itaconix plc
Mirriad Advertising plc
Oxbotica Limited
Oxford Advanced Surfaces Limited
Open Ophan Plc 2, 3, 6
Oxford Nanopore Technologies Limited
Perachem Holdings plc
Surrey Nanosystems Limited
Tissue Regenix Group plc
Ultraleap Holdings Limited 1
Xeros Technology Group plc 5
Greg Smith
Alesi Surgical Limited
Avacta Group plc 2, 6
Crysalin Limited
Deepverge plc 4
Ditto AI Limited
Diurnal Group plc
EmDot Limited
Istesso Limited
Itaconix plc
Perachem Holdings plc
Mirriad Advertising plc
Open Orphan plc 2, 3, 6
Oxbotica Limited
Oxford Nanopore Technologies Limited
Surrey Nanosystems Limited
Tissue Regenix Group plc
Xeros Technology Group plc 5
Number of
shares held at
1 January
2020
Number
of shares
acquired/
(disposed of)
in the period
Number of
shares held at
31 December
2020
104
11,966
21
22,619
20,001
117
1,286
932,944
66,549
613,048
15,000
14
1,185,150
64,940
25,000
26
1
91,785
28,651
113,222
404
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
104
11,966
21
22,619
20,001
117
1,286
932,944
66,549
613,048
15,000
14
1,185,150
64,940
25,000
26
1
91,785
28,651
113,222
404
1,950,862
9,600,000
11,550,862
1,224
355
2
3,904
149
73
144,246
15,000
4
313,425
4,500
4,830
16,667
151,510
8
1,537
88
50,000
14
–
–
–
(1,487)
–
–
–
–
–
–
–
–
–
–
–
63
–
–
–
1,224
355
2
2,417
149
73
144,246
15,000
4
313,425
4,500
4,830
16,667
151,510
8
1,600
88
50,000
14
%
3.12%
1.04%
0.32%
<0.1%
<0.1%
<0.1%
0.11%
0.13%
0.46%
<0.1%
<0.1%
0.81%
1.05%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
0.30%
0.20%
0.16%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
0.23%
0.28%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
1 7 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the consolidated financial statements continued
26. Related Party Transactions continued
Director/ PDMR
David Baynes
Company name
Alesi Surgical Limited
Arkivum Limited
Creavo Medical Technologies Limited
Diurnal Group plc
Mirriad Advertising plc
Oxford Nanopore Technologies Limited
Ultraleap Holdings Limited 1
Zeetta Networks Limited
Mark Reilly
Actual Experience plc
Bramble Energy Limited
Ceres Power Holdings plc 2, 6
Diurnal Group plc
Itaconix plc
Mirriad Advertising plc
Oxbotica Limited
Ultraleap Holdings Limited 1
Wave Optics Limited
Sam Williams
Accelercomm Limited
Alesi Surgical Limited
Avacta Group plc 2, 6
Creavo Medical Technologies Limited
Diurnal Group plc
Genomics plc
Istesso Limited
Microbiotica Limited
Mirriad Advertising plc
Oxehealth Limited
Oxford Nanopore Technologies Limited
Topivert Limited
Ultraleap Holdings Limited 1
1 Previously called Ultrahaptics Holdings Limited.
2 No longer a portfolio company at the balance sheet date.
Number of
shares held at
1 January
2020
Number
of shares
acquired/
(disposed of)
in the period
Number of
shares held at
31 December
2020
4
377
46
73,000
16,667
174
2,600
424
65,500
–
5,697
7,500
–
–
–
–
–
–
–
–
–
16
(5,697)
–
–
377,358
66,666
8
1,700
308
127
1
19,537
23
52,248
333
7,048,368
7,000
3,333
27
340
1,000
558
–
–
–
–
–
–
(19,537)
–
33,000
–
–
–
–
–
445
–
–
4
377
46
73,000
16,667
174
2,600
424
65,500
16
–
7,500
377,358
66,666
8
1,700
308
127
1
–
23
85,248
333
7,048,368
7,000
3,333
27
785
1,000
558
%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
0.13%
0.14%
<0.1%
<0.1%
<0.1%
0.09%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
8.89%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
3 Open Orphan plc acquired hVivo plc. Shares were issued 1:2.47, hVivo plc : Open Orphan plc. Open Orphan plc opening position restated
post acquisition of hVivo plc.
4 Deepverge plc acquired Modern Water plc. Shares were issued 10:1, Modern Water plc : Deepverge plc. Deepverge plc opening position
restated post acquisition of Modern Water plc.
5 Xeros Technology Group plc opening position restated following 100:1 share consolidation.
6 Disclosed number reflects position at the point that the company ceased to be an IP Group holding.
7 Restated opening position.
1 7 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 7 9
Notes to the consolidated financial statements continued
26. Related Party Transactions continued
Director/ PDMR
Company name
David Baynes
Alesi Surgical Limited
Mark Reilly
Actual Experience plc
Sam Williams
Accelercomm Limited
Arkivum Limited
Creavo Medical Technologies Limited
Diurnal Group plc
Mirriad Advertising plc
Oxford Nanopore Technologies Limited
Ultraleap Holdings Limited 1
Zeetta Networks Limited
Bramble Energy Limited
Ceres Power Holdings plc 2, 6
Diurnal Group plc
Itaconix plc
Mirriad Advertising plc
Oxbotica Limited
Ultraleap Holdings Limited 1
Wave Optics Limited
Alesi Surgical Limited
Avacta Group plc 2, 6
Diurnal Group plc
Genomics plc
Istesso Limited
Microbiotica Limited
Mirriad Advertising plc
Oxehealth Limited
Creavo Medical Technologies Limited
Number of
shares held at
Number
of shares
Number of
acquired/
shares held at
1 January
(disposed of)
31 December
2020
in the period
4
377
46
73,000
16,667
174
2,600
424
65,500
5,697
7,500
66,666
–
–
8
1,700
308
127
1
19,537
23
52,248
333
7,000
3,333
27
340
1,000
558
7,048,368
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
16
(5,697)
377,358
(19,537)
33,000
2020
4
377
46
73,000
16,667
174
2,600
424
65,500
16
–
7,500
377,358
66,666
8
1,700
308
127
1
–
23
85,248
333
7,048,368
7,000
3,333
27
785
1,000
558
%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
0.13%
0.14%
<0.1%
<0.1%
<0.1%
0.09%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
8.89%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
<0.1%
Oxford Nanopore Technologies Limited
445
Topivert Limited
Ultraleap Holdings Limited 1
1 Previously called Ultrahaptics Holdings Limited.
2 No longer a portfolio company at the balance sheet date.
post acquisition of hVivo plc.
restated post acquisition of Modern Water plc.
3 Open Orphan plc acquired hVivo plc. Shares were issued 1:2.47, hVivo plc : Open Orphan plc. Open Orphan plc opening position restated
4 Deepverge plc acquired Modern Water plc. Shares were issued 10:1, Modern Water plc : Deepverge plc. Deepverge plc opening position
5 Xeros Technology Group plc opening position restated following 100:1 share consolidation.
6 Disclosed number reflects position at the point that the company ceased to be an IP Group holding.
7 Restated opening position.
26. Related Party Transactions continued
ii) Key management personnel compensation
Key management personnel compensation comprised the following:
Short-term employee benefits(i)
Post-employment benefits(ii)
Other long-term benefits
Termination benefits
Share-based payments(iii)
Total
2020
£m
3,206
65
–
–
1,515
4,786
2019
£m
2,776
93
–
–
1,195
4,064
(i) 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.
(ii) Represents employer contributions to defined contribution pension and life assurance plans
(iii) 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 description of these schemes.
c) 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 arms-length transactions. The following amounts have been included in respect of these fees:
Statement of comprehensive income
Revenue from services
Statement of financial position
Trade receivables
2020
£m
0.2
2020
£m
0.3
2019
£m
0.5
2019
£m
0.2
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:
Statement of comprehensive income
Net portfolio gains/(losses)
Statement of financial position
Equity and debt investments
2020
£m
20.9
2020
£m
500.8
2019
£m
(54.2)
2019
£m
532.7
d) Subsidiary companies
Subsidiary companies that are not 100% owned either directly or indirectly by the parent Company have intercompany
balances with other Group companies totalling as follows:
Intercompany balances with other Group companies
2020
£m
2.6
2019
£m
1.5
These intercompany balances represent funding loans provided by Group companies that are interest free, repayable on
demand and unsecured.
1 8 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the consolidated financial statements continued
27. Capital management
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 benefits 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 new shares or dispose of interests in
more mature portfolio companies.
During 2020, the Group’s strategy, which was unchanged from 2019, was to maintain healthy cash and short-term deposit
balances that enable it to provide capital to all portfolio companies, as determined by the Group’s investment committee,
whilst having sufficient cash reserves to meet all working capital requirements in the foreseeable future.
The Group has an external debt facility with associated covenants that are described in note 19.
28. Capital commitments
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 2020:
IP Venture Fund II LP
UCL Technology Fund LP
Apollo Therapeutics LLP
Total
Year of
commencement
of partnership
Original
commitment
£m
Invested to
date £m
Remaining
commitment
£m
2013
2016
2016
10.0
24.8
3.3
38.1
7.6
18.1
3.0
28.7
2.4
6.7
0.3
9.4
1 8 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 8 1
Notes to the consolidated financial statements continued
27. Capital management
29. Alternative Performance Measures (“APM”)
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 benefits 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 new shares or dispose of interests in
more mature portfolio companies.
During 2020, the Group’s strategy, which was unchanged from 2019, was to maintain healthy cash and short-term deposit
balances that enable it to provide capital to all portfolio companies, as determined by the Group’s investment committee,
whilst having sufficient cash reserves to meet all working capital requirements in the foreseeable future.
The Group has an external debt facility with associated covenants that are described in note 19.
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.
28. Capital commitments
Commitments to limited partnerships
into limited partnerships as at 31 December 2020:
Pursuant to the terms of their limited partnership agreements, the Group has committed to invest the following amounts
APM
Hard NAV
IP Venture Fund II LP
UCL Technology Fund LP
Apollo Therapeutics LLP
Total
Year of
Original
Remaining
commencement
commitment
Invested to
commitment
of partnership
date £m
2013
2016
2016
£m
10.0
24.8
3.3
38.1
7.6
18.1
3.0
28.7
£m
2.4
6.7
0.3
9.4
Reference for
reconciliation Definition and purpose
Primary
Statements
Hard NAV is defined as the total equity of
the Group less intangible assets. Excluding
intangible assets highlights the Group’s
assets that management can be reasonably
expected to influence in the short term and
therefore reflects the short-term resources
available to drive future performance.
Additionally, excluding intangible assets
allows better comparison with the Group’s
competitors, many of which operate under
fund structures and therefore would not
include intangible assets.
The measure shows tangible assets managed
by the Group. It is used as a performance
metric for directors and employees as a part
of annual incentives in the Group.
Hard NAV per share is defined as Hard NAV,
as defined above, divided by the number of
shares in issue.
The measure shows tangible assets managed
by the Group per share in issue. It is a useful
measure to compare to the Group’s share
price.
Return on Hard NAV is defined as the total
comprehensive income or loss for the year
excluding charges which do not impact
on Hard NAV, specifically amortisation of
intangible assets, share-based payment
charges and the charge in respect of
consideration deemed to represent post-
acquisition services under IFRS 3 which is
anticipated to be a non-recurring item. The
measure shows a summary of the income
statement gains and losses which directly
impact Hard NAV
Calculation
2020
£m
1,331.9
0.4
–
Total Equity
Excluding:
Goodwill
Other intangible
assets
2019
£m
1,141.9
–
–
Hard NAV
1,331.5
1,141.5
Hard NAV
£1,331.5m
£1,141.5m
Shares in issue 1,062,353,734 1,059,144,595
107.8p
Hard NAV
per share
125.3p
Total
comprehensive
income
Excluding:
Amortisation
of intangible
assets
Goodwill
impairment
Share based
payment charge
IFRS3 charge
in respect of
acquisition of
subsidiary
Return on
Hard NAV
185.4
(78.8)
–
–
2.9
1.2
0.3
–
2.3
2.5
189.5
(73.7)
Hard NAV per
share
Primary
Statements,
note 20
Return on
Hard NAV
Primary
statements,
note 8
1 8 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the consolidated financial statements continued
29. Alternative Performance Measures (“APM”) continued
APM
Net portfolio
gains/(losses)
Reference for
reconciliation Definition and purpose
note 13
Net portfolio gains are defined as the
movement in the value of holdings in the
portfolio due to share price movements
or impairments in value, gains or losses on
realisation of investments and gains or losses
on disposals of subsidiaries.
Net
(realisations)/
investment
Portfolio
review
Net overheads Financial
review:
note 8
The measure shows a summary of the
income statement gains and losses which
are directly attributable to the portfolio,
which is a headline measure for the Group’s
performance. This is a key driver of the Return
on Hard NAV which is a performance metric
for directors’ and employees’ incentives.
Net realisations is defined as the net amount
realised/invested from/into the portfolio. It
is calculated by taking the net amount of the
purchases of equity and debt investments,
less the proceeds from the sale of equity and
debt investments. The measure is used as a
KPI for the relative generation or use of cash
by the portfolio.
Net overheads are defined as the Group’s
core overheads less operating income. The
measure reflects the Group’s controllable
net operating “cash-equivalent” central cost
base and is used as a performance metric in
the Group’s Annual Incentive Scheme. Core
overheads exclude items such as share-based
payments, amortisation of intangibles and
consolidated portfolio company costs.
Cash and
deposits
Primary
statements
Cash is defined as cash and cash equivalents
plus deposits.
Change in
fair value of
equity and debt
investments
Gain on disposal
of equity
investments
Gain on disposal
of subsidiary
Net portfolio
gains/(losses)
Purchase of
equity and debt
investments
Proceeds from
sale of equity
and debt
investments
Net
realisations/
(investment)
Other income
Other
administrative
expenses
Excluding:
Administrative
expenses –
consolidated
portfolio
companies
IFRS3 charge
in respect of
acquisition of
subsidiary
Net overheads
Cash and cash
equivalents
The measures gives a view of the Group’s
liquid resources on a short-term timeframe.
The Group’s Treasury Policy has a maximum
maturity limit of 13 months for deposits.
Deposits
Cash
Calculation
2020
£m
148.9
2019
£m
(70.6)
82.5
16.1
–
10.6
231.4
(43.9)
(67.5)
(64.7)
191.0
79.5
123.5
14.8
6.2
(29.4)
8.6
(39.1)
0.4
5.4
1.2
2.5
(21.2)
127.6
142.7
270.3
(22.6)
121.9
73.0
194.9
1 8 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 8 3
29. Alternative Performance Measures (“APM”) continued
30. Post balance sheet events
In February 2021 IP Group, Inc., the Group’s North American platform, secured an additional $50.0m (£36.5m*) of funding,
including $40.0m from a new US blue-chip institutional investor. IP Group plc committed $10.0m of funding and now has a
61.3% interest in the North American platform. This brings the total funds raised by the team over the past twelve months to
$63.5m, including $15.0m from IP Group plc. This additional funding is consistent with the Group’s strategy of financing IP
Group, Inc. alongside third-party strategic investors. The funds will support the continued growth of the platform’s maturing
portfolio as well as its pipeline of new opportunities.
*GBP equivalent using 1.37 USD/GBP
Notes to the consolidated financial statements continued
APM
reconciliation Definition and purpose
Reference for
Net portfolio
note 13
Net portfolio gains are defined as the
gains/(losses)
movement in the value of holdings in the
Change in
fair value of
Calculation
2020
£m
148.9
2019
£m
(70.6)
portfolio due to share price movements
equity and debt
or impairments in value, gains or losses on
investments
realisation of investments and gains or losses
Gain on disposal
82.5
16.1
on disposals of subsidiaries.
The measure shows a summary of the
income statement gains and losses which
are directly attributable to the portfolio,
which is a headline measure for the Group’s
performance. This is a key driver of the Return
on Hard NAV which is a performance metric
for directors’ and employees’ incentives.
of equity
investments
of subsidiary
Net portfolio
gains/(losses)
Gain on disposal
–
10.6
231.4
(43.9)
Net
Portfolio
Net realisations is defined as the net amount
Purchase of
(67.5)
(64.7)
(realisations)/
review
realised/invested from/into the portfolio. It
equity and debt
investment
is calculated by taking the net amount of the
investments
Net overheads Financial
Net overheads are defined as the Group’s
Other income
review:
note 8
core overheads less operating income. The
Other
measure reflects the Group’s controllable
administrative
purchases of equity and debt investments,
less the proceeds from the sale of equity and
debt investments. The measure is used as a
KPI for the relative generation or use of cash
by the portfolio.
net operating “cash-equivalent” central cost
base and is used as a performance metric in
the Group’s Annual Incentive Scheme. Core
overheads exclude items such as share-based
payments, amortisation of intangibles and
consolidated portfolio company costs.
Proceeds from
sale of equity
and debt
investments
Net
realisations/
(investment)
expenses
Excluding:
Administrative
expenses –
consolidated
portfolio
companies
IFRS3 charge
in respect of
acquisition of
subsidiary
Net overheads
equivalents
191.0
79.5
123.5
14.8
6.2
(29.4)
8.6
(39.1)
0.4
5.4
1.2
2.5
(21.2)
127.6
142.7
270.3
(22.6)
121.9
73.0
194.9
Cash and
deposits
statements
plus deposits.
Primary
Cash is defined as cash and cash equivalents
Cash and cash
The measures gives a view of the Group’s
Deposits
liquid resources on a short-term timeframe.
The Group’s Treasury Policy has a maximum
Cash
maturity limit of 13 months for deposits.
1 8 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Company balance sheet
As at 31 December 2020
ASSETS
Non-current assets
Investment in subsidiary undertakings
Equity and debt investments
Other investments
Current assets
Debtors: amounts falling due within one year
Trade and other receivables
Loans to subsidiary undertakings
Total assets
EQUITY AND LIABILITIES
Capital and reserves
Called up share capital
Share premium account
Retained earnings
Total equity
Current liabilities
Trade and other payables
EIB debt facility
Non-current liabilities
EIB debt facility
Total liabilities
Total equity and liabilities
Registered number: 4204490
Note
3
4
5
6
7
7
7
2020
£m
326.6
0.8
2.1
0.3
619.4
949.2
21.3
101.9
807.5
930.7
0.3
6.2
12.0
18.5
949.2
2019
£m
331.6
0.8
2.0
–
627.9
962.3
21.2
100.0
814.2
935.4
2.6
6.3
18.0
26.9
962.3
The accompanying notes form an integral part of the financial statements. The financial statements on pages 186 to 187
were approved by the Board of Directors and authorised for issue on 9 March 2021 and were signed on its behalf by:
Alan Aubrey
Chief Executive Officer
Greg Smith
Chief Financial Officer
1 8 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 8 5
Company balance sheet
As at 31 December 2020
Company statement of changes in equity
As at 31 December 2020
At 1 January 2019
Comprehensive income
Capital reduction
At 1 January 2020
Comprehensive income
Issue of shares
Equity-settled share-based payments (iv)
At 31 December 2020
Share
capital
£m
21.2
–
–
21.2
–
0.1
–
21.3
Attributable to equity holders of the parent
Share
premium(i)
Merger
reserve(ii)
Retained
earnings(iii)
£m
684.7
–
(584.7)
100.0
–
1.9
–
101.9
£m
372.6
–
(372.6)
–
–
–
–
–
£m
(63.7)
(79.4)
957.3
814.2
(20.1)
–
13.4
807.5
Total
£m
1,014.8
(79.4)
–
935.4
(20.1)
2.0
13.4
930.7
(i) Share premium – Amount subscribed for share capital in excess of nominal value, net of directly attributable issue costs.
(ii) Merger reserve – Amount subscribed for share capital in excess of nominal value in relation to the qualifying acquisition of subsidiary
undertakings.
(iii) Retained earnings – net gains and losses recognised in the consolidated statement of comprehensive income net of associated share-
based payments credits.
(iv) Equity-settled share-based payments – the credit in respect of 2020 is £2.9m and the credit in respect of prior years is £10.5m, this is not
considered material.
The accompanying notes form an integral part of the financial statements.
ASSETS
Non-current assets
Investment in subsidiary undertakings
Equity and debt investments
Other investments
Current assets
Debtors: amounts falling due within one year
Trade and other receivables
Loans to subsidiary undertakings
Total assets
EQUITY AND LIABILITIES
Capital and reserves
Called up share capital
Share premium account
Retained earnings
Total equity
Current liabilities
Trade and other payables
EIB debt facility
Non-current liabilities
EIB debt facility
Total liabilities
Total equity and liabilities
Registered number: 4204490
Note
3
4
5
6
7
7
7
2020
£m
326.6
0.8
2.1
0.3
619.4
949.2
21.3
101.9
807.5
930.7
0.3
6.2
12.0
18.5
949.2
2019
£m
331.6
0.8
2.0
–
627.9
962.3
21.2
100.0
814.2
935.4
2.6
6.3
18.0
26.9
962.3
The accompanying notes form an integral part of the financial statements. The financial statements on pages 186 to 187
were approved by the Board of Directors and authorised for issue on 9 March 2021 and were signed on its behalf by:
Alan Aubrey
Chief Executive Officer
Greg Smith
Chief Financial Officer
1 8 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the company 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
International Accounting Standards in conformity with the requirements of the Companies Act 2006 (“Adopted IFRSs”), 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; 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.
Equity and debt Investments
Investments are held at fair value through profit and loss vision for impairment in value and are held for long-term
investment purposes.
The valuation methods applied are the same as those at the Group level; details of which can be found in note 1 to the
Group’s financial accounts on pages 155 to 157.
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 fixed 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 22 in the Group accounts. When options are exercise, 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.
1 8 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 8 7
Notes to the company financial statements
1. Accounting policies
Framework (“FRS 101”).
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure
In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of
International Accounting Standards in conformity with the requirements of the Companies Act 2006 (“Adopted IFRSs”), 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.
2. Significant accounting estimates
(i) Valuation of subsidiary investments
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.
Under section s408 of the Companies Act 2006 the company is exempt from the requirement to present its own profit and
3. Investments in subsidiary undertakings
loss account.
At 1 January 2020
Share-based payments
Restructure of subsidiary undertakings in the year
At 31 December 2020
£m
331.6
13.4
(18.4)
326.6
The restructure of investments in subsidiary undertakings relates to a planned restructure of the Group’s subsidiaries as
part of a Group simplification exercise, which resulted in a reduction in the carrying amount of investments in subsidiary
undertakings for the Company.
Details of the Company’s subsidiary undertakings as at 31 December 2020 are detailed in note 10 to the Company financial
statements.
4. Equity and debt investments
At 1 January 2020
Fair value gains in the year
Disposals in the year
At 31 December 2020
£m
0.8
0.1
(0.1)
0.8
Investments are held at fair value through profit and loss vision for impairment in value and are held for long-term
Details of the Company’s associated undertakings and significant holdings as at 31 December 2020 are disclosed in note 10
to the Company financial statements.
5. Other investments
At 1 January 2020
Fair value gain during the year
At 31 December 2020
£m
2.0
0.1
2.1
Other investments relate to the Group’s 17.7% partnership interest in Technikos LLP, see note 1 of the Group accounts for
further details.
6. Loans to subsidiary undertakings
At 1 January 2020
Repayment of loans by subsidiary undertakings during the year
At 31 December 2020
£m
627.9
(8.5)
619.4
The amounts due from subsidiary undertakings are interest free, repayable on demand and unsecured. These loans 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 under £0.1m and therefore not disclosed further (2019: less than £0.1m).
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; 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
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
these financial statements.
Subsidiary investments
be recoverable.
Equity and debt Investments
investment purposes.
Group’s financial accounts on pages 155 to 157.
Intercompany loans
The valuation methods applied are the same as those at the Group level; details of which can be found in note 1 to the
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 fixed assets.
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.
Financial instruments
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 22 in the Group accounts. When options are exercise, 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.
1 8 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the company financial statements continued
7. Share capital and reserves
At 1 January 2020
Loss for the year
Issue of shares
Equity-settled share-based payments
At 31 December 2020
Share
capital
£m
21.2
–
0.1
–
21.3
Share
premium
£m
100.0
–
1.9
–
101.9
Merger
reserve
£m
Profit and loss
reserve
£m
–
–
–
–
–
814.2
(20.1)
–
13.4
807.5
Details of the Company’s authorised share capital and changes in its issued share capital can be found in note 20 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.
8. 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 £20.1m (2019: £79.4m) mainly due to the charge arising
from the restructure of subsidiary undertakings described in note 3.
Details of the auditor’s remuneration are disclosed in note 6 to the consolidated financial statements.
9. 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 107 to 122
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 2020 or 2019.
10. Details of subsidiary undertakings
Name of subsidiary undertakings
IP2IPO Limited
IP2IPO Carry Partner Limited
IP2IPO Americas Limited
IP2IPO US Partners Limited
IP Group Inc.
Top Technology Ventures Limited(iii)
Fusion IP Sheffield Limited(ii)
Fusion IP Cardiff Limited(ii)
IP Venture Fund (GP) Limited(iii)
IP Venture Fund II (GP) LLP(iii)
IP Ventures (Scotland) Limited(iii)
IP2IPO Portfolio (GP) Limited(iii)
IP2IPO Portfolio LP
IP Capital Limited(ii)
IP2IPO Asia-Pacific Limited
IP Group Greater China Limited
IP2IPO ANZ Carry Limited(ii)
Transition Ventures Limited(ii)
IP2IPO Australia Pty Limited
IP2IPO Australia HP Pty Limited
IP2IPO Australia Management Pty Limited
Proportion
of ownership
interest
%(i)
Proportion of
voting power
held
%(i)
Proportion of
nominal value
held
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Held by
Parent/
Group
Direct
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
1 8 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 8 9
7. Share capital and reserves
10. Details of subsidiary undertakings continued
Name of subsidiary undertakings
IP2IPO Australia GP Pty Limited
IP2IPO Australia CT Pty Limited
IP2IPO Australia VCMP LP
IP2IPO Australia VCLP No 1 LP
IP Assist Services Limited
Parkwalk Advisors Limited
Touchstone Innovations Limited
IP2IPO Innovations Limited
Innovations Limited Partner Limited
IP2IPO Company Maker Limited
Touchstone Innovations Businesses LLP
IP2IPO Innovations 1 LLP
IPG USA (LP) Limited
IP Group Holdco Inc
IPG USA (GP) LLC
IPG USA Plan LLC
IPG Cayman LP
IP University Holdings LLC
Fed Impact LLC
IPG USA SCO LP
IP2IPO Nominees Limited(ii)
IP2IPO Services Limited(ii)
LifeUK (IP2IPO) Limited(ii)
IP Industry Partners Limited(ii)
Union Life Sciences Limited – Ordinary shares
Union Life Sciences Limited – Preference shares(ix)
Union Life Sciences Limited – Total
Biofusion Licensing (Sheffield) Limited(ii),(vi)
Fusion IP Nottingham Limited(ii),(vi)
Fusion IP Two Limited(ii),(vi)
Asterion Limited
PH Therapeutics Limited(ii)
Extraject Technologies Limited(ii)
Stratium Limited
IP Venture Fund II L.P.(v)
Proportion
of ownership
interest
%(i)
100.0
Proportion of
voting power
held
%(i)
100.0
Proportion of
nominal value
held
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
80.7
100.0
100.0
100.0
100.0
100.0
100.0
100.0
95.0
100.0
95.0
100.0
100.0
100.0
66.8
60.0
60.0
52.9
33.3
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
80.7
100.0
100.0
100.0
100.0
100.0
100.0
100.0
95.0
100.0
95.0
100.0
100.0
100.0
66.8
60.0
60.0
52.9
33.3
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
80.7
100.0
100.0
100.0
100.0
100.0
100.0
100.0
95.0
100.0
99.9
100.0
100.0
100.0
66.5
60.0
60.0
52.9
33.3
Held by
Parent/
Group
Indirect
Indirect
Indirect
Indirect
Direct
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Direct
Direct
Direct
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
(i) All holdings are via Ordinary Shares unless separate classes are specified in the table.
(ii) Dormant/non-trading company.
(iii) Company/limited liability partnership 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 L.P. means the Group fulfils the control criteria set out in IFRS 10 and the fund is
thus consolidated.
(vi) Not consolidated due to immateriality.
Notes to the company financial statements continued
Share
capital
£m
21.2
0.1
–
–
21.3
Share
premium
£m
100.0
1.9
–
–
101.9
Merger
Profit and loss
reserve
£m
reserve
£m
814.2
(20.1)
–
13.4
807.5
–
–
–
–
–
At 1 January 2020
Loss for the year
Issue of shares
Equity-settled share-based payments
At 31 December 2020
statement of changes in equity.
8. Profit and loss account
Details of the Company’s authorised share capital and changes in its issued share capital can be found in note 20 to the
consolidated financial statements. Details of the movement in the share premium account can be found in the consolidated
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 £20.1m (2019: £79.4m) mainly due to the charge arising
from the restructure of subsidiary undertakings described in note 3.
Details of the auditor’s remuneration are disclosed in note 6 to the consolidated financial statements.
9. 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 107 to 122
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 2020 or 2019.
10. Details of subsidiary undertakings
Proportion
of ownership
Proportion of
voting power
Proportion of
nominal value
Name of subsidiary undertakings
IP2IPO Limited
IP2IPO Carry Partner Limited
IP2IPO Americas Limited
IP2IPO US Partners Limited
IP Group Inc.
Top Technology Ventures Limited(iii)
Fusion IP Sheffield Limited(ii)
Fusion IP Cardiff Limited(ii)
IP Venture Fund (GP) Limited(iii)
IP Venture Fund II (GP) LLP(iii)
IP Ventures (Scotland) Limited(iii)
IP2IPO Portfolio (GP) Limited(iii)
IP2IPO Portfolio LP
IP Capital Limited(ii)
IP2IPO Asia-Pacific Limited
IP Group Greater China Limited
IP2IPO ANZ Carry Limited(ii)
Transition Ventures Limited(ii)
IP2IPO Australia Pty Limited
IP2IPO Australia HP Pty Limited
IP2IPO Australia Management Pty Limited
interest
%(i)
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
held
%(i)
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
held
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Held by
Parent/
Group
Direct
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
1 9 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the company financial statements continued
10. Details of subsidiary undertakings continued
All companies above have their registered offices at The Walbrook Building, 25 Walbrook, London, EC4N 8AF unless
separately listed.
IP Group Inc: 1105 North Market Street, Suite 1800, Wilmington, DE 19801, USA.
IP Ventures (Scotland) Limited: 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ.
IP Assist Services Limited: Nexus, Discovery Way, Leeds, West Yorkshire, LS2 3AA.
Asterion Limited: Nexus, Discovery Way, Leeds, West Yorkshire, LS2 3AA.
PH Therapeutics Limited: Discovery Way, Leeds, West Yorkshire, LS2 3AA.
Extraject Technologies Limited: Discovery Way, Leeds, West Yorkshire, LS2 3AA.
Stratium Limited: C/O Uhy Hacker Young Lanyon House, Mission Court, Newport, NP20 2DW.
Parkwalk Advisors Ltd: Warwick House, 25 Buckingham Palace Road, London, SW1W 0PP.
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.
IP2IPO Australia HP Pty Limited: Level 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.
IP Group Holdco Inc: Corporation Trust Center, 1209 Orange street, New Castle, DE 19801, USA.
IPG USA (GP) LLC: Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman
Islands.
IPG USA Plan LLC: Corporation Trust Center, 1209 Orange street, New Castle, DE 19801, USA.
IPG Cayman LP: Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
IP University Holdings LLC: Corporation Trust Center, 1209 Orange street, New Castle, DE 19801, USA.
Fed Impact LLC: 251 Little Falls Drive, Wilmington, New Castle, DE 19808, USA.
IPG USA SCO LP: 13 Queens Road, Aberdeen, AB15 4YL.
All companies above are incorporated in England and Wales with the exception of IP Ventures (Scotland) Limited
incorporated in Scotland, IP Group Inc, IP Group Holdco Inc, IPG USA Plan LLC, IP University Holdings LLC and Fed Impact
LLC which were incorporated in Delaware, USA, IPG USA (GP) LLC and IPG Cayman LP which were incorporated in the
Cayman Islands, 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 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 being immaterial.
Notes to the company financial statements continued
All companies above have their registered offices at The Walbrook Building, 25 Walbrook, London, EC4N 8AF unless
separately listed.
IP Group Inc: 1105 North Market Street, Suite 1800, Wilmington, DE 19801, USA.
IP Ventures (Scotland) Limited: 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ.
IP Assist Services Limited: Nexus, Discovery Way, Leeds, West Yorkshire, LS2 3AA.
Asterion Limited: Nexus, Discovery Way, Leeds, West Yorkshire, LS2 3AA.
PH Therapeutics Limited: Discovery Way, Leeds, West Yorkshire, LS2 3AA.
Extraject Technologies Limited: Discovery Way, Leeds, West Yorkshire, LS2 3AA.
Stratium Limited: C/O Uhy Hacker Young Lanyon House, Mission Court, Newport, NP20 2DW.
Parkwalk Advisors Ltd: Warwick House, 25 Buckingham Palace Road, London, SW1W 0PP.
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.
IP2IPO Australia HP Pty Limited: Level 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.
IP Group Holdco Inc: Corporation Trust Center, 1209 Orange street, New Castle, DE 19801, USA.
IPG USA (GP) LLC: Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman
Islands.
IPG USA Plan LLC: Corporation Trust Center, 1209 Orange street, New Castle, DE 19801, USA.
IPG Cayman LP: Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
IP University Holdings LLC: Corporation Trust Center, 1209 Orange street, New Castle, DE 19801, USA.
Fed Impact LLC: 251 Little Falls Drive, Wilmington, New Castle, DE 19808, USA.
IPG USA SCO LP: 13 Queens Road, Aberdeen, AB15 4YL.
All companies above are incorporated in England and Wales with the exception of IP Ventures (Scotland) Limited
incorporated in Scotland, IP Group Inc, IP Group Holdco Inc, IPG USA Plan LLC, IP University Holdings LLC and Fed Impact
LLC which were incorporated in Delaware, USA, IPG USA (GP) LLC and IPG Cayman LP which were incorporated in the
Cayman Islands, 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 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 being immaterial.
1 9 0
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 9 1
10. Details of subsidiary undertakings continued
11. Details of significant holdings and associated undertakings
Name of undertaking
Registered address
Accelercomm Limited:
A ordinary shares
Ordinary shares
2 Venture Road, Southampton Science Park, Chilworth,
Southampton, SO16 7NP
Actual Experience plc
Quay House, The Ambury, Bath, Somerset, England, BA1 1UA
Alesi Surgical Limited:
Cardiff Medicentre, Heath Park, Cardiff, CF14 4UJ
B shares
Ordinary shares
Preferred B shares
Preferred ordinary shares
Amaethon Limited:
A ordinary shares
B ordinary shares
Ordinary shares
Anacail Limited:
A shares
Ordinary shares
Heslington Hall, Heslington, York, North Yorkshire, YO10 5DD
First Floor, South Suite, Telford Pavilion West Of Scotland
Science Park, Maryhill Road, Glasgow, Scotland, G20 0XA
AnywhereHPLC Limited
52 Princes Gate, Exhibition Road, London, SW7 2PG
Apcintex Limited:
A preference shares
B preference shares
B ordinary shares
Ordinary shares
Aperio Pharma Limited
Aptatek Biosciences, Inc.
Aqdot Limited:
EIS shares
Ordinary shares
Preferred shares
Arkivum Limited
Ordinary Shares
A Ordinary Shares
Art of Xen Limited:
A preference shares
B preference shares
Atazoa Limited
AudioScenic Limited
Ordinary Shares
A Ordinary Shares
C/o Medicxi, 25 Great Pulteney Street, London, England,
W1F 9LT
The Walbrook Building, 25 Walbrook, London, England,
EC4N 8AF
Corporation Trust Centre, 1209 Orange Street, Wilmington,
New Castle, DE 19801
Lab 1 Iconix 2 Iconix Park, London Road, Cambridge, CB22
3EG
The Walbrook Building, 25 Walbrook, London, EC4N 8AF
NHS Liaison Unit, 4th Floor, Mckenzie House, 30–36 Newport
Road, Cardiff, CF24 0DE
Skempton Building, Imperial College Room 205, Skempton
Building, Imperial College, London, London, SW7 2AZ
Suite A, Epsilon House Enterprise Road, Southampton Science
Park, Southampton, England, SO16 7NS
Proportion
of nominal
value held
%(i)
Held by
Parent/Group
32.9%
Group
30.9%
35.4%
21.2%
28.7%
100.0%
57.0%
9.7%
40.3%
27.6%
52.9%
27.6%
0.0%
39.7%
40.7%
38.8%
50.0%
27.5%
47.5%
11.0%
0.0%
0.0%
46.1%
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
40.1%
Group
45.6%
Group
0.0%
0.0%
79.7%
33.5%
35.1%
36.0%
83.5%
100.0%
100.0%
24.9%
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
33.2%
Group
38.5%
33.1%
Group
Group
1 9 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the company financial statements continued
Name of undertaking
Autifony Therapeutics Limited: Stevenage Bioscience Catalyst, Gunnels Wood Road,
Registered address
Stevenage, Hertfordshire, England, SG1 2FX
Ordinary shares
A preference shares
A2 preference shares
A3 preference shares
Azuri Technologies Limited:
A preference shares
Ordinary Shares
Boxarr Limited
St. John’s Innovation Centre, Cowley Road, Cambridge,
CB4 0WS
65 London Road, St. Albans, Hertfordshire, AL1 1LJ
Bramble Energy Limited
52 Princes Gate, Exhibition Road, London, SW7 2PG
Ordinary Shares
A Ordinary Shares
Cagen Limited
Cardian Limited:
A preferred shares
Ordinary shares
52 Princes Gate, Exhibition Road, London, SW7 2PG
30 Broad Street Broad Street, Great Cambourne, Cambridge,
England, CB23 6HJ
Cardiovascular Imaging
Solutions Limited
Suite 19 Maple Court, Grove Park, Maidenhead, Berkshire,
England, SL6 3LW
C-Capture Limited:
Leeds Innovation Centre, 103 Clarendon Road, Leeds, LS2 9DF
A preference shares
A preference (NV) shares
Ordinary shares
Celltron Networks Limited
Leeds Innovation Centre, 103 Clarendon Road, Leeds, LS2 9DF
Ceryx Medical Limited
4th Floor, 14, Museum Place, Cardiff, Wales, CF10 3BH
Ordinary Shares
A Ordinary Shares
Chip Diagnostics, Inc.
251 Little Falls Drive, Wilmington, New Castle, DE, 19808
Chromosol Limited
The Walbrook Building 25 Walbrook, London, EC4N 8AF
Clarity Vision Technologies, Inc. 1 Righter Parkway, Wilmington, Delaware, DE 19803
Convincis Limited
52 Princes Gate, London, SW7 2PG
Creavo Medical Technologies
Limited:
Leeds Innovation Centre, 103 Clarendon Road, Leeds, LS2 9DF
A shares
Ordinary shares
Z shares
Crysalin Limited:
A shares
B shares
C shares
D shares
Ordinary shares
Cynash, Inc.
Deep Matter Group plc:
OAS ordinary shares
Ordinary shares
The Walbrook Building, 25 Walbrook, London, EC4N 8AF
251 Little Falls Drive, Wilmington, New Castle, DE, 19808
The Walbrook Building, 25 Walbrook, London, England,
EC4N 8AF
Proportion
of nominal
value held
%(i)
27.6%
Held by
Parent/Group
Group
2.9%
38.4%
0.0%
35.5%
26.3%
23.0%
37.4%
45.4%
31.6%
32.9%
30.9%
45.0%
53.7%
100.0%
13.6%
24.9%
36.9%
37%
100.0%
36.3%
30.0%
20.6%
12.1%
26.8%
47.0%
34.6%
51.2%
39.9%
37.8%
100.0%
38.2%
0.0%
28.5%
0.0%
0.0%
0.0%
0.0%
30.6%
75.6%
22.2%
0.0%
22.2%
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
1 9 2
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 9 3
Notes to the company financial statements continued
Name of undertaking
Registered address
Autifony Therapeutics Limited: Stevenage Bioscience Catalyst, Gunnels Wood Road,
Stevenage, Hertfordshire, England, SG1 2FX
Proportion
of nominal
value held
Held by
%(i)
Parent/Group
27.6%
Group
Ordinary shares
A preference shares
A2 preference shares
A3 preference shares
A preference shares
Ordinary Shares
Boxarr Limited
Ordinary Shares
A Ordinary Shares
Cagen Limited
Cardian Limited:
A preferred shares
Ordinary shares
Solutions Limited
C-Capture Limited:
A preference shares
A preference (NV) shares
Ordinary shares
Ordinary Shares
A Ordinary Shares
Limited:
A shares
Ordinary shares
Z shares
Crysalin Limited:
A shares
B shares
C shares
D shares
Ordinary shares
Cynash, Inc.
Azuri Technologies Limited:
St. John’s Innovation Centre, Cowley Road, Cambridge,
CB4 0WS
Bramble Energy Limited
52 Princes Gate, Exhibition Road, London, SW7 2PG
65 London Road, St. Albans, Hertfordshire, AL1 1LJ
52 Princes Gate, Exhibition Road, London, SW7 2PG
30 Broad Street Broad Street, Great Cambourne, Cambridge,
England, CB23 6HJ
Celltron Networks Limited
Leeds Innovation Centre, 103 Clarendon Road, Leeds, LS2 9DF
Ceryx Medical Limited
4th Floor, 14, Museum Place, Cardiff, Wales, CF10 3BH
Chip Diagnostics, Inc.
251 Little Falls Drive, Wilmington, New Castle, DE, 19808
Chromosol Limited
The Walbrook Building 25 Walbrook, London, EC4N 8AF
Clarity Vision Technologies, Inc. 1 Righter Parkway, Wilmington, Delaware, DE 19803
Convincis Limited
52 Princes Gate, London, SW7 2PG
Creavo Medical Technologies
Leeds Innovation Centre, 103 Clarendon Road, Leeds, LS2 9DF
The Walbrook Building, 25 Walbrook, London, EC4N 8AF
Deep Matter Group plc:
The Walbrook Building, 25 Walbrook, London, England,
251 Little Falls Drive, Wilmington, New Castle, DE, 19808
OAS ordinary shares
Ordinary shares
EC4N 8AF
2.9%
38.4%
0.0%
35.5%
26.3%
23.0%
37.4%
45.4%
31.6%
32.9%
30.9%
45.0%
53.7%
100.0%
13.6%
24.9%
36.9%
37%
100.0%
36.3%
30.0%
20.6%
12.1%
26.8%
47.0%
34.6%
51.2%
39.9%
37.8%
100.0%
38.2%
0.0%
28.5%
0.0%
0.0%
0.0%
0.0%
30.6%
75.6%
22.2%
0.0%
22.2%
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Name of undertaking
Defenition Limited:
B ordinary shares
Ordinary shares
Diurnal Group plc
Registered address
Leeds Innovation Centre, 103 Clarendon Road, Leeds, LS2 9DF
Cardiff Medicentre, Heath Park, Cardiff, CF14 4UJ
Econic Technologies Limited:
Block 19s Alderley Park, Macclesfield, Cheshire, England, SK10 4TG
A ordinary shares
A preference shares
B preference shares
C preference shares
Ordinary shares
Edgetic Limited:
Ordinary shares
B ordinary shares
Emdot Limited
Enachip, Inc.
Leeds Innovation Centre, 103 Clarendon Road, Leeds, LS2 9DF
The Walbrook Building, 25 Walbrook, London, England, EC4N
8AF
PHS Corporate Services, Inc., 1313 N Market Street, STE, 5100,
Wilmington, New Castle, DE, 19801
Enterprise Therapeutics
Holdings Limited:
Sussex Innovation Centre Science Park Square, Falmer,
Brighton, England, BN1 9SB
Cardiovascular Imaging
Suite 19 Maple Court, Grove Park, Maidenhead, Berkshire,
England, SL6 3LW
Leeds Innovation Centre, 103 Clarendon Road, Leeds, LS2 9DF
Ordinary shares
Series A shares
Series B shares
Exyn Technologies, Inc.
203 NE Front Street STE 101, Milford, Kent, DE, 19963
Common Stock
Series A3 Preferred Stock
Series A4 Preferred Stock
FaultCurrent Limited:
The Maltings East Tyndall Street, Cardiff Bay, Cardiff, CF24 5EZ
A shares
Ordinary shares
First Light Fusion Limited:
Unit 10 Mead Road, Yarnton, Kidlington, Oxfordshire, OX5 1QU
Ordinary shares
A ordinary shares
Fluid Pharma Limited:
Leeds Innovation Centre, 103 Clarendon Road, Leeds, LS2 9DF
Ordinary shares
B ordinary shares
Garrison Technology Limited:
117 Waterloo Road, London, England, SE1 8UL
A preference shares
A1 preference shares
A2 preference shares
B preference shares
Ordinary shares
Helio Display Materials Limited The Walbrook Building, 25 Walbrook, London, EC4N 8AF
I2L Research Limited:
Capital Business Park, Wentloog, Cardiff, CF3 2PX
A ordinary shares
B ordinary shares
Ordinary shares
Ibex Innovations Limited
Explorer 2 – Netpark Thomas Wright Way, Sedgefield,
Stockton-on-Tees, TS21 3FF
Proportion
of nominal
value held
%(i)
49.5%
100.0%
48.5%
31.9%
47.9%
86.3%
41.2%
50.0%
42.9%
8.9%
49.0%
55.8%
100.0%
26.3%
Held by
Parent/Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
46.7%
Group
21.7%
Group
0.0%
47.6%
16.4%
44.8%
46.6%
32.7%
21.4%
35.7%
35.8%
35.7%
32.0%
33.1%
0.0%
40.3%
39.6%
87.1%
23.4%
94.9%
25.0%
32.9%
14.0%
0.0%
21.2%
31.0%
84.0%
13.3%
0.0%
39.1%
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
1 9 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the company financial statements continued
Name of undertaking
Ieso Digital Health Limited:
Registered address
The Stable Block The Grange, 20 Market Street, Swavesey,
Cambridge, CB24 4QG
A preference shares
A ordinary shares
B ordinary shares
Ordinary shares
Iksuda Therapeutics Limited:
The Biosphere, Draymans Way, Newcastle Helix, Newcastle
upon Tyne, NE4 5BX
A Ordinary shares
Ordinary shares
Inivata Limited:
A preference shares
Ordinary shares
Series A shares
Series B shares
Innervace, Inc.:
Instrumems, Inc.:
Common Stock
Series Seed Preferred Stock
The Portway Granta Park, Great Abington, Cambridge, CB21 6GS
University of Pennsylvania, Philadelphia, PA 19104, United States
Corporation Trust Centre, 1209 Orange Street, Wilmington,
New Castle, DE 19801
Intelligent Ultrasound Group plc: Floor 6A, Hodge House, 114-116 St Mary Street, Cardiff, CF10 1DY
A Shares
Ordinary Shares
Intrinsic Semiconductor
Technologies Limited
Ucl Business Plc, The Network Building, 97 Tottenham Court
Road, London, United Kingdom, W1T 4TP
Proportion
of nominal
value held
%(i)
46.2%
Held by
Parent/Group
Group
46.9%
85.1%
0.0%
18.0%
32.2%
50.0%
23.1%
21.4%
37.5%
0.0%
31.7%
26.0%
26.7%
51.3%
43.4%
67.0%
21.1%
0.0%
21.1%
43.4%
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Ionix Advanced Technologies
Limited
Windsor House, Cornwall Road, Harrogate, England, HG1 2PW
29.2%
Group
B Ordinary Shares
Ordinary Shares
Ipalk SAS
IR Pharma Limited
Istesso Limited:
A shares
Ordinary shares
Judo Security, Inc.
Lixea Limited:
Lorem Pharmaceuticals, Inc.
Lumiode, Inc.
Common Stock
Series A Shares
112 rye des hautes variennes, 45200, Amilly France
1st Floor Sir Alexander Fleming Building, Imperial College
London Exhibition Road, London, SW7 2AZ
The Walbrook Building, 25 Walbrook, London, EC4N 8AF
2508 Lorentz Plane North, Seattle, WA 98108, United States
The Walbrook Building, 25 Walbrook, London, England, EC4N
8AF
Renaissance Centre, 405 North King Street, Suite 500,
Wilmington, New Castle, DE, 19801
Corporation Trust Centre, 1209 Orange Street, Wilmington,
New Castle, DE 19801
Magnomatics Limited:
Park House, Bernard Road, Sheffield, S2 5BQ
A shares
B shares
C shares
Ordinary shares
Metabometrix Limited
10 Fern Hill, Dersingham, King’s Lynn, Norfolk, England, PE31 6HT
100.0%
29.1%
23.5%
28.0%
44.9%
75.6%
42.7%
54.9%
33.3%
Group
Group
Parent
Parent
Parent
Group
Group
34.5%
Group
39.5%
Group
49.7%
27.1%
37.8%
52.1%
100.0%
100.0%
15.3%
23.0%
Group
Group
Group
Group
Group
Group
Group
Group
1 9 4
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 9 5
Notes to the company financial statements continued
Name of undertaking
Registered address
Ieso Digital Health Limited:
The Stable Block The Grange, 20 Market Street, Swavesey,
46.2%
Group
Cambridge, CB24 4QG
Proportion
of nominal
value held
Held by
%(i)
Parent/Group
Iksuda Therapeutics Limited:
The Biosphere, Draymans Way, Newcastle Helix, Newcastle
upon Tyne, NE4 5BX
The Portway Granta Park, Great Abington, Cambridge, CB21 6GS
A preference shares
A ordinary shares
B ordinary shares
Ordinary shares
A Ordinary shares
Ordinary shares
Inivata Limited:
A preference shares
Ordinary shares
Series A shares
Series B shares
Innervace, Inc.:
Instrumems, Inc.:
Common Stock
Series Seed Preferred Stock
A Shares
Ordinary Shares
Limited
B Ordinary Shares
Ordinary Shares
Ipalk SAS
Istesso Limited:
A shares
Ordinary shares
Judo Security, Inc.
Lixea Limited:
Common Stock
Series A Shares
A shares
B shares
C shares
Ordinary shares
University of Pennsylvania, Philadelphia, PA 19104, United States
Corporation Trust Centre, 1209 Orange Street, Wilmington,
New Castle, DE 19801
Intelligent Ultrasound Group plc: Floor 6A, Hodge House, 114-116 St Mary Street, Cardiff, CF10 1DY
Intrinsic Semiconductor
Ucl Business Plc, The Network Building, 97 Tottenham Court
Technologies Limited
Road, London, United Kingdom, W1T 4TP
Ionix Advanced Technologies
Windsor House, Cornwall Road, Harrogate, England, HG1 2PW
29.2%
Group
IR Pharma Limited
1st Floor Sir Alexander Fleming Building, Imperial College
112 rye des hautes variennes, 45200, Amilly France
London Exhibition Road, London, SW7 2AZ
The Walbrook Building, 25 Walbrook, London, EC4N 8AF
2508 Lorentz Plane North, Seattle, WA 98108, United States
The Walbrook Building, 25 Walbrook, London, England, EC4N
8AF
Lorem Pharmaceuticals, Inc.
Renaissance Centre, 405 North King Street, Suite 500,
34.5%
Group
Lumiode, Inc.
Corporation Trust Centre, 1209 Orange Street, Wilmington,
39.5%
Group
Wilmington, New Castle, DE, 19801
New Castle, DE 19801
Magnomatics Limited:
Park House, Bernard Road, Sheffield, S2 5BQ
Metabometrix Limited
10 Fern Hill, Dersingham, King’s Lynn, Norfolk, England, PE31 6HT
46.9%
85.1%
0.0%
18.0%
32.2%
50.0%
23.1%
21.4%
37.5%
0.0%
31.7%
26.0%
26.7%
51.3%
43.4%
67.0%
21.1%
0.0%
21.1%
43.4%
100.0%
29.1%
23.5%
28.0%
44.9%
75.6%
42.7%
54.9%
33.3%
49.7%
27.1%
37.8%
52.1%
100.0%
100.0%
15.3%
23.0%
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Parent
Parent
Parent
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Name of undertaking
Microbiotica Limited:
Seed shares
Ordinary shares
Mixergy Limited
Ordinary Shares
A Ordinary Shares
Registered address
Biodata Innovation Centre Wellcome Genome Campus,
Hinxton, Cambridge, Cambridgeshire, CB10 1DR
30 Upper High Street, Thame, Oxfordshire, OX9 3EZ
MOBILion Systems, Inc.
4 Hillman Drive, Suite 130, Chadds Ford, PA 19317
A preferred stock
Common stock
Series B Preferred Stock
Nascient Limited:
A shares
Ordinary shares
Preferred shares
NGenics Global Limited
30 Broad Street, Great Cambourne, Cambridge,
Cambridgeshire, CB23 6HJ
The Catalyst Baird Lane, Heslington, York, North Yorkshire,
YO10 5GA
Optimeos Life Sciences, Inc
251 Little Falls Drive, Wilmington, Delaware, 19808
Oxehealth Limited
Sadler Building Heatley Road, Oxford Science Park, Oxford,
Oxfordshire, OX4 4GE
Oxford Biotrans Limited:
30 Upper High Street, Thame, Oxfordshire, OX9 3EZ
Ordinary shares
Seed preferred shares
OxSyBio Limited:
The Walbrook Building, 25 Walbrook, London, C4N 8AF
A shares
Ordinary shares
Preference shares
Oxular Limited:
A preferred shares
Ordinary shares
Perachem Holdings Plc
Perlemax Limited
Perpetuum Limited:
Ordinary shares
Series B shares
Series C shares
Series C1 shares
Preference shares
Magdalen Centre, Robert Robinson Avenue, Oxford, OX4 4GA
C/O Valentine & Co 1st Floor Galler House, Moon Lane, Barnet,
EN5 5YL
The Sheffield Bioincubator, 40 Leavy Greave Road, Sheffield,
S3 7RD
2 Venture, Southampton Science Park, Chilworth,
Southampton, SO16 7NP
Ph Therapeutics Limited
The Innovation Centre, 217 Portobello, Sheffield, S1 4DP
Quantima Limited
Reinfer Limited:
Seed Preference shares
Ordinary shares
Leeds Innovation Centre, 103 Clarendon Road, Leeds, West
Yorkshire, United Kingdom, LS2 9DF
Mindspace Whitechapel, 114 Whitechapel High Street, London,
E1 7PT
Proportion
of nominal
value held
%(i)
27.4%
Held by
Parent/Group
Group
39.8%
0.0%
27.4%
27.9%
21.1%
38.7%
38.9%
100.0%
16.0%
73.2%
0%
50.0%
100.0%
29.6%
41.8%
34.6%
42.3%
13.7%
70.4%
43.9%
100.0%
45.8%
40.0%
33.3%
56.2%
0.0%
46.2%
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
34.5%
Group
22.0%
Group
33.1%
13.4%
30.4%
0.0%
0.0%
60.0%
42.9%
Group
Group
Group
Group
Group
Group
Group
23.0%
Group
71.9%
0.0%
Group
Group
1 9 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Notes to the company financial statements continued
Name of undertaking
RFC Power Limited:
Ordinary Shares
T Ordinary Shares
Registered address
Windsor House, Cornwall Road, Harrogate, England, HG1 2PW
Riotech Pharmaceuticals
Limited
49 Arrivato Plaza, Hall Street, St Helens, United Kingdom,
WA10 1GH
Silicon Microgravity Limited:
Clarendon House, Clarendon Road, Cambridge, CB2 8FH
B Preference shares
Seed Preferred shares
SkyStrata, Inc.
Spinetic Energy Limited
The Old Post Office, 41-43 Market Place, Chippenham,
Wiltshire, England, SN15 3HR
Stratium Limited
15th Floor Brunel House, 2 Fitzalan Road, Cardiff, CF24 0EB
Surrey NanoSystems Limited:
The Walbrook Building, 25 Walbrook, London, England,
EC4N 8AF
A Ordinary shares
A2 Ordinary shares
Ordinary shares
Sweetgen Limited
Telectica Limited:
Ordinary shares
A Ordinary shares
Seed Preferred shares
52 Princes Gate, Exhibition Road, London, England, SW7 2PG
49 Burnham Road, St. Albans, Hertfordshire, AL1 4QN
Therapeutic Frontiers Limited Gowran House, 56 Broad Street, Chipping Sodbury, Bristol,
Topivert Limited:
265 Strand, London, WC2R 1BH
BS37 6AG
A Ordinary shares
A Preference shares
B1 Preferred shares
B2 Preferred shares
Ordinary shares
TriboSim Limited
Tunoptix, Inc.
Ubiquigent Limited
49 Station Road Tribosim Ltd, Polegate, East Sussex, England,
BN26 6EA
2508 Lorentz Pl North, Seattle, WA 98109, United States
Dundee University Incubator Dundee Technopole, James
Lindsay Place, Dundee, DD1 5JJ
Ultraleap Holdings Ltd:
The West Wing, Glass Wharf, Bristol, BS2 0EL
B Ordinary shares
Ordinary shares
C Preference shares
Preference shares
Proportion
of nominal
value held
%(i)
28.4%
24.6%
100.0%
24.9%
27.7%
47.2%
71.9%
28.8%
29.6%
57.1%
21.1%
17.4%
9.1%
32.2%
50.0%
26.4%
0.0%
0.0%
90.5%
25.8%
28.7%
37.8%
0.0%
34.0%
37.1%
1.8%
22.5%
57.8%
39.3%
27.6%
0.0%
44.7%
1.8%
28.0%
Held by
Parent/Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
1 9 6
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 9 7
Notes to the company financial statements continued
Registered address
Windsor House, Cornwall Road, Harrogate, England, HG1 2PW
Riotech Pharmaceuticals
49 Arrivato Plaza, Hall Street, St Helens, United Kingdom,
Limited
WA10 1GH
Silicon Microgravity Limited:
Clarendon House, Clarendon Road, Cambridge, CB2 8FH
Held by
%(i)
Parent/Group
Proportion
of nominal
value held
28.4%
24.6%
100.0%
24.9%
Name of undertaking
RFC Power Limited:
Ordinary Shares
T Ordinary Shares
B Preference shares
Seed Preferred shares
SkyStrata, Inc.
A Ordinary shares
A2 Ordinary shares
Ordinary shares
Sweetgen Limited
Telectica Limited:
Ordinary shares
A Ordinary shares
Seed Preferred shares
A Ordinary shares
A Preference shares
B1 Preferred shares
B2 Preferred shares
Ordinary shares
TriboSim Limited
B Ordinary shares
Ordinary shares
C Preference shares
Preference shares
Spinetic Energy Limited
The Old Post Office, 41-43 Market Place, Chippenham,
Wiltshire, England, SN15 3HR
Stratium Limited
15th Floor Brunel House, 2 Fitzalan Road, Cardiff, CF24 0EB
Surrey NanoSystems Limited:
The Walbrook Building, 25 Walbrook, London, England,
EC4N 8AF
52 Princes Gate, Exhibition Road, London, England, SW7 2PG
49 Burnham Road, St. Albans, Hertfordshire, AL1 4QN
Therapeutic Frontiers Limited Gowran House, 56 Broad Street, Chipping Sodbury, Bristol,
Topivert Limited:
265 Strand, London, WC2R 1BH
BS37 6AG
49 Station Road Tribosim Ltd, Polegate, East Sussex, England,
BN26 6EA
Tunoptix, Inc.
2508 Lorentz Pl North, Seattle, WA 98109, United States
Ubiquigent Limited
Dundee University Incubator Dundee Technopole, James
Ultraleap Holdings Ltd:
The West Wing, Glass Wharf, Bristol, BS2 0EL
Lindsay Place, Dundee, DD1 5JJ
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
27.7%
47.2%
71.9%
28.8%
29.6%
57.1%
21.1%
17.4%
9.1%
32.2%
50.0%
26.4%
0.0%
0.0%
90.5%
25.8%
28.7%
37.8%
0.0%
34.0%
37.1%
1.8%
22.5%
57.8%
39.3%
27.6%
0.0%
44.7%
1.8%
28.0%
Name of undertaking
UMIP Project 003 Limited
Registered address
PO Box 4385, 09150911: COMPANIES HOUSE DEFAULT
ADDRESS, Cardiff, CF14 8LH
Uniformity Labs, Inc.
41400 Christy Street, Fremont, CA 94538, USA
Common Stock
Series B Preferred Shares
Uniphy Limited
A shares
Ordinary shares
Zeetta Networks Limited
Ordinary shares
Preference shares
Zihipp Limited
Zoompast Limited
Leeds Innovation Centre, 103 Clarendon Road, Leeds, LS2 9DF
The Walbrook Building, 25 Walbrook, London, United
Kingdom, EC4N 8AF
Da Vinci House, Basing View, Basingstoke, Hampshire, RG21 4EQ
Office 7, 35-37 Ludgate Hill, London, EC4M 7JN
Proportion
of nominal
value held
%(i)
33.3%
Held by
Parent/Group
Group
29.2%
25.8%
51.0%
39.0%
16.0%
39.1%
26.6%
12.3%
33.9%
30.9%
31.3%
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
Group
(i) All holdings are via Ordinary Shares unless separate classes are specified in the table.
(ii) A fund in which the Group is a limited partner. Proportion of nominal value stated is equivalent to capital contributed to the partnership
in question.
All companies above are incorporated in the United Kingdom with the exception of Aptatek Biosciences, Inc., Chip
Diagnostics, Inc., Clarity Vision Technologies, Inc., Cynash, Inc., Enachip, Inc., Exyn Technologies, Inc., Innervace, Inc.,
Instrumems, Inc., Judo Security, Inc., Lorem Pharmaceuticals, Inc., Lumiode, Inc., MOBILion Systems, Inc., Optimeos Life
Sciences, Inc., SkyStrata, Inc., Tunoptix, Inc. and Uniformity Labs, Inc. which were incorporated in Delaware, USA, Ipalk
SAS which was incorporated in France. 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.
1 9 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Shareholder notes
1 9 8
IP Group plc
Annual Report and Accounts for the year ended 31 December 2020
Stock Code:
IPO
Business Overview
Strategic Report
Our Governance
Our Financials
1 9 9
Shareholder notes
Company information
Company registration number
Brokers
04204490
Registered office
The Walbrook Building
25 Walbrook
London
EC4N 8AF
Directors
Sir Douglas Jardine Flint
(Non-executive Chairman)
Alan John Aubrey
(Chief Executive Officer)
Michael Charles Nettleton Townend
(Chief Investment Officer)
Gregory Simon Smith
(Chief Financial Officer)
David Graham Baynes
(Chief Operating Officer)
Jonathan Brooks
(Non-executive Director)
(resigned from the Board on 10 March 2020)
Dr Caroline Anne Brown
(Non-executive Director)
Heejae Richard Chae
(Non-executive Director)
Aedhmar Hynes
(Non-executive Director)
Dr Elaine Sullivan
(Non-executive Director)
Professor David Knox Houston Begg
(Senior Independent Director)
Company secretary
Angela Leach
Bank of America Merrill Lynch
Financial Centre
2 King Edward Street
London
EC1A 1HQ
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
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
Pinsent Masons LLP
30 Crown Place
Earl Street
London
EC2A 4ES
Independent auditor
KPMG LLP
15 Canada Square
London
E14 5GL
IP Group plc Top Floor,The Walbrook Building,25 Walbrook,London, EC4N 8AFT +44 (0)20 7444 0050F +44 (0)20 7929 6415www.ipgroupplc.comIP Group plc Annual Report and Accounts for the year ended 31 December 2020