IP Group announces £20mn share buyback programme

IP Group’s (IPO) discount to net assets was broadly static from the half-year rate at 57 per cent. But management has taken the decision to pause dividend payments in favour of a £20mn share buyback programme to capture and hopefully narrow the discount in the process. This amounts to more than just tinkering at the margins. The intellectual property investor has returned over £75mn to shareholders through dividends and buybacks since 2021.

Prospects for further returns are dependent to an extent on what IP terms its “multiple near-term value creation opportunities”. There are several candidates coming into view, with 10 companies now in clinical studies, with key data expected by the end of 2025. The group has prioritised its “highest-growth opportunities”, while deprioritising future investment in the US platform and canning plans for the China growth fund.

The group saw mixed outcomes through a challenging year characterised by asset write-downs and interest rate pressure. The market value of Oxford Nanopore (ONT), in which the group owns a 9.8 per cent stake, marched back through the year, while the unrealised 2022 gain on its stake in First Light Fusion was reversed. However, other investments, most notably the position in Hysata Pty Ltd, saw valuation uplifts. The Australian company's electrolyser tech continues to gain support as the energy transition inches forward.

Management maintains that valuations for unlisted stocks could find support from initiatives announced by the UK chancellor, particularly in relation to UK retirement savings schemes. But in an election year, group chairman Sir Douglas Flint notes that “risk appetite will remain cautious until at least the electoral map has settled, and potential policy changes are digested”. Hold.

Last IC view: Hold, 57p, 2 Aug 2023