Interim Results for the six months to 31 Dec 2013

RNS Number : 5168D

Port Erin Biopharma Investments Ltd

31 March 2014

 



Port Erin Biopharma Investments Limited

("Port Erin" or the "Company")

Interim Results for the six month period ending 31 December 2013

The Board of Port Erin, the AIM quoted company focussed on investing in the biotechnology and biopharmaceutical sectors, is pleased to announce its interim results for the six month period ending 31 December 2013.

Financial Highlights

As at 31 December 2013 Profit £1,787,086 Earnings per share 5.28 pence Total assets £5,798,952

For further information, please contact:-

Port Erin Biopharma Investments Limited Denham Eke	([phone]
Beaumont Cornish Roland Cornish / Felicity Geidt	[phone]
Peterhouse Corporate Finance Limited John Levinson	[phone]

Chairman's statement

Introduction

I have great pleasure in presenting the Interim Results for the period ending 31 December 2013.

The Company not only recorded a net profit of £1.8 million for the six months, but also following the General Meeting of Shareholders on 11 November 2013, we amended our investing policy to allow for an in specie transfer of cash and assets to acquire 324,174 shares in the Magna Biopharma Investment Fund ("MBIF") at €10 per share which was completed on 6 December 2013. The latter followed a strategic review to eliminate the significant discount to Net Asset Value implicit in the Company's share price.

MBIF, as a UCITS fund, is a distinctive new investment proposition, providing exposure to technological innovation but with an attractive income. The investment advisors, including myself, have a proven track record in the Biopharma sector. The advantages of this acquisition to the Company include daily dealing of the fund with no discount to Net Asset Value and a performance fee charged on a relative basis to the MSCI World Health Care Net EUR Index, rather than the absolute basis charged before.

As set out in the circular, at the end of a 12 month lock-in period, the Directors intend to put further proposals to return value to shareholders, either by transferring the Fund's shares as a dividend distribution, share buy-back or other de-merger of assets, in order to realise value for shareholders based on the then proportional Net Asset Value of MBIF shares. By transferring the majority of the investment portfolio in this way, the Company will be able to distribute or sell the MBIF shares at the end of the lock-in period at a price based on the MBIF's Net Asset Value and thereby procure a better return to all shareholders.

Financial Review

During the period, our investment income including dividends, net realised gains on sales, and net unrealised gains was £2,340,447 (2012: £72,881). Operating expenses, including the performance fee and the professional fees in connection with the in specie purchase of the Magna Biopharma Income shares, were £553,384 (2012: £68,804), resulting in profit for the period of £1,787,086 (2012: £9,866).

Thus the basic and diluted earnings per share were 5.28 pence (2012: 0.03 pence).

Our invested assets at fair value were £4,991,105 (2012: £3,031,135), cash and equivalents were £802,741 (2012: £101,241). Adding receivables of £5,106 (2012: £9,035), our total assets stood at £5,798,952 (2012: £3,141,411).

Our share premium increased to £2,759,551 (2012: £2,699,013) and our retained earnings increased to £2,627,452 (2012: £435,075).

Thus the net asset value per share at 31 December 2013 was 15.9 pence (2012: 9.5 pence), an increase of 10.5%.

Strategy and Outlook

Since our acquisition, MBIF generated a net euro return of 6.1% in January 2014, the first full month of operation and comfortably ahead of the 2.8% rise seen in its MSCI World Health Care Index benchmark. The latest available figures for February 2014 showed a further positive month with widespread gains led once again by the biotech sector, which comprises 35% of the portfolio. The Fund generated a net euro return of 3.6% over the month, slightly below the 4.5% rise seen in its MSCI World Health Care Index benchmark. Since launch the Fund is up 12.2%, some 3% ahead of its benchmark.

The fund advisors believe that, in the coming year, important positive announcements will be made for the treatment of currently difficult to treat cancers like melanoma and lung cancer, with immunotherapy and its combinations at big pharmaceutical companies. The MBIF portfolio has been positioned to provide investors with exposure to all of these developments, and also to mitigate the extreme volatility that is inherent in the smaller to medium sized companies in the sector.

By acquiring MBIF shares, thus providing a clear exit strategy for shareholders, the Company has well positioned itself to consider other acquisitions in the sector. Your board is currently considering a number of exciting options which show significant promise.

Jim Mellon

Chairman

Statement of comprehensive income

	Notes		Period ended 31/12/2013 (unaudited)	Period ended 31/12/2012 (unaudited)	Year ended 30/06/2013 (audited)
			£	£	£
Investment Income	3		2,340,447	72,881	588,966
Operating expenses
Directors' fees	2,5		(7,233)	(5,000)	(12,192)
Performance fee			(379,057)	-	(60,539)
Other costs	4		(93,276)	(57,231)	(112,428)
Foreign exchange (losses)/gains			(73,818)	(6,573)	2,662
			────────	────────	────────
Profit from operating activities	5		1,787,063	4,077	406,469
Interest received			23	5,789	8,689
			────────	────────	────────
Profit before taxation			1,787,086	9,866	415,158
Taxation			-	-	-
			────────	────────	────────
Profit for the period/year			1,787,086	9,866	415,158
Other comprehensive income			-	-	-
			────────	────────	────────
Total comprehensive income for the period/year			1,787,086	9,866	415,158
			════════	════════	════════
Basic and diluted earnings per share	12		5.28 pence	0.03 pence	1.25 pence

The Directors consider that the Company's activities are continuing.

Statement of financial position

	Notes		31/12/2013 (unaudited)	31/12/2012 (unaudited)	30/06/2013 (audited)
			£	£	£
Current assets
Financial assets at fair value through             profit or loss	7		4,991,105	3,031,135	2,916,930
Trade and other receivables			5,106	9,035	7,797
Cash and cash equivalents			802,741	101,241	707,624
			────────	────────	────────
Total assets			5,798,952	3,141,411	3,632,351
			════════	════════	════════
Equity and liabilities
Capital and reserves
Share capital	6		34	33	34
Share premium	6		2,759,551	2,699,013	2,759,551
Retained earnings			2,627,452	435,074	840,366
			────────	────────	────────
			5,387,037	3,134,120	3,599,951
Current liabilities
Trade and other payables	9		411,915	7,291	32,400
			────────	────────	────────
Total equity and liabilities			5,798,952	3,141,411	3,632,351
			════════	════════	════════

These financial statements were approved by the Board of Directors on 28 March 2014 and were signed on their behalf by:

Denham Eke

Director

Statement of changes in equity

	Notes	Share Capital £		Share Premium £		Retained Profit £		Total £
Balance at 01 July 2013 (audited)		34		2,759,551		840,366		3,599,951
Total comprehensive income for the period		-		-		1,787,086		1,787,086
Shares issued	6	-		-		-		-
		_________		_________		_________		_________
Balance at 31 December 2013 (unaudited)		34		2,759,551		2,627,452		5,387,037
		═══════		═══════		═══════		═══════

	Notes	Share Capital £		Share Premium £		Retained Profit £		Total £
Balance at 01 July 2012 (audited)		33		2,699,013		425,208		3,124,254
Total comprehensive income for the period		-		-		9,866		9,866
Shares issued	6	-		-		-		-
		_________		_________		_________		_________
Balance at 31 December 2012 (unaudited)		33		2,699,013		435,074		3,134,120
		═══════		═══════		═══════		═══════

Statement of cash flows

	Notes	Period ended 31/12/ 2013	Period ended 31/12/ 2012	Year ended 30/06/2013
		(unaudited)	(unaudited)	(audited)
		£	£	£
Cash flows from operating activities
Profit for the period/year		1,787,086	9,866	415,158
Adjusted for:
Interest received		(23)	(5,789)	(8,689)
Realised and unrealised gains	3	(2,338,021)	(66,341)	(572,667)
Services settled by way of issue of shares		-	-	60,539
		───────	───────	───────
Operating loss before changes in working capital		(550,958)	(62,264)	(105,659)
Decrease in receivables		2,691	545	1,783
Increase/(decrease) in payables		379,515	(24,610)	500
		───────	───────	───────
Net cash outflow from operating activities		(168,752)	(86,329)	(103,376)
		───────	───────	───────
Cash flows from investing activities
Purchase of investments		(3,395,510)	(532,831)	(1,720,400)
Proceeds from sale of investments		3,659,356	483,004	2,285,320
Interest received		23	6	8,689
		───────	───────	───────
		263,869	(49,821)	573,609
		───────	───────	───────
(Decrease)/increase in cash and cash equivalents		95,117	(136,150)	470,233
Cash and cash equivalents at beginning of period/year		707,624	237,391	237,391
		───────	───────	───────
Cash and cash equivalents at the end of period/year		802,741	101,241	707,624
		═══════	═══════	═══════

Notes to the financial statements

1          Accounting policies

             Port Erin Biopharma Investments Limited is a Company domiciled in the Isle of Man. The Company's strategy is to create value for Shareholders through investing in companies that have the potential to generate substantial revenues through the development of biopharmaceutical drugs.

             The principal accounting policies are set out below.

             a)         Statement of compliance

These condensed interim financial statements have been prepared in accordance with IAS34 Interim Financial Reporting and do not include all of the information required for full annual financial statements..

                         The financial statements were approved by the Board of Directors on 28 March 2014.

             b)         Basis of preparation

                         Use of estimates and judgment

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period or in the period of the revision and future periods if the revision affects both current and future periods.

                         Going concern

The financial statements have been prepared on a going concern basis, taking into consideration the level of cash and cash equivalents and short term investments held by the Company. The Directors have a reasonable expectation that the Company will have adequate resources for its continuing existence and projected activities for the foreseeable future, and for these reasons, continue to adopt the going concern basis in preparing the financial statements for the period ended 31 December 2013.

Functional and presentation currency

These financial statements are presented in Pound Sterling which is the Company's functional currency and rounded to the nearest Pound.

c)         Significant accounting policies

The accounting policies adopted by the Company in the preparation of these condensed interim financial statements are the same as those applied by the Company in its financial statements as at and for the year ended 30 June 2013. There were no new accounting policies adopted during the period.

The audited financial statements of the Company as at and for the year ended 30 June 2013 are available at the Company's website below:

http://www.porterinbiopharma.com/financial_reports.php

2          Directors' fees

The fees of Directors who served during the period to 31 December 2013 were as follows:

	31/12/13 (unaudited) £	31/12/12 (unaudited) £	30/06/2013 (audited) £
James Mellon	-	-	-
Nicholas James Woolard	-	5,000	10,000
Denham Eke	-	-	-
Alexander Anderson Stuart Whamond	7,233	-	2,192
	───────	───────	───────
	7,233	5,000	12,192

On 6 May 2011, Shellbay Investments Limited entered into a letter of appointment with the Company to provide the services of James Mellon as Non-Executive Chairman of the Company. Remuneration under the letter of appointment shall be payable to Shellbay Investments Limited and shall be satisfied by the issue of such number of Ordinary Shares equivalent to 15.0 per cent. of any increase in the Net Asset Value of the Company over each quarterly period. There are no provisions providing for any benefit to Shellbay Investments Limited or James Mellon on the termination of the engagement. The Director of Shellbay Investments Limited has agreed to waive any share-based payments until the Net Asset Value of each share exceeds 10.00 pence.

On the 6 December 2013, the Company agreed that the Management Fee of £353,041 for the period to 30 September 2013 shall be settled by the transfer of sufficient Fund Shares from the Company to Shellbay (each with an implied price equal to the Subscription Price) in full and final settlement of the September 2013 Management Fee. Shellbay agreed that the current Management Agreement shall be amended so that no further fees relating to the Magna Biopharma Income Fund (MBIF) Shares under the current Management Agreement shall be due and the current "high watermark" rebased to reflect the value of the other assets remaining in the Company following the Subscription. Any future fees due to Shellbay will be settled by the transfer of MBIF Shares at the offer price prevailing on the quarterly valuation date

On 6 May 2011 Nicholas James Woolard entered into a letter of appointment with the Company to provide services as a Non-Executive Director of the Company. The letter of appointment was for an initial period of twelve months, from 16 May 2011, and may be terminated on not less than three months' notice given by either party to the other at any time. The letter of appointment contains provisions for early termination, inter alia, in the event of a breach by Nicholas James Woolard. Remuneration under the letter of appointment was for an annual fee of £10,000 payable on a quarterly basis. There are no provisions providing for any benefit to Nicholas James Woolard on the termination of the engagement. Nicholas Woolard resigned from his position on 12 April 2013.

Denham Eke, appointed a Director on 30 May 2012, currently receives no remuneration for providing his services.

As at 6 December 2013, the value of non-MBIF assets held by the Company was £2,052,035. As at the 31 December 2013, the value of non-MBIF assets had increased to £2,225,475. Thus, under the revised Shellbay Letter of Appointment, the increase in Net Asset Value of £173,440.15 will be settled by a performance fee of 15%, which is £26,016.

At present, there are no other fees due by the Company in respect of investment management services.

3          Investment income

	31/12/2013 (unaudited) £	31/12/2012 (unaudited) £	30/06/2013 (audited) £
Dividend income	2,426	6,541	16,299
Net realised gains on sale of investments	966,330	50,529	769,484
Net unrealised gains on investments	1,371,691	15,812	(196,817)
	───────	───────	───────
	2,340,447	72,881	588,966

4          Other costs

	31/12/2013 (unaudited) £	31/12/2012 (unaudited) £	30/06/2013 (audited) £
Auditors' remuneration for the current period/year	8,625	7,200	14,904
Bank charges	209	119	415
Insurance	3,193	3,176	6,283
Marketing	3,575	72	72
Professional fees	77,299	46,664	86,555
Sundry expenses	375	-	4,199
	───────	───────	───────
	93,276	57,231	112,428

             The Company has no employees other than the Directors.

5          Profit from operating activities

             Profit from operating activities is stated after charging:

	31/12/2013 (unaudited) £	31/12/2012 (unaudited) £	30/06/2013 (audited) £
Auditors' fees	8,625	7,200	14,400
Directors' fees	7,233	5,000	10,000
	───────	───────	───────
	15,858	12,200	24,400

6          Share capital and share premium

             Each share in the Company confers upon the shareholder:

·   the right to one vote at a meeting of the shareholders or on any resolution of shareholders;

·   the right to an equal share in any dividend paid by the Company, and

·   the right to an equal share in the distribution of the surplus assets of the Company on its liquidation

             The Company may by resolution of Directors redeem, purchase or otherwise acquire all or any of the shares in the Company subject to regulations set out in the Company's Articles of Association.

	31/12/2013 (unaudited) £		31/12/2012 (unaudited) £		30/06/2013 (audited £
Authorised
2,000,000,000 Ordinary shares of £0.000001	2,000		2,000		2,000
	═══════		═══════		═══════
	No. of Shares		Share Capital £		Share Premium £
Balance at 01 July 2012/ 31 December 2013	33,000,000		33		2,699,013
Shares issued in settlement of services	864,836		1		60,538
	───────		───────		───────
Balance at 30 June 2013/ 31 December 2013	33,864,836		34		2,759,551
	═══════		═══════		═══════

On 9 April 2013 the Company issued 864,836 ordinary shares at a price of £0.07 each resulting in share premium of £60,538. The shares were issued to Shellbay Investments Limited in settlement of services provided to the Company (see note 2)

Capital management

The Company manages its capital to maximise the return to shareholders through the optimisation of equity. The capital structure of the Company as at 31 December 2013 consists of equity attributable to equity holders of the Company, comprising issued capital, reserves and retained earnings as disclosed.

The Company manages its capital structure and makes adjustments to it in the light of economic conditions and the strategy approved by shareholders. To maintain or adjust the capital structure, the Company may make dividend payment to shareholders, return capital to shareholders or issue new shares and release the share premium account. No changes were made in the objectives, policies or processes during the period under review.

Dividends

No dividends were declared or proposed by the Directors during the period (31 December 2012: Nil).

7          Financial assets at fair value through profit or loss

	31/12/2013 (unaudited) £	31/12/2012 (unaudited) £	30/06/2013 (audited) £
Quoted	4,671,135	2,709,427	2,667,817
Unquoted	319,970	321,708	249,113
	───────	───────	───────
	4,991,105	3,031,135	2,916,930
	═══════	═══════	═══════
Equities	4,901,454	3,007,987	2,900,677
Warrants	89,651	23,148	16,253
	───────	───────	───────
	4,991,105	3,031,135	2,916,930
	═══════	═══════	═══════

8          Financial instruments

             Financial Risk Management

All aspects of the Company's financial risk management objectives and policies are consistent with those disclosed in the financial statements as at and for the year ended 30 June 2013.

9          Trade and other payables

	31/12/2013	31/12/2012	30/06/2013
	(unaudited) £	(unaudited) £	(audited) £
Provision for audit fee	7,500	7,200	18,000
Shellbay Investments Limited	379,057	-	-
Other	25,358	90	14,400
	───────	───────	───────
	411,915	7,290	32,400

10        Share warrants

At the date of admission to AIM, the Company issued 30,000,000 non-transferable warrants, entitling the holder to subscribe for one new ordinary share for every placing share, and which will not be admitted to trading on AIM. The warrants were exercisable for 12.5 pence at any time within two years of the date of issue. The warrant exercise was either at the option of the holder or at the option of the Company, in the event that the closing price of the ordinary shares was more than 20 pence for five consecutive trading days. In considering the share subscription price, the lack of historic share price performance data, and the price and conditions attaching to exercise, the Directors deemed that the warrants had no separate value from the shares issued on the Company's admission to AIM.

             All warrants lapsed on 15 September 2013 and there were thus no warrants in issue at the year-end.

11        Related party transaction

Under an agreement dated 1 December 2011, Burnbrae Limited, a Company related to both James Mellon and Denham Eke, provide certain services, principally accounting and administration, to the Company. This agreement may be terminated by either party on three months' notice. The Company incurred a total cost of £18,000 (31 December 2012: £18,000) during the period under this agreement of which £ Nil was outstanding as at the period end (31 December 2012: £ Nil).

12         Basic and diluted earnings per share

The calculation of basic earnings per share of the Company is based on the profit for the period of £1,787,086 (31 December 2012: £9,866) and the weighted average number of shares of 33,864,836 (31 December 2012: 33,000,000) in issue during the period.

Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares such as warrants and options. There is no dilutive effect at 31 December 2013 because the warrants have lapsed.

13         Commitments and contingent liabilities

There are no known commitments or contingent liabilities as at the period end.

14         Events after the reporting date

There have been no material events since the reporting date that require disclosure in the interim financial statements.

 

END

 

 

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