Hygea VCT plc : Half-yearly report for the Six ...
For Immediate Release
14 August 2013
Hygea vct plc
Unaudited Half-Yearly Report for the Six Months Ended 30 June 2013
Financial Headlines
| 112.8p | Net Asset Value per share at 30 June 2012 |
| 21.25p | Cumulative dividends paid to date |
| 134.05p | Total return per share since launch |
| 3p | Dividends declared for the period |
| £260K | Amount invested into new and existing portfolio companies during the period |
Financial Summary
| Six months to 30 June 2013 | Six months to 30 June 2012 | Year to 31 December 2012 | |
| Net assets (£'000s) | 9,156 | 5,457 | 9,594 |
| Return on ordinary activities after tax (£'000s) | (438) | (276) | 3,861 |
| Earnings per share | (5.4)p | (3.4)p | 47.6p |
| Net asset value per share | 112.8p | 67.2p | 118.2p |
| Dividends paid to date | 21.25p | 21.25p | 21.25p |
| Total return per share | 134.05p | 88.45p | 139.45p |
| Dividends declared for the period | 3p | 0p | 0p |
About Hygea vct plc
Hygea vct plc ("the Company") is a Venture Capital Trust (VCT). Since 30 July 2007, the Board has managed the Company. The Company was launched in October 2001 and raised over £7 million through an offer for subscription.
The Company's objective is to develop a portfolio of unquoted and quoted MedTech companies conforming to the Company's investment template (which can be found on www.hygeavct.com, clicking on About, and then clicking on Investment Strategy/Process) in order to generate capital growth over the long-term.
Venture Capital Trusts (VCTs)
VCTs were introduced by the UK Government in 1995 to encourage individuals to invest in UK smaller companies by offering VCT investors a series of tax benefits.
The Company has been approved as a VCT by HM Revenue & Customs (HMRC). In order to maintain its approval the Company must comply with certain requirements on a continuing basis. Within three years from the date of provisional approval at least 70% of the Company's investments must comprise "qualifying holdings" of which at least 30% must be in eligible ordinary shares. A "qualifying holding" consists of up to £5 million invested in any one year in new shares or securities in an unquoted company (including companies listed on AIM and PLUS) which is carrying on a qualifying trade and whose gross assets do not exceed £15 million at the time of investment. The Company has continued its compliance with these requirements.
Chairman's Statement
I am pleased to present the unaudited results for the six months ended 30 June 2013. I can report that the company's unaudited net asset value per share at 30 June 2013 was 112.8p compared to 118.2p at 31 December 2012 and 67.2p at 30 June 2012. The overall change in the company's net asset value in recent months results principally from the valuation of our holding in Scancell plc which is explained in more detail in the commentary below.
The total return (ie NAV plus dividends paid to date) at 30June 2013 was 134.05p (31 December 2012: 139.45p and 30 June 2012: 88.45p) after accruing 13.5p per share for the Board performance fee (31 December 2012: 14.9p).
Results and Dividends
The total negative return for the period amounted to 5.4p (June 2012: negative 3.4p). This was made up of a negative revenue return of 0.9p (June 2012: negative 0.9p), being operating costs net of income, and a negative capital return of 4.5p (June 2012: negative 2.5p). This negative return is net of a reduction in the performance fee accrual since the year end of £110,000 but an increase since 30 June 2012 of £1,097,000. Our unquoted portfolio has shown a small reduction in value and our AIM portfolio has shown a reduction since the year end, principally due to the decrease in the bid value of Scancell plc shares from 47.0p at 31 December to 44.1p at 30 June. We also received further proceeds from the sale of our DxS investment of £180,000 in the period being the settlement of a dispute at the time of the sale which had required a retention. This is likely to be the final material receipt following the sale and now means that we have received proceeds of £5,028,293 for our investment which amounted to £325,000.
Following the realisation of a proportion of our investment in Scancell plc (as detailed below), and after allowing for follow-on investments in our current portfolio, we have declared an interim dividend of 3p per share payable on 25 October 2013 to shareholders on the register on 27 September 2013.
Portfolio review summary
At 30 June 2013, the fund consisted of a total of 17 holdings with 6 companies quoted on AIM and 11 unquoted companies.
During the period a further £100,000 was invested into Axon, £110,000 into OR Productivity and £50,000 into Omega Diagnostics.
In the period we have taken the opportunity to realise some cash through the sale of a small proportion of our holding in Scancell plc. We have sold 1,000,000 shares for total net proceeds of £436,735. In addition we sold 15,000 shares in Epistem for net proceeds of £81,585.
Since the 30 June, we sold a further 500,000 Scancell shares for net proceeds of £246,300, leaving Hygea owning 13,349,730 shares.
Since the period end we have committed to invest a further £100,000 into Eykona and £200,000 into OR Productivity.
Since the 30 June, Scancell has announced a fund raising at 22.5p per share to raise £6.5 million. This has inevitably had a negative effect on the share price and the current bid value of Scancell shares is 37p. Had our current holding been valued at this price at 30 June after taking account of the most recent sale of 500,000 shares, the company's net asset value (net of performance fee) would have been 103.7p. Whilst it would have been attractive to partake in the open offer to shareholders, HM Revenue and Customs ('HMRC') rules prevented us buying any shares at 22.5p since the value of our holding would have exceeded permitted limits.
The company's cash resources at 30 June, before taking account of the transactions since that date, were £478,000.
For further information on all of our portfolio please visit our website at www.hygeavct.com.
Portfolio review commentary
a) Scancell
Hygea's most significant investment currently in terms of value is Scancell (cancer vaccines - www.scancell.co.uk), which is resulting in wider investor interest in Hygea as a good value way of obtaining exposure to Scancell because of Hygea's significant holding in Scancell and the significant discount which Hygea's share price represents to its NAV. Scancell has two platforms, Immunobody and Moditope - the latter was announced in August 2012, whilst the former has been being developed over many years, with one product (for melanoma) now in Phase II trials following excellent results disclosed in December 2012 from the Phase I trial. The Scancell board had been pursuing a strategy of i) selling the Immunobody platform in 2014 following completion of the Phase II study and ii) continuing the development of Moditope in a similar manner to Immunobody for sale at a later stage. However, the Scancell board concluded that Scancell shareholders would achieve a markedly improved return by delaying the sale of Immunobody and selling the two platforms together, a decision which led to the fundraising referred to above.
The board of Hygea supports the above change of strategy at Scancell and is encouraged by three further related developments, namely:
i) the appointment in April 2013 of a new NED, Peter Allen. He has had a distinguished career in the life science industry, involving extensive M&A experience on sizable transactions.
ii) investment analysts are finally catching up with the cancer immunotherapy opportunity which the scientists have been working on for many years. Citi's head of healthcare research, Andrew Baum, is forecasting that in ten years time these drugs will be treating 60% of cancer patients and earning $35 billion a year.
iii) M&A activity in this sector has been increasing (which is unsurprising in view of big pharma's depleting product pipeline) and a number of these have involved the acquisition of technology development companies at very attractive prices from the standpoint of the vendors.
b) Portfolio strategy
With the significant weighting of Scancell in Hygea's NAV, we have been focusing on ensuring that other portfolio companies in which Hygea holds meaningful shareholdings are pursuing strategies (with well backed up execution plans) to deliver significant growth from their present valuations in order to ensure that future growth in NAV is potentially driven by a number of companies rather than relying on one. We currently consider there to be at least five companies (including Scancell) each of which has the potential to achieve significant growth in value. However, shareholders need to bear in mind that nothing is certain in the world of technology!
c) Investee fundraisings
Some game changing technologies require very sizable investment to reach value inflection points. It is therefore pleasing to report that in addition to the Scancell fundraising, Glide (treatment delivery - www.glidepharma.com) competed a £14 million fundraising in February 2013 and ReNeuron (stem cells - www.reneuron.com) achieved a £25.35 million fundraising in August 2013.
d) Other investee events of note
Other events of note within portfolio companies in 2013 include:
EKF Diagnostics (diagnostics - www.ekfdiagnostics.com): in March 2013, 360 Genomics was acquired, giving EKF a capability in companion diagnostics. Genomics has a pipeline of tests for detecting mutations that are far more sensitive than existing chemistry platforms (detecting 1 mutant gene in 100,000 normal gene copies vs. the nearest technology which detects 1 in 100). The acquisition was accompanied by Andrew Webb joining EKF from Qiagen, which he had joined as part of the DxS acquisition in 2009.
Hallmarq Veterinary Imaging (MRI systems for use by vets - www.hallmarq.net): development of the companion animal MRI scanner, PetVet (which started two years ago) has been completed, with the first system being delivered to a vet practice in August 2013.
Omega Diagnostics (diagnostics - www.omegadiagnostics.com): in March 2013, £4 million was raised to finance the commercial launch of Visitect CD4, which is a point-of-care diagnostic to assist the management of HIV treatment whilst reducing the total associated costs.
VCT qualifying status
PricewaterhouseCoopers LLP continues to provide the Board with advice on the ongoing compliance with HMRC rules and regulations concerning VCTs. The Board believes that the company continues to comply with the conditions laid down by HMRC for maintaining approval as a VCT.
Outlook
Your Board continues to view the portfolio with confidence and believes that progress within the unquoted portfolio will lead to an overall increase in value, particularly when the more mature companies are able to list their shares. We continue to aspire to the payment of annual dividends of 5p per share, but have not been able to declare a dividend at this level for the time being due to the demands of the current portfolio, in what remains a demanding fundraising environment for young MedTech companies.
James Otter
Chairman
13 August 2013
Investment Review
Investment Portfolio
| Unquoted Investments | Investment at cost (£'000) | Unrealised profit/(loss) (£'000) | Carrying value at 30 June 2013 (£'000) | Movement in the six months to 30 June 2013 (£'000) |
| Hallmarq Veterinary Imaging Limited | 1,116 | (257) | 859 | - |
| OR Productivity Limited | 565 | (101) | 464 | (101) |
| Glide Pharmaceutical Technologies Limited | 326 | (12) | 314 | - |
| Exosect Limited | 250 | - | 250 | - |
| Axon Limited | 300 | (92) | 208 | - |
| Insense Limited | 509 | (333) | 176 | - |
| Arecor Limited | 127 | 5 | 132 | - |
| ImmunoBiology Limited | 868 | (742) | 126 | (23) |
| Archimed LLP | 122 | - | 122 | - |
| Eykona Technologies Limited | 100 | (72) | 28 | - |
| Wound Solutions Limited | 350 | (350) | - | (88) |
| Total unquoted investments | 4,633 | (1,954) | 2,679 | (212) |
| Quoted Investments | ||||
| Scancell plc | 899 | 5,209 | 6,108 | (311) |
| Omega Diagnostics plc | 406 | 31 | 437 | 14 |
| EKF Diagnostics plc | 260 | 65 | 325 | (29) |
| EpiStem Holdings plc | 44 | 157 | 201 | 9 |
| Reneuron plc | 50 | (29) | 21 | 2 |
| Tristel plc | 55 | (35) | 20 | (9) |
| Total quoted investments | 1,714 | 5,398 | 7,112 | (324) |
| Total investments | 6,347 | 3,444 | 9,791 | (536) |
Objective and Investment Policy
The Company's objective is to provide shareholders with an attractive income and capital return by investing its funds in a portfolio of unquoted and quoted UK MedTech companies which meet the relevant criteria under the VCT Rules.
The Company's investment policy is designed to deliver absolute returns on its investments rather than a performance measured against the market indices. On an ongoing basis, it is intended that at least 80% of the Company's assets will be invested in qualifying holdings, with the remainder held in cash and money market securities. The Board does not intend to vary the Company's investment policy. However, should a material change be deemed appropriate this will be done with shareholders' approval by the passing of an ordinary resolution and in accordance with the Listing Rules.
The Directors control the overall risk of the portfolio by ensuring that the Company has exposure to a diversified range of quoted and unquoted companies from the MedTech sector. The Directors will continually monitor the investment process and ensure compliance with the investment policy.
Valuation Methodology
Quoted and unquoted investments are valued in accordance with the accounting policy set out on page 32 of the 2012 Annual Report, which takes account of current industry guidelines for the valuation of venture capital portfolios and is compliant with International Private Equity and Venture Capital Valuations guidelines and current financial reporting standards.
| Income Statement | |||||||||
| Six months to 30 June 2013 | Six months to 30 June 2012 | Year to 31 December 2012 | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Gain on disposal of fixed asset investments | - | 59 | 59 | - | 96 | 96 | - | 96 | 96 |
| Loss on valuation of fixed asset investments | - | (536) | (536) | - | (300) | (300) | - | 5,128 | 5,128 |
| Performance fee | - | 110 | 110 | - | - | - | - | (1,207) | (1,207) |
| Investment income | 5 | - | 5 | 6 | - | 6 | 13 | - | 13 |
| Other expenses | (76) | - | (76) | (78) | - | (78) | (169) | - | (169) |
| Return on ordinary activities before tax | (71) | (367) | (438) | (72) | (204) | (276) | (156) | 4,017 | 3,861 |
| Taxation on profit/(loss) on ordinary activities | - | - | - | - | - | - | - | - | - |
| Return on ordinary activities after tax | (71) | (367) | (438) | (72) | (204) | (276) | (156) | 4,017 | 3,861 |
| Earnings per share - basic and diluted | (0.9)p | (4.5)p | (5.4)p | (0.9)p | (2.5)p | (3.4)p | (1.9)p | 49.5p | 47.6p |
The 'Total' column of this statement is the profit and loss account of the Company; the supplementary Revenue return and Capital return columns have been prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing operations.
The accompanying notes are an integral part of the half-yearly report.
The Company has only one class of business and derives its income from investments made in shares and securities and from bank and money market funds.
The Company has no recognised gains or losses other than those disclosed in the income statement.
| Reconciliation of Movements in Shareholders' Funds | |||
| Six months to 30 June 2013 | Six months to 30 June 2012 | Year to 31 December 2012 | |
| £'000 | £'000 | ||
| Shareholders' funds at start of period | 9,594 | 5,733 | 5,733 |
| Return on ordinary activities after tax | (438) | (276) | 3,861 |
| Dividends paid | - | - | - |
| Shareholders' funds at end of period | 9,156 | 5,457 | 9,594 |
| Balance Sheet | ||||||
| As at 30 June 2013 | As at 30 June 2012 | As at 31 December 2012 | ||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Fixed asset investments* | 9,791 | 5,201 | 10,709 | |||
| Current assets: | ||||||
| Debtors | 9 | 10 | 8 | |||
| Cash at bank | 478 | 274 | 112 | |||
| 487 | 284 | 120 | ||||
| Creditors: amounts falling due within one year | (1,122) | (28) | (1,235) | |||
| Net current assets | (635) | 256 | (1,115) | |||
| Net assets | 9,156 | 5,457 | 9,594 | |||
| Called up equity share capital | 4,058 | 4,058 | 4,058 | |||
| Share premium | - | 1,737 | - | |||
| Special distributable reserve | 3,397 | 1,660 | 3,397 | |||
| Capital redemption reserve | 38 | 38 | 38 | |||
| Capital reserve - gains/(losses) on disposal | (536) | 44 | (1,163) | |||
| - holding gains/(losses) | 3,444 | (990) | 4,438 | |||
| Revenue reserve | (1,245) | (1,090) | (1,174) | |||
| Total equity shareholders' funds | 9,156 | 5,457 | 9,594 | |||
| Net asset value per share | 112.8p | 67.2p | 118.2p | |||
*At fair value through profit and loss
| Cash flow statement | |||
| Six months to 30 June 2013 | Six months to 30 June 2012 | Year to 31 December 2012 | |
| £'000 | £'000 | £'000 | |
| Net cash (outflow)/inflow from operating activities | (75) | (75) | (157) |
| Financial investment: | |||
| Purchase of investments | (260) | (50) | (130) |
| Sale of investments | 701 | 96 | 96 |
| Dividends paid: | - | - | - |
| Decrease in cash resources at bank | 366 | (29) | (191) |
| Reconciliation of net cash flow to movement in liquid resources | |||
| Six months to 30 June 2013 | Six months to 30 June 2012 | Year to 31 December 2012 | |
| £'000 | £'000 | £'000 | |
| Increase/(decrease) in cash resources at bank | 366 | (29) | (191) |
| Opening net liquid resources | 112 | 303 | 303 |
| Net funds at period end | 478 | 274 | 112 |
| Reconciliation of profit before taxation to cash flow from operating activities | |||
| Six months to 30 June 2013 | Six months to 30 June 2012 | Year to 31 December 2012 | |
| £'000 | £'000 | £'000 | |
| Return on ordinary activities before tax | (438) | (276) | 3,861 |
| Gain on disposal of fixed asset investments | (59) | (96) | (96) |
| Loss/(gain) on valuation of fixed asset investments | 536 | 300 | (5,128) |
| (Increase)/decrease in debtors | (1) | (1) | 1 |
| (Decrease)/increase in creditors | (113) | (2) | 1,205 |
| Net cash (outflow)/inflow from operating activities | (75) | (75) | (157) |
Notes to the Half-Yearly Report
1. Basis of preparation
The unaudited half-yearly results which cover the six months to 30 June 2013 have been prepared in accordance with the Accounting Standard Board's (ASB) statement on half-yearly financial reports (July 2007) and adopting the accounting policies set out in the statutory accounts of the Company for the year ended 31 December 2012, which were prepared under UK GAAP and in accordance with the Statement of Recommended Practice for Investment Companies issued by the Association of Investment Companies in January 2009.
2. Publication of non-statutory accounts
The unaudited half-yearly results for the six months ended 30 June 2013 do not constitute statutory accounts within the meaning of Sections 435 of the Companies Act 2006 and have not been delivered to the Registrar of Companies. The comparative figures for the year ended 31 December 2012 have been extracted from the audited financial statements for that year, which have been delivered to the Registrar of Companies. The independent auditor's report on those financial statements under Sections 434 of the Companies Act 2006 was unqualified. This half-yearly report has not been reviewed by the Company's auditor.
3. Earnings per share
The earnings per share at 30 June 2013 are calculated on the basis of 8,115,376 shares (31 December 2012: 8,115,376 and 30 June 2012: 8,115,376) being the weighted average number of shares in issue during the period.
There are no potentially dilutive capital instruments in issue and, therefore, no diluted returns per share figures are relevant.
4. Net asset value per share
The net asset value per share is based on net assets as at 30 June 2013 divided by 8,115,376 (31 December 2012: 8,115,376 and 30 June 2012: 8,115,376) shares in issue at that date.
5. Principal risks and uncertainties
The Company's assets consist of equity and fixed interest investments, cash and liquid resources. Its principal risks are therefore market risk, credit risk and liquidity risk. Other risks faced by the Company include economic, loss of approval as a Venture Capital Trust, investment and strategic, regulatory, reputational, operational and financial risks. These risks, and the way in which they are managed, are described in more detail in the Company's Annual Report and Accounts for the year ended 31 December 2012. The Company's principal risks and uncertainties have not changed materially since the date of that report.
6. Related party transactions
The Board of the Company acts as the investment manager of the Company through its Commercial Advisory Committee. During the period under review, no remuneration was paid to the Board in their capacity as investment manager. The Directors received remuneration for their roles as non-executive Directors to Hygea on the terms as set out in the Directors' Remuneration Report of the Company's Annual Report and Accounts for the year ended 31 December 2012.
The Commercial Advisory Committee is entitled to receive a performance incentive fee, being 20% of sums returned to shareholders by way of dividends and capital distributions of whatever nature, which in aggregate exceeds the sum of 80p per share (including dividends paid to date, i.e. 21.25p, but excluding any sums returned to shareholders from HMRC in the year of subscription).
7. Copies of this statement are being sent to all shareholders. Copies are also available from the registered office of the Company at 39 Alma Road, St Albans, AL1 3AT.
Shareholder Information and Contact Details
Financial Calendar
The Company's financial calendar is as follows:
April 2014 - Annual results for year to 31 December 2013 announced; Annual Report and accounts published
May 2014 - Annual General Meeting
Dividends
Dividends are paid by the Registrar on behalf of the Company. Shareholders who wish to have dividends paid directly into their bank account rather than by cheque to their registered address can complete a mandate form for this purpose. Queries relating to dividends, shareholdings and requests for mandate forms should be directed to the Company's Registrar, Capita Registrars, by calling 0871 664 0300 (calls cost 10p per minute plus network extras), or by writing to them at:
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4BR
www.capitaregistrars.com
Share Price
The Company's share price is published daily on the London Stock Exchange's website (www.londonstockexchange.com), and other financial websites, and can also be accessed through the Company's website (www.hygeavct.com). The share price may be found with the following TIDM/EPIC code:
| Ordinary shares | |
| TIDM/EPIC code | HYG |
| Latest mid-market share price (12 August 2013) | 60.0p per share |
Buying and selling shares
The Company's Ordinary shares, which are listed on the London Stock Exchange and traded on Asset Match, can be bought and sold in the same way as any other company quoted on a recognised stock exchange via a stockbroker. There may be tax implications in respect of all or part of your holdings, so Shareholders should contact their independent financial adviser if they have any queries.
The Company does not currently operate a buyback policy. If you are considering selling your shares or trading in the secondary market, please contact the Company's Corporate Broker, Panmure Gordon (UK) Limited ('Panmure'). Panmure can be contacted as follows:
Chris Lloyd 020 7886 2716 chris.lloyd@panmure.com
Paul Nolan 020 7886 2717 paul.nolan@panmure.com
Asset Match can be contacted as follows:
Iain Baillie 020 7248 2788 iain.baillie@assetmatch.com
Notification of change of address
Communications with Shareholders are mailed to the registered address held on the share register. In the event of a change of address or other amendment this should be notified to the Company's Registrar, Capita Registrars, (contact details shown above) under the signature of the registered holder.
Other information for Shareholders
Previously published Annual Reports and Half-yearly Reports are available for viewing on the Company's website at www.hygeavct.com.
Enquiries:
James Otter, Hygea vct plc on 01730 829877 or james.otter@ellipson.co.uk
Charles Breese, Hygea vct plc on 01280 703482 or larpentnewton@btinternet.com
Roland Cornish, Beaumont Cornish Limited on 020 7628 3396
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: Hygea VCT plc via Thomson Reuters ONE
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