Hygea VCT plc : Half-yearly report

For immediate release                                                                                                    11 August 2014

Hygea vct plc

 

Unaudited Half-Yearly Report for the Six Months Ended 30 June 2014

Financial Headlines

 

93.0p	Net Asset Value per share at 30 June 2014
24.25p	Cumulative dividends paid to date
117.25p	Total return per share since launch
£70k	Amount invested into existing portfolio companies during the period

Financial Summary

	Six months to 30 June 2014	Six months to 30 June 2013	Year to 31 December 2013
Net assets (£'000s)	7,545	9,156	7,829
Return on ordinary activities after tax (£'000s)	(284)	(438)	(1,522)
Earnings per share	(3.5p)	(5.4p)	(18.7p)
Net asset value per share	93.0p	112.8p	96.5p
Dividends paid to date	24.25p	21.25p	24.25p
Total return per share	117.25p	134.05p	120.75p
Dividends declared for the period	-	3p	-

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) 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 can now present the unaudited results for the six months ended 30 June 2014. The company's unaudited net asset value ("NAV") per share at 30 June 2014 was 93.0p compared to 96.5p at 31 December 2013 and 112.8p at 30 June 2013. Shareholders will recall that a dividend of 3p was paid in October 2013 and the NAV at 30 June 2013 is stated before deduction of this dividend. 

Results and Dividends

The total negative return for the period amounted to 3.5p (June 2013: negative 5.4p). This was made up of a negative revenue return of 1.0p (June 2013: negative 0.9p), being operating costs net of income, and a negative capital return of 2.5p (June 2013: negative 4.5p). This negative return includes a reduction of the accrual for the performance fee. Our unquoted portfolio has shown a small net 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 33p at 31 December 2013 to 32p at 30 June 2014.

Portfolio review

At 30 June 2013, the fund consisted of a total of 17 holdings with six companies quoted on AIM and 11 unquoted companies.

During the period a further £11,000 was invested into Axon Limited and, as previously reported, a further £50,000 into Fuel 3D Technologies Limited (previously Eykona Technologies Limited) and £9,000 into Microarray Limited (previously Archimed LLP).

During the period we sold 195,000 shares in Omega Diagnostics plc at an average price of 31.5p, compared with our cost price of 15.5p, to realise funds to cover our running expenses.

Since Scancell's fund raising in 2013, the share price has remained subdued and indeed the small reduction in the bid price of 1p at 30 June 2014 compared to the year end valuation, together with the reduction in the share price of EKF Diagnostics plc, has largely contributed to our negative capital return in the period.

The principal movements in the unquoted portfolio relate to Fuel 3D Technologies where we have revalued our investment in line with a fundraising subsequent to our most recent investment. However we have reduced the valuation of our investment in Axon due to the need for a fund raising which is likely to significantly dilute our current shareholding. The net effect of these two revaluations results in a small decrease in NAV.

Hallmarq Veterinary Imaging Limited continues to make excellent progress in all its areas of activity. However this progress has yet to be reflected in a share transaction at an increased share price, so the published valuation of our holding remains unchanged.

The company's cash resources at 30 June 2014 were an overdraft of £21,000 offset by £26,000 of cash held in escrow awaiting investment.

For further information on all of our portfolio please visit our website at www.hygeavct.com.

Capital Markets

I mentioned in my statement in the 2013 accounts the reasoning underlying our strategy for having as much of the portfolio listed on AIM as practicable. One of the benefits of this strategy is illustrated by the ability to realise cash from the sale of some Omega shares referred to under the Portfolio review. However, achieving successful IPOs has to date been very much a function of the appetite of institutional investors - over the last 12 months the AIM IPO market has changed from being frenetic in the course of 2013 to being much more challenging again. Accordingly, in order to assist portfolio companies with fundraisings (which may or may not involve IPOs), your Board is developing relationships with certain of the leading players in the crowdfunding sector in order to reduce dependency on institutional investors. The crowdfunding sector is developing some very interesting business models which we believe will revolutionise the capital markets to the benefit of both private investors and also Hygea's portfolio companies.

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

Overall your Board views the future with optimism both in relation to Hygea's portfolio and the MedTech sector in general, despite the current demanding capital market conditions. At the present time our confidence is based on a combination of:

1. Scancell - major pharmaceutical companies are making significant investments in the emerging area of cancer immunotherapy.
2. Hallmarq - see comments under Portfolio review.
3. The remainder of the AIM portfolio, excluding Scancell - a number of these companies combine profitable core businesses with developing technologies, particularly in the upcoming field of personalised medicine, with the potential to transform their core businesses.
4. OR Productivity plc - the company is starting to get demonstrable traction with its robotic controller for the telescopes used by keyhole surgeons.

In addition, we believe that other companies are developing within the unquoted portfolio with the potential to join the above list and reduce the reliance on any single company for success. Having said that, it is interesting to note that Hygea's quoted share price almost exactly reflects the value of our AIM portfolio with no value implied for the unquoted portfolio.

We continue to aspire to the payment of annual dividends of 5p per share, but have not thought it wise to realise significant portions of our AIM portfolio, at what we regard as subdued prices, in order to pay dividends.

James Otter
Chairman
8 August 2014

Investment Review

Investment Portfolio

Unquoted Investments	Investment at cost (£'000)	Unrealised profit/(loss) (£'000)	Carrying value at 30 June 2014 (£'000)	Movement in the six months to 30 June 2014 (£'000)
Hallmarq Veterinary Imaging Limited	1,116	(41)	1,075	-
OR Productivity Limited	765	(101)	664	-
Glide Pharmaceutical Technologies Limited	326	(7)	319	-
Fuel 3D Technologies Limited (formerly Eykona Technologies Limited)	250	63	313	224
Exosect Limited	250	-	250	-
Arecor Limited	127	5	132	-
ImmunoBiology Limited	868	(742)	126	-
Insense Limited	509	(421)	88	-
Microarray Limited (formerly Archimed LLP)	132	(61)	71	-
Axon Limited	374	(346)	28	(254)
Wound Solutions Limited	350	(350)	-	-
Total unquoted investments	5,067	(2,001)	3,066	(30)
Quoted Investments
Scancell plc	802	3,439	4,241	(265)
Omega Diagnostics plc	347	114	461	65
EKF Diagnostics plc	260	81	341	(87)
EpiStem Holdings plc	44	73	117	4
Reneuron plc	50	(18)	32	4
Tristel plc	55	23	78	34
Total quoted investments	1,558	3,712	5,270	(245)
Total investments	6,625	1,711	8,336	(275)

 

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 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 40 of the 2013 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.

Responsibility Statement of the Directors' in respect of the half-yearly report

We confirm that to the best of our knowledge:

• the half-yearly financial statements have been prepared in accordance with the statement "Half-Yearly Financial Reports" issued by the UK Accounting Standards Board;

• the half-yearly report includes a fair review of the information required by the Financial Services Authority Disclosure and Transparency Rules, being:

• an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements.
   
• a description of the principal risks and uncertainties for the remaining six months of the year.
   
• a description of related party transactions that have taken place in the first six months of the current financial year that may have materially affected the financial position or performance of the Company during that period and any changes in the related party transactions described in the last annual report that could do so.

On behalf of the Board:

James Otter
Chairman

8 August 2014 Income Statement
	Six months to 30 June 2014			Six months to 30 June 2013			Year to 31 December 2013
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
(Loss)/gain on disposal of fixed asset investments	-	(1)	(1)	-	59	59	-	156	156
Loss on valuation of fixed asset investments	-	(275)	(275)	-	(536)	(536)	-	(1,896)	(1,896)
Performance fee	-	70	70	-	110	110	-	382	382
Investment income	5	-	5	5	-	5	11	-	11
Other expenses	(83)	-	(83)	(76)	-	(76)	(175)	-	(175)
Return on ordinary activities before tax	(78)	(206)	(284)	(71)	(367)	(438)	(164)	(1,358)	(1,522)
Taxation on profit/(loss) on ordinary activities	-	-	-	-	-	-	-	-	-
Return  on ordinary activities after tax	(78)	(206)	(284)	(71)	(367)	(438)	(164)	(1,358)	(1,522)
Earnings per share - basic and diluted	(1.0p)	(2.5p)	(3.5p)	(0.9p)	(4.5p)	(5.4p)	(2.0p)	(16.7p)	(18.7p)

• 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 2014	Six months to 30 June 2013	Year to 31 December 2013
	£'000	£'000	£'000
Shareholders' funds at start of period	7,829	9,594	9,594
Return on ordinary activities after tax	(284)	(438)	(1,522)
Dividends paid	-	-	(243)
Shareholders' funds at end of period	7,545	9,156	7,829

Balance Sheet
	As at 30 June 2014		As at 30 June 2013		As at 31 December 2013
	£'000	£'000	£'000	£'000	£'000	£'000
Fixed asset investments*		8,336		9,791		8,603
Current assets:
Debtors	9		9		75
Cash at bank	5		478		30
	14		487		105
Creditors: amounts falling due within one year	(805)		(1,122)		(879)
Net current assets		(791)		(635)		(774)
Net assets		7,545		9,156		7,829
Called up equity share capital	4,058		4,058		4,058
Share premium	-		-		-
Special distributable reserve	3,397		3,397		3,397
Capital redemption reserve	38		38		38
Capital reserve - gains/(losses) on disposal	(242)		(536)		(315)
- holding gains/(losses)	1,710		3,444		1,989
Revenue reserve	(1,416)		(1,245)		(1,338)
Total equity shareholders' funds		7,545		9,156		7,829
Net asset value per share		93.0p		112.8p		96.5p

*At fair value through profit and loss

Cash flow statement
	Six months to 30 June 2014	Six months to 30 June 2013	Year to 31 December 2013
	£'000	£'000	£'000
Net cash (outflow)/inflow from operating activities	(16)	(75)	(205)
Financial investment:
Purchase of investments	(70)	(260)	(623)
Sale of investments	61	701	989
Dividends paid:	-	-	(243)
(Decrease)/increase in cash resources at bank	(25)	366	(82)

Reconciliation of net cash flow to movement in liquid resources
	Six months to 30 June 2014	Six months to 30 June 2013	Year to 31 December 2013
	£'000	£'000	£'000
(Decrease)/increase in cash resources at bank	(25)	366	(82)
Opening net liquid resources	30	112	112
Net funds at period end	5	478	30

Reconciliation of profit before taxation to cash flow from operating activities
	Six months to 30 June 2014	Six months to 30 June 2013	Year to 31 December 2013
	£'000	£'000	£'000
Return on ordinary activities before tax	(284)	(438)	(1,522)
Loss/(gain) on disposal of fixed asset investments	1	(59)	(156)
Loss/(gain) on valuation of fixed asset investments	275	536	1,896
Decrease/(increase) in debtors	66	(1)	(67)
(Decrease)/increase in creditors	(74)	(113)	(356)
Net cash (outflow)/inflow from operating activities	(16)	(75)	(205)

Notes to the Half-Yearly Report

1.         Basis of preparation
The unaudited half-yearly results which cover the six months to 30 June 2014 have been prepared in accordance with the Accounting Standard Board's (ASB) statement on half-yearly financial reports (July 2007) adopting the accounting policies set out in the statutory accounts of the Company for the year ended 31 December 2013, 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 2014 do not constitute statutory accounts within the meaning of Section 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 2013 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 Section 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 2014 are calculated on the basis of 8,115,376 shares (31 December 2013: 8,115,376 and 30 June 2013: 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 2014 divided by 8,115,376 (31 December 2013: 8,115,376 and 30 June 2013: 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 2013. 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 2013. 

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. 24.25p, 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 and on the company's website - www.hygeavct.com.

Enquiries:

James Otter, Hygea vct on 01730 829877 or [e-mail]
Charles Breese, Hygea vct on 01280 703482 or [e-mail]
Roland Cornish, Beaumont Cornish Limited on 020 7628 3396

Shareholder Information and Contact Details

Financial Calendar

The Company's financial calendar is as follows:

                      April 2015            -            Annual results for year to 31 December 2014 announced; Annual Report and accounts published
                       May 2015          -            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 (8 August 2014)	64p 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                [e-mail]

Paul Nolan        020 7886 2717               [e-mail]

Asset Match can be contacted as follows:

Iain Baillie         020 7248 2788                 [e-mail] 

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.

Directors and Advisers

Board of Directors James Otter (Chairman) Charles Breese John Hustler Company Number - 04221489 Registered in England & Wales Secretary and Registered Office Craig Hunter 39 Alma Road St Albans AL1 3AT Administration Manager Octopus Investments Limited 20 Old Bailey London EC4M 7AN Solicitors Keystone Law 53 Davies Street London W1K 5JH Corporate Broker Panmure Gordon (UK) Limited One New Change London EC4M 9AF Tel: [phone]

 

Independent Auditor and Taxation Adviser James Cowper LLP Willow Court 7 West Way Botley Oxford OX2 0JB VCT Status Adviser PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH Bankers The Royal Bank of Scotland plc 62/63 Threadneedle Street, London EC2R 8LA Registrars Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Tel:  [phone] (calls cost 10p per minute plus network extras) www.capitaregistrars.com Financial Adviser Beaumont Cornish Limited 2nd Floor, Bowman House 29 Wilson Street London EC2M 2SJ

 

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The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Hygea VCT plc via Globenewswire

HUG#1847894