Hygea VCT plc : Half-yearly report
For immediate release 28 August 2015
HYGEA VCT PLC
Unaudited Half-Yearly Report for the Six Months Ended 30 June 2015
Financial Headlines
| 85.7p | Net Asset Value per share at 30 June 2015 |
| 24.25p | Cumulative dividends paid to date |
| 109.95p | Total return per share since launch |
Financial Summary
| Six months to 30 June 2015 | Six months to 30 June 2014 | Year to 31 December 2014 | |
| Net assets (£'000s) | 6,951 | 7,545 | 7,334 |
| Return on ordinary activities after tax (£'000s) | (383) | (284) | (495) |
| Earnings per share | (4.7p) | (3.5p) | (6.1p) |
| Net asset value per share | 85.7p | 93.0p | 90.4p |
| Dividends paid to date | 24.25p | 24.25p | 24.25p |
| Total return per share | 109.95p | 117.25p | 114.65p |
| Dividends declared for the period | - | - | - |
Contacts:
| Charles Breese Tel: 01280 703482 | Hygea VCT |
| Roland Cornish Tel: 020 7628 3396 | Beaumont Cornish Ltd |
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
As announced on 15 July 2015, following James Otter's resignation as Chairman, I was appointed to replace him. The Board is grateful to James for his contribution in leading the Board over the last ten years, following its assumption of the management of the Company. James remains on the Hygea Board as a Director.
I am pleased to present the unaudited results for the six months ended 30 June 2015. The Company's net asset value ('NAV') per share at 30 June 2015 was 85.7p compared to 90.4p at 31 December 2014 and 93.0p at 30 June 2014.
Results and Dividend
The total negative return for the period amounted to 4.7p. This was made up of a negative revenue return of 0.9p (June 2014: negative 1.0p), being operating expenses net of income, and a negative capital return of 3.8p (June 2014: negative 2.5p). This negative return also reflects a reduction in the accrual for performance fee. Our unquoted portfolio has shown a small reduction in value and our AIM portfolio has also shown a net reduction in value since the last year end, principally due to the decrease in the bid price of Scancell plc shares from 32p at 31 December 2014 to 29p at 30 June 2015.
Whilst believing that the market has yet to realise the underlying commercial value of our AIM portfolio, without any liquidity event within the portfolio, we remain unable to pay a dividend.
Portfolio Review
At 30 June 2015, the fund consisted of 16 holdings with five companies quoted on AIM and 11 unquoted companies. No new investments have been made in the portfolio since 31 December 2014. During the period we have taken the opportunity to realise the final 13,000 shares of our holding in Tristel plc. The Company's holding in our significant AIM investments, therefore, remains as reported on 14 May 2015, namely 13,249,730 shares in Scancell plc, 2,431,768 shares in Omega Diagnostics Holdings plc and 1,285,552 shares in EKF Diagnostics Holdings plc. At 30 June 2015 the Company had utilised £64,189 of its overdraft facility of £100,000.
As mentioned above, the value of our AIM portfolio has reduced over the last six months, mainly due to the reduction in value of our Scancell holding which remains an exciting stock but whose share price, like many small biotechnology stocks, is volatile. Scancell still accounts for half of the value of our investment portfolio.
In respect of our unquoted portfolio, we remain encouraged by the progress of the majority of holdings, and in particular Hallmarq Veterinary Imaging Limited. When the accounts of that company for the year to 31 August 2015 are available, we believe that these will support a meaningful uplift in the carrying value. Meanwhile, Exosect Limited continues to disappoint and in view of their current liquidity position, we have decided to reduce the carrying value by a further 25%.
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
Following the AGM on 14 May 2015, the Board announced that it would be holding discussions regarding the appropriate Board structure and on 15 July 2015 we further announced that we had asked Richard Roth, who is a significant shareholder in the Company and a Director of the Oxford Technology VCTs, to assist in this process. In conjunction with Richard, we are well under way in this review, the scope of which has been extended to include reviews of a) the cost base of the Company, given that current financial restrictions effectively prohibit further new or follow-on investments, and b) the performance fee arrangements. It is expected that discussions on these matters will be concluded in the near future, at which time we will report to shareholders with the intention of seeking your approval to the proposals.
In the 2014 annual report, reference was made to Charles Breese and his company, Larpent Newton & Co Limited, developing a broking service based on the same investment template as that used by the Company. Charles has informed the Board that this service will be launched as SMARTCO Investment Services in Q4 2015. The existence of such a service is expected to assist the Company in supporting its investee companies to realise their full potential.
The Board continues to believe that the portfolio has significant upside potential and believes that this will be demonstrated during the three year extension of the life of the fund which shareholders agreed to at the AGM on 14 May 2015. Whilst this will appear to many shareholders to have taken a very long time, the timescale is in line with that generally experienced for converting a disruptive technology into an established business. The strategy has been to invest in businesses which bring better patient outcomes at a lower total cost, and we continue to believe that this is a particularly attractive investment positioning at a time of global economic uncertainty, increasing demand for healthcare and many governments needing to cut costs.
John Hustler
Chairman
28 August 2015
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 | (62) | 1,054 | - |
| OR Productivity Limited | 765 | (101) | 664 | - |
| Glide Pharmaceutical Technologies Limited | 325 | (7) | 318 | - |
| Fuel 3D Technologies Limited (formerly Eykona Technologies Limited) | 250 | 146 | 396 | - |
| Exosect Limited | 250 | (188) | 62 | (62) |
| Arecor Limited | 127 | 5 | 132 | - |
| ImmunoBiology Limited | 868 | (742) | 126 | - |
| Insense Limited | 509 | (421) | 88 | - |
| Microarray Limited (formerly Archimed LLP) | 132 | (65) | 67 | - |
| Axon Limited | 374 | (374) | - | - |
| Wound Solutions Limited | 350 | (350) | - | - |
| Total unquoted investments | 5,066 | (2,159) | 2,907 | (62) |
| Quoted Investments | ||||
| Scancell plc | 801 | 3,042 | 3,843 | (398) |
| Omega Diagnostics plc | 348 | 157 | 505 | 58 |
| EKF Diagnostics plc | 260 | (3) | 257 | (16) |
| EpiStem Holdings plc | 44 | 49 | 93 | (1) |
| Reneuron plc | 50 | - | 50 | 12 |
| Total quoted investments | 1,503 | 3,245 | 4,748 | (345) |
| Total investments | 6,569 | 1,086 | 7,655 | (407) |
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 38 of the 2014 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 "Interim Financial Reporting" issued by the Financial Reporting Council;
- 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:
John Hustler
Chairman
28 August 2015
| Income Statement | |||||||||
| Six months to 30 June 2015 | Six months to 30 June 2014 | Year to 31 December 2014 | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Gain/(loss) on disposal of fixed asset investments | - | 5 | 5 | - | (1) | (1) | - | 60 | 60 |
| Loss on valuation of fixed asset investments | - | (407) | (407) | - | (275) | (275) | - | (527) | (527) |
| Performance fee | - | 95 | 95 | - | 70 | 70 | - | 123 | 123 |
| Investment income | - | - | - | 5 | - | 5 | 12 | - | 12 |
| Other expenses | (76) | - | (76) | (83) | - | (83) | (163) | - | (163) |
| Return on ordinary activities before tax | (76) | (307) | (383) | (78) | (206) | (284) | (151) | (344) | (495) |
| Taxation on profit/(loss) on ordinary activities | - | - | - | - | - | - | - | - | - |
| Return on ordinary activities after tax | (76) | (307) | (383) | (78) | (206) | (284) | (151) | (344) | (495) |
| Earnings per share - basic and diluted | (0.9p) | (3.8p) | (4.7p) | (1.0p) | (2.5p) | (3.5p) | (1.9p) | (4.2p) | (6.1p) |
- 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.
| Statement of Changes in Equity | |||
| Six months to 30 June 2015 | Six months to 30 June 2014 | Year to 31 December 2014 | |
| £'000 | £'000 | £'000 | |
| Shareholders' funds at start of period | 7,334 | 7,829 | 7,829 |
| Return on ordinary activities after tax | (383) | (284) | (495) |
| Dividends paid | - | - | - |
| Shareholders' funds at end of period | 6,951 | 7,545 | 7,334 |
| Balance Sheet | ||||||
| As at 30 June 2015 | As at 30 June 2014 | As at 31 December 2014 | ||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Fixed asset investments* | 7,655 | 8,336 | 8,072 | |||
| Current assets: | ||||||
| Debtors | 12 | 9 | 8 | |||
| Cash at bank | - | 5 | 16 | |||
| 12 | 14 | 24 | ||||
| Creditors** | (110) | (49) | (60) | |||
| Net current assets | (98) | (35) | (36) | |||
| Performance fee payable | (606) | (756) | (702) | |||
| Net assets | 6,951 | 7,545 | 7,334 | |||
| 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 | (62) | (242) | (165) | |||
| - holding gains/(losses) | 1,085 | 1,710 | 1,495 | |||
| Revenue reserve | (1,565) | (1,416) | (1,489) | |||
| Total equity shareholders' funds | 6,951 | 7,545 | 7,334 | |||
| Net asset value per share | 85.7p | 93.0p | 90.4p | |||
*At fair value through profit and loss
**Included within creditors as at 30 June 2015 is a bank overdraft of £64,189
Company Number: 04221489
Cash flow statement | |||
| Six months to 30 June 2015 | Six months to 30 June 2014 | Year to 31 December 2014 | |
| £'000 | £'000 | £'000 | |
| Net cash (outflow)/inflow from operating activities | (95) | (16) | (78) |
| Financial investment: | |||
| Purchase of investments | - | (70) | (70) |
| Sale of investments | 15 | 61 | 134 |
| Dividends paid: | - | - | - |
| (Decrease)/increase in cash resources at bank | (80) | (25) | (14) |
| Reconciliation of net cash flow to movement in net funds | |||
| Six months to 30 June 2015 | Six months to 30 June 2014 | Year to 31 December 2014 | |
| £'000 | £'000 | £'000 | |
| (Decrease)/increase in cash resources at bank | (80) | (25) | (14) |
| Opening net liquid resources | 16 | 30 | 30 |
| Net funds at period end | (64) | 5 | 16 |
| Reconciliation of return before taxation to cash flow from operating activities | |||
| Six months to 30 June 2015 | Six months to 30 June 2014 | Year to 31 December 2014 | |
| £'000 | £'000 | £'000 | |
| Return on ordinary activities before tax | (383) | (284) | (495) |
| (Gain)/loss on disposal of fixed asset investments | (5) | 1 | (60) |
| Loss on valuation of fixed asset investments | 407 | 275 | 527 |
| (Increase)/decrease in debtors | (4) | 66 | 67 |
| (Decrease)/increase in creditors | (110) | (74) | (117) |
| Net cash (outflow)/inflow from operating activities | (95) | (16) | (78) |
Notes to the Half-Yearly Report
1. Basis of preparation
The unaudited half-yearly results which cover the six months to 30 June 2015 have been prepared in accordance with the Financial Reporting Council's (FRC) Financial Reporting Standard 104 Interim Financial Reporting (March 2015) and the Statement of Recommended Practice (SORP) for Investment Companies re-issued by the Association of Investment Companies in November 2014.
2. Publication of non-statutory accounts
The unaudited half-yearly results for the six months ended 30 June 2015 do not constitute statutory accounts within the meaning of Section 415 of the Companies Act 2006. The comparative figures for the year ended 31 December 2014 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, in accordance with chapter 3, part 16 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 2015 are calculated on the basis of 8,115,376 shares (31 December 2014: 8,115,376 and 30 June 2014: 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 2015 divided by 8,115,376 (31 December 2014: 8,115,376 and 30 June 2014: 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 2014. 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 2014.
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.
Shareholder Information and Contact Details
Financial Calendar
The Company's financial calendar is as follows:
April 2016 - Annual results for year to 31 December 2015 announced; Annual Report and accounts published
May 2016 - 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 (27 August 2015) | 65p per share |
Buying and selling shares
The Company's Ordinary shares, which are listed on the London Stock Exchange, 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
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 John Hustler (Chairman) Charles Breese James Otter 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 33 Holborn London EC1N 2HT Solicitors Keystone Law 53 Davies Street London W1K 5JH Corporate Broker Panmure Gordon (UK) Limited One New Change London EC4M 9AF Tel: 020 7886 2500 | 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: 0871 664 0300 (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 |
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
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