Hygea VCT plc : Unaudited Half-Yearly Report fo...

FOR IMMEDIATE RELEASE

                                                                                 30 August 2012
Hygea vct plc

Unaudited Half-Yearly Report for the Six Months Ended 30 June 2012

Financial Headlines

67.2p           Net Asset Value per share at 30 June
21.25p         Cumulative dividends paid to date
88.45p         Total return per share since launch
£50,000   Amount invested into new and existing portfolio             companies during the period

Financial Summary

	Six months to 30 June 2012	Six months to 30 June 2011	Year to 31 December 2011
Net assets (£'000s)	5,457	5,546	5,733
Return on ordinary activities after tax (£'000s)	(276)	(330)	(143)
Earnings per share	(3.4)p	(4.0)p	(1.8)p
Net asset value per share	67.2p	68.3p	70.6p
Dividends paid to date	21.25p	21.25p	21.25p
Total return per share	88.45p	89.55p	91.85p

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 2012.  I can report that our company's unaudited net asset value per share at 30 June 2012 was 67.2p compared to 70.6p at 31 December 2011 and 68.3p at 30 June 2011. The negative total return of 3.4p in the period relates largely to net operating costs and the reduction in the value of the unquoted portfolio, despite a welcome increase in the value of the AIM portfolio.

Results and Dividends

The total negative return for the period amounted to 3.4p (June 2011: negative  4.0p).  This was made up of a negative revenue return of 0.9p (June 2011: negative 0.8p) being operating costs net of income, and a negative capital return of 2.5p (June 2011: negative 3.2p).  This arose through the reduction in the value of our unquoted portfolio, broadly due to the difficult fund raising environment, offset by a significant increase in the value of our AIM portfolio and the receipt of a further £96,000 of deferred consideration in connection with the sale of DxS.

As previously announced, it is your Board's intention to recommend an annual dividend of 5p per share. However, as stated in my Chairman's statement accompanying the annual report, the absence of both cash resources and distributable reserves has meant that dividends will have to be deferred.  The necessary resolution to seek Court approval for the reduction in the Share Premium account has been passed and we are awaiting a suitable time to make the formal application to the Court.

Cash resources could be made available through the realisation of part of our AIM or unquoted portfolio, but your Board does not believe that it is sensible to make this a priority in the current economic climate as values are still depressed despite a recent increase in value.

Portfolio review

At 30 June 2012, the fund consisted of a total of 17 holdings with 6 companies quoted on AIM and 11 unquoted companies.

During the period a further investment of £50,000 was made into Axon to maintain Hygea's position.  Since the period end further investments have been made into OR Productivity (£30,000) and Immunobiology (£50,000) leaving the company with cash resources of £194,000.

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

We are particularly pleased that the value of our holding in Scancell, where we hold 7.6% of the share capital, is being recognised by the market. Scancell's share price has risen from 6.0p at December 2011 to 12.12p at 30 June 2012 contributing an increase of over £900,000 to the value of our AIM portfolio and the holding now represents over 22p per Hygea share.  We further note the rise in the price of Scancell since 30 June following the announcement of a new platform technology that stimulates the production of killer CD4 T cells with powerful anti-tumour activity, without toxicity, and at 28 August the bid price was 32p. Had our Scancell holding been valued at this price at 30 June, Hygea's NAV would have been over 94p (after providing for the potential performance fees as set out in Note 6) with our Scancell investment representing over 58p per Hygea share.

Our two largest unquoted investments by value, OR Productivity and Hallmarq, are both making good progress.  OR Productivity has upgraded its robotic controller of laparoscopes for keyhole surgery and is securing access to new segments in the surgical market.  Hallmarq is now reaping the benefits of the business model initiated with Hygea's influence some five years ago which is underpinned by revenue share contracts with its vet customers.  Hallmarq is now expanding into the larger companion animal market.

However on the negative side, despite improved operational performance, fund raisings by Axon, Immunobiology and Insense, were all at significant discounts to our carrying values reflecting the brutal fundraising climate currently for SMEs needing to raise funds from new investors. The logical short term response by Hygea is to participate in fundraisings where justified by operational progress.  This has meant that we have had to reduce the value of our holdings by £1.3 million, representing some 16p per Hygea share.  Our view is that these companies have strong prospects and so we have supported fund raisings in Axon and Immunobiology. We did not participate in the fundraising for Insense because the company has a supportive investor and we expect that there will be another fundraising within the next year.

Against the fundraising background described above, your board is taking proactive steps to improve the fundraising process in the UK for ambitious SMEs with able management teams and significant market opportunities.

Shares

Whilst our shares continue to trade at a significant discount to net asset value, we are pleased that a number of shareholders see the potential value in our portfolio and so there is rarely a significant overhang on the market maker's books.  We note recent articles identifying our holding in Scancell and promoting Hygea as a low cost route into Scancell.  We will continue to communicate the underlying strength of Hygea's shares in the light of their significant discount to net asset value.

VCT qualifying status

PricewaterhouseCoopers LLP continues to provide the Board with advice on the ongoing compliance with HM Revenue & Customs rules and regulations concerning VCTs. The Board believes that the company continues to comply with the conditions laid down by HM Revenue & Customs for maintaining approval as a VCT.

Outlook

This is a demanding period for bioscience SME's in the UK.  However those with a modest cost base, innovative technologies, efficient routes to market and robust, capable management teams are now attracting the interest both of major corporations, seeking out innovation, and experienced entrepreneurs, who instinctively know when is the best time to invest.

Your Board is therefore confident that the Hygea investee companies and the fund as a whole will enjoy prosperity in the future.  Hygea's modest cost structure allows the fund to be relatively independent of the precise timing of the inevitable upturn.

James Otter
Chairman
29 August 2012

Investment Review

Investment Portfolio

Unquoted Investments	Investment at cost (£'000)	Unrealised profit/(loss) (£'000)	Carrying value at 30 June 2012 (£'000)	Movement in the six months to 30 June 2012 (£'000)
Hallmarq Veterinary Imaging Limited	1,116	(257)	859	-
OR Productivity Limited	425		425
Exosect Limited	250	-	250	-
Insense Limited	509	(333)	176	(221)
Arecor Limited	127	5	132	5
Archimed LLP	122		122	-
Glide Pharmaceutical Technologies Limited	326	(206)	120	-
Axon Limited	200	(92)	108	(174)
Eykona Technologies Limited	100	-	100	-
ImmunoBiology Limited	818	(719)	99	(963)
Wound Solutions Limited	350	(262)	88	-
Total unquoted investments	4,343	(1,864)	2,479	(1,353)
Quoted Investments
Scancell plc	1,061	739	1,800	908
EKF Diagnostics plc	260	87	347	65
Omega Diagnostics plc	356	(41)	315	76
EpiStem Holdings plc	66	130	196	20
Reneuron plc	50	(13)	37	(5)
Tristel plc	55	(28)	27	(11)
Total quoted investments	1,848	874	2,722	1,053
Total investments	6,191	(990)	5,201	(300)

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 33 of the 2011 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.

29 August 2012 Income Statement
	Six months to 30 June 2012			Six months to 30 June 2011			Year to 31 December 2011
	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	-	96	96	-	-	-	-	347	347
Loss on valuation of fixed asset investments	-	(300)	(300)	-	(262)	(262)	-	(404)	(404)
Investment income	6	-	6	3	-	3	64	-	64
Other expenses	(78)	-	(78)	(71)	-	(71)	(150)	-	(150)
Return on ordinary activities before tax	(72)	(204)	(276)	(68)	(262)	(330)	(86)	(57)	(143)
Taxation on profit/(loss) on ordinary activities	-	-	-	-	-	-	-	-	-
Return  on ordinary activities after tax	(72)	(204)	(276)	(68)	(262)	(330)	(86)	(57)	(143)
Earnings per share - basic and diluted	(0.9)p	(2.5)p	(3.4)p	(0.8)p	(3.2)p	(4.0)p	(1.1)p	(0.7)p	(1.8)p

• 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 2012	Six months to 30 June 2011	Year to 31 December 2011
		£'000	£'000
Shareholders' funds at start of period	5,733	6,282	6,282
Return on ordinary activities after tax	(276)	(330)	(143)
Dividends paid	-	(406)	(406)
Shareholders' funds at end of period	5,457	5,546	5,733

 

Balance Sheet
	As at 30 June 2012		As at 30 June 2011		As at 31 December 2011
	£'000	£'000	£'000	£'000	£'000	£'000
Fixed asset investments*		5,201		5,365		5,451
Current assets:
Debtors	10		327		9
Cash at bank	274		(125)		303
	284		202		312
Creditors: amounts falling due within one year	(28)		(21)		(30)
Net current assets		256		181		282
Net assets		5,457		5,546		5,733
Called up equity share capital	4,058		4,058		4,058
Share premium	1,737		1,737		1,737
Special distributable reserve	1,660		1,660		1,660
Capital redemption reserve	38		38		38
Capital reserve - gains/(losses) on disposal	44		1,288		(52)
- holding gains/(losses)	(990)		(2,235)		(690)
Revenue reserve	(1,090)		(1,000)		(1,018)
Total equity shareholders' funds		5,457		5,546		5,733
Net asset value per share		67.2p		68.3p		70.6p

 

 

*At fair value through profit and loss

Company Number: 04221489

Cash flow statement
	Six months to 30 June 2012	Six months to 30 June 2011	Year to 31 December 2011
	£'000	£'000	£'000
Net cash outflow from operating activities	(75)	(81)	228
Financial investment:
Purchase of investments	(50)	(402)	(630)
Sale of investments	96	-	347
Dividends paid:	-	(406)	(406)
(Decrease)/increase in cash resources at bank	(29)	(889)	(461)

Reconciliation of net cash flow to movement in liquid resources
	Six months to 30 June 2012	Six months to 30 June 2011	Year to 31 December 2011
	£'000	£'000	£'000
Decrease in cash resources at bank	(29)	(889)	(461)
Opening net liquid resources	303	764	764
Net funds at period end	274	(125)	303

Reconciliation of profit before taxation to cash flow from operating activities
	Six months to 30 June 2012	Six months to 30 June 2011	Year to 31 December 2011
	£'000	£'000	£'000
Return on ordinary activities before tax	(276)	(330)	(143)
Gain on disposal of fixed asset investments	(96)	-	(347)
Loss on valuation of fixed asset investments	300	262	404
(Increase)/decrease in debtors	(1)	(4)	314
(Decrease)/increase in creditors	(2)	(9)	-
Net cash (outflow)/inflow from operating activities	(75)	(81)	228

Notes to the Half-Yearly Report

1.   Basis of preparation
The unaudited half-yearly results which cover the six months to 30 June 2012 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 2011, 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 2012 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 2011 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 2012 are calculated on the basis of 8,115,376 shares (31 December 2011: 8,115,376 and 30 June 2011: 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 2012 divided by 8,115,376 (31 December 2011: 8,115,376 and 30 June 2011: 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 2011. 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 2011.  

The Commercial Advisory Committee shall be entitled to receive a performance incentive fee which shall be calculated as 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 2013        -Annual results for year to 31 December 2012 announced;
May 2013   -   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 (28 August 2012)	71.5p per share

       
Buying and selling shares
The Company's Ordinary shares, which are listed on the London Stock Exchange and traded on Sharemark, 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, Matrix Corporate Capital LLP ('Matrix').  Matrix can be contacted as follows:

Chris Lloyd        020 3206 7176        [e-mail]

Paul Nolan        020 3206 7177        [e-mail]

Sharemark can be contacted as follows:

Sophie Murra        01296 439432        [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	Independent Auditor and Taxation Adviser James Cowper LLP Willow Court 7 West Way Botley Oxford OX2 0JB
Secretary and Registered Office Craig Hunter 39 Alma Road St Albans AL1 3AT	VCT Status Adviser PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH
Administration Manager Octopus Investments Limited 20 Old Bailey London EC4M 7AN	Bankers The Royal Bank of Scotland plc 1st Floor Mayfair Commercial Banking Centre 65 Piccadilly London W1A 2PP
Solicitors Pinsent Masons 30 Aylesbury Street London EC1R 0ER	Registrars Capital Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
Corporate Broker Matrix Corporate Capital LLP 1 Vine Street London W1J 0AH Tel: [phone]	Financial Adviser Beaumont Cornish Limited 2nd Floor, Bowman House 29 Wilson Street London EC2M 2SJ

Enquiries:
James Otter, Hygea vct plc                     [e-mail]
Charles Breese, Hygea vct plctel: 01280 703482 or [e-mail]
Roland Cornish, Beaumont Cornish Limited   tel: [phone]

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