Interim Results

RNS Number : 1400C

Hygea VCT plc

28 August 2008

 



FOR IMMEDIATE RELEASE                                                                                        7.00am 28 August 2008

Hygea VCT plc

Unaudited Interim Report for the six months ending 30 June 2008 

Hygea VCT plc ('Hygea', 'Company' or 'Fund') is a Venture Capital Trust ('VCT') which aims to provide shareholders with attractive long-term returns by investing in quoted and unquoted MedTech companies.

The Board manages the Company. The Company was launched in October 2001 and raised over £7.0 million (£6.8 million net of expenses) through an offer for subscription. 

Financial Highlights

	Six months to 30 June 2008	Six months to 30 June 2007	Year to 31 December 2007
Net assets (£'000)	£4,619	£4,535	£4,608
Net total return/(loss) before tax (£'000)	£(65)	£241	£314
Net asset value per share	60.1p	60.2p	61.2p
Revenue return/(loss) per share*	(0.9)p	(1.2)p	(2.2)p
Total return/(loss) per share*	(0.8)p	3.2p	4.2p

* based on a weighted average of 7,596,691 (June 2007: 7,530,191 and December 2007: 7,530,191) shares in issue in the period.

Chairman's Statement

I am pleased to present the results for the six months ended 30 June 2008. The Company's net asset value per share at 30 June 2008 was 60.1p compared to 61.2p at 31 December 2007 and 60.2p at 30 June 2007 - the drop in net asset per share during the six months ended 30 June 2008 is based on a net increase of £6,000 in the value of investments offset by net expenses of £71,000.Your Board is pleased that the net asset value has remained relatively stable over the period, following a modest increase in the overall value of the unquoted portfolio and despite the need to write down the AIM portfolio. Annual running costs remain less than our target of 3% per annum of net asset value after allowing for the costs of the share issue, which are shown in the profit and loss account.

Portfolio review

(a) Investing

At 30 June 2008, the Fund consisted of 16 holdings, 6 AIM quoted companies and 10 unquoted companies.

During the period the Company subscribed for further shares in Prosurgics Limited (a leading surgical robotics company) at a total cost of £100,000. We have now written up our shareholding in line with that fundraising and Prosurgics is currently in the process of seeking further funds at a significantly higher value.

We have also subscribed a further £100,000 in Hallmarq Veterinary Imaging Limited. The company's order book is developing well and the company is currently engaged in a further fundraising at a significantly higher value than we paid earlier this year, thus leading to the prospect of an increase in our carrying value later this year.

We identified an opportunity to invest £25,000 in Immunodiagnostic Holdings PLC, an AIM quoted company, which has subsequently been sold realising a profit of some £10,000. We also invested a further £37,000 in Insense Limited during the period.

DxS Limited continues to perform well and we have taken the opportunity to increase our valuation in line with that ascribed by the lead investor. Glide Pharmaceutical Technologies Limited has recently completed a fundraising and we have increased our valuation in line with the current share price. However, whilst Scancell Limited has completed assembling investors for its current fundraising (completion of which will coincide with listing on PlusMarkets), prevailing market conditions dictated that the pre-money value was below that previously ascribed and so we have reduced the value of our holding accordingly.

(b) Selected operational highlights

Selected examples of developments within portfolio companies which give your board confidence concerning the underlying value building within the portfolio are:

• DxS Limited (www.dxsdiagnostics.com) - personalised medicine based on the use of molecular diagnostic products to aid doctors and drug companies select therapies for patients predominantly in the field of cancer. In the last year, contracts have been won from, inter alia, Amgen and Roche Diagnostics. The unaudited management accounts for the year to June 2008 show a transition from being lossmaking into profitability.

• Hallmarq Veterinary Imaging Limited (www.hallmarq.net) - developed the world's first MRI scanner for equine vets to use on standing horses. The Key Performance Indicator is the increase in scan fees, which provide recurring revenue - scan fees for the 11 months to July 2008 were £491,000, an increase of more than 40% over the same period for 2007 and representing about 43% of overheads. Version 2 of the instrument, which was launched in early 2007, delivers greater performance and reliability, and a high percentage of sales prospects have now been converted into orders - which will, in turn, generate additional scan fees.

Shareholders seeking further information on portfolio companies can do so by visiting www.hygeavct.com, clicking on Investee Companies and then following the appropriate links.

Shares

We have been pleased by the response to our 10% top up offer which has now officially closed, although we can still issue shares within the limits of the top up as we come across interested investors. We have raised a total of £129,000 following the allotment of 258,000 shares at 50p each. In addition to the issue of new shares we have also seen a small but significant number of transactions in the secondary market and we will continue to take steps to communicate the potential of our portfolio. We remain committed to our policy of not buying back shares, since we do not believe that this is the best use of the Fund's limited resources.

Value added tax

HM Revenue & Customs have recently agreed that Investment Company management fees are not subject to VAT and that this situation should apply retrospectively. This will have no effect on your Company for the future since the Fund is now managed by the Board, but it is likely that VAT on investment management fees paid in the previous three years may be reclaimable. We are currently working with Octopus Investments Limited with regard to the reclaim but it is not presently possible to be certain as to its value and therefore no credit has been taken in these accounts.

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 Hygea VCT continues to comply with the conditions laid down by HM Revenue & Customs for maintaining approval as a VCT.

Outlook

Notwithstanding the reduction in investor confidence which has affected much of the microcap sector in particular, we are encouraged by the performance of many of our investee companies and also the progress some are making towards flotation. We are pleased that a number of portfolio companies have successfully raised funds in this very challenging climate. We remain confident that the portfolio will deliver value to shareholders over the three to five year period referred to in the annual report based on positive operating developments within the portfolio.

James Otter

Chairman

28 August 2008

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors confirm that to the best of their knowledge the half-yearly financial report has been prepared in accordance with the Disclosure and Transparency rules and in accordance with applicable accounting standards, and includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements.

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 2007. The Company's principal risks and uncertainties have not changed materially since the date of that report.

Related Party Transactions

The Board of Hygea VCT plc acts as the investment manager ('Commercial Advisory Committee') of the Company. 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 VCT plc 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 2007.  

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. 1.25p, but excluding any sums returned to shareholders from HMRC in the year of subscription).

Profit and Loss Account
	Six months to 30 June 2008			Six months to 30 June 2007			Year to 31 December 2007
	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	-	3	3	-	(364)	(364)	-	124	124
(Loss)/gain on valuation of fixed asset investments	-	2	2	-	716	716	-	378	378
(Loss)/gain on valuation of current asset investments		1	1	-	-	-	-	4	4
Income	6	-	6	2	-	2	1	-	1
Investment management fees	-	-	-	(8)	(23)	(31)	(10)	(28)	(38)
Other expenses	(77)	-	(77)	(82)	-	(82)	(155)	-	(155)
(Loss)/profit on ordinary activities before tax	(71)	6	(65)	(88)	329	241	(164)	478	314
Taxation on (loss)/profit on ordinary activities	-	-	-	-	-	-	-	-	-
(Loss)/profit on ordinary activities after tax	(71)	6	(65)	(88)	329	241	(164)	478	314
Revenue and capital (loss)/return per share - basic and diluted	(0.9)p	0.1p	(0.8)p	(1.2)p	4.4p	3.2p	(2.2)p	6.4p	4.2p

• Each total column of this statement is the profit and loss account of the Company

• All revenue and capital items in the above statement derive from continuing operations

• The accompanying notes are an integral part of the interim financial information

• 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 securities.

Reconciliation of Movements in Shareholders' Funds
	Six months ended 30 June 2008	Six months ended 30 June 2007	Year to 31 December 2007
	£'000	£'000	£'000
Shareholders' funds at start of period	4,608	4,294	4,294
(Loss)/profit on ordinary activities after tax	(65)	241	314
Issue of equity	76	-	-
Shareholders' funds at end of period	4,619	4,535	4,608

Balance Sheet
	As at 30 June 2008		As at 30 June 2007		As at 31 December 2007
	£'000	£'000	£'000	£'000	£'000	£'000
Fixed asset investments		4,616		4,375		4,358
Current assets:
Debtors	17		11		3
Cash at bank	15		198		272
	32		209		275
Creditors: amounts falling due within one year	(29)		(49)		(25)
Net current assets		3		160		250
Net assets		4,619		4,535		4,608
Called up equity share capital		3,841		3,765		3,765
Share Premium		1,722		1,722		1,722
Special distributable reserve		1,660		1,660		1,660
Capital redemption reserve		38		38		38
Capital reserve - realised		(1,471)		(901)		(1,474)
- unrealised		(437)		(1,163)		(440)
Revenue reserve		(734)		(586)		(663)
Total shareholders' funds		4,619		4,535		4,608
Net asset value per share		60.1p		60.2p		61.2p

Cash flow statement
	Six months to  30 June 2008	Six months to 30 June 2007	Year to 31 December 2007
	£'000	£'000	£'000
Net cash outflow from operating activities	(80)	(30)	(122)
Financial investment :
Purchase of investments	(262)	(291)	(713)
Sale of investments	9	425	1,013
Financing :
Issue of own shares	76	-	-
(Decrease)/ increase in cash resources	(257)	104	178

Reconciliation of net cash flow to movement in liquid resources
	Six months to  30 June 2008	Six months to 30 June 2007	Year to 31 December 2007
	£'000	£'000	£'000
(Decrease)/ increase in cash resources	(257)	104	178
Movement in liquid resources	-	-	-
Opening net liquid resources	272	94	94
Net cash at end of period	15	198	272

Reconciliation of operating profit before taxation to cash flow from operating activities
	Six months to  30 June 2008	Six months to 30 June 2007	Year to 31 December 2007
	£'000	£'000	£'000
(Loss)/profit on ordinary activities before tax	(65)	241	314
(Profit)/loss on disposal of investments	(3)	364	(124)
(Increase)/decrease in debtors	(14)	66	74
Increase/(decrease) in creditors	4	15	(8)
Gain on valuation of investments	(2)	(716)	(378)
Outflow from operating activities	(80)	(30)	(122)

Investment Portfolio as at 30 June 2008
		Cost	Valuation
Ten largest investments by value		£'000	£'000
ImmunoBiology Limited		600	844
DxS Limited		325	636
Scancell Limited		725	585
Prosurgics Limited		490	509
Hallmarq Veterinary Imaging Limited		885	438
Glide Pharmaceutical Technologies Limited		105	370
Wound Solutions Limited		350	350
Insense Limited		282	341
BioAnaLab Limited		279	279
EpiStem Holdings plc		62	89
		4,103	4,441
Other AIM quoted investments		583	175
Other unquoted investments		371	-
		5,057	4,616

Notes to the Interim Financial Statements

 

1.             Basis of preparation

The unaudited interim results which cover the six months to 30 June 2008 have been prepared in accordance with applicable accounting standards in the United Kingdom, to include a Profit and Loss Account, Reconciliation of Movements in Shareholders’ Funds, Balance Sheet and Cash Flow Statement. The principal accounting policies of the Company have remained unchanged from those set out in its 2007 annual report.

 

2.             Publication of non-statutory accounts

The unaudited interim results for the six months ended 30 June 2008 and 30 June 2007 do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985 and have not been delivered to the Registrar of Companies. The comparative figures for the year ended 31 December 2007 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 235 of the Companies Act 1985 was unqualified.

 

3.             Earnings per share

The calculation of the revenue and capital (loss)/return per share at 30 June 2008 is based on the (loss)/return on ordinary activities after tax for the period and on 7,596,691 shares (30 June 2007: 7,530,191 and 31 December 2007: 7,530,191 shares), 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 return per share figures are relevant.

 

4.             Net asset value per share

The calculation of net asset value per share is based on the net assets at 30 June 2008 and on 7,682,191 shares being the number of shares in issue at the same date (30 June 2007: 7,530,191 and 31 December 2007: 7,530,191 shares).

 

5.             During the six months ended 30 June 2008 the Company issued 152,000 ordinary shares at a price of 50 pence per share. Since the period end, a further 106,000 ordinary shares of 50 pence each have been issued at a price of 50 pence per share.

               

6.             Copies of this statement are being sent to all shareholders. Copies are also available from the registered office of the Company at 8 Angel Court, London, EC2R 7HP and on the Company’s website, www.hygeavct.com.

Enquiries:

Charles Breese, Hygea VCT plc on 01280 703482 or [e-mail]

Roland Cornish, Beaumont Cornish Limited on 020 7628 3396

 

END

 

 

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