Unaudited Interim Report for six months ending ...
7.00am
   16 August 2011
Hygea vct plc
Unaudited Interim Report for the six months ending 30 June 2011
Financial Summary
 Six months to Six months to Year to
 30 June 2011 30 June 2010 31 December 2010
Net assets (£'000s) 5,546 6,067 6,282
Return on ordinary activities after (330) (120) 94
tax (£'000s)
Earnings per share (4.0)p (1.4)p 1.2p
Net asset value per share 68.3p 74.8p 77.4p
Dividends paid to date 21.25p 16.25p 16.25p
Total return per share 89.6p 91.1p 93.7p
--------------------------------------------------------------------------------
About Hygea vct plc
Hygea vct plc ("the Company") is a Venture Capital Trust (VCT). Â Since 30 July
2007, the Board has managed the Company. Â 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
onwww.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. Â 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. Â A "qualifying holding"
consists of up to £1 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. Â The Company has continued its compliance
with these requirements.
Chairman's Statement
I am pleased to present the results for the six months ended 30 June 2011. The
Company's unaudited net asset value per share at 30 June 2011 was 68.3p compared
to 77.4p at 31 December 2010 and 74.8p at 30 June 2010. The loss on ordinary
activities in the period is largely accounted for by a reduction in the value of
the AIM portfolio.
The reduction in net asset value is after providing for the dividend of 5p per
share which was paid on 1 July 2011. The Board was interested in the views of a
number of shareholders attending the Annual General Meeting, the consensus of
which was that we should consider reducing the dividends to allow us more
flexibility to invest in new or existing opportunities. However the Board
continues to believe that most shareholders would prefer to continue with the
current distribution policy and it therefore remains the Board's intention to
pay an annual dividend of 5p per share. However the timing of such payments is
principally dependent on the realisation of investments, which, in current
economic conditions, is rather more uncertain than in recent years. Our
objective will, therefore, be to make payments equating to 5p per annum per
share as and when our cash resources allow. Shareholders have now received a
total of 21.25p in dividends which equates to a total return (being net asset
value per share plus dividends) of 89.6p since launch excluding tax relief.
Results
The total negative return for the period amounted to (4.0p) (June 2010: (1.4)p)
which was made up of a negative revenue return of (0.8)p (June 2010: (0.8)p)
being net operating costs offset by a modest amount of income and a negative
capital return of (3.2)p (June 2010: (0.6)p) being the reduction in the value of
our quoted portfolio in line with general market conditions.
Portfolio review
At 30 June 2010, the Fund consisted of 17 active holdings, six companies quoted
on AIM and 11 unquoted companies.
As we reported in our Interim Management Statement, during the three months
ended 31 March 2011 the Company made an investment of £72,340 into Archimed
Limited, a woundcare business spun out of Insense Limited and £250,000 into
Freehand 2010 Limited. In the three months ended 30 June 2011, the Company has
made further investments of £50,000 into Axon Limited and £30,000 into Freehand
2010 Limited. We have invested a further £24,000 into Freehand 2010 Limited
since 30 June 2011.
I am pleased to report that the latest round of fundraising in Axon, in which we
participated, was at a share price uplift of 82% to the previous round and we
have therefore increased the value of our original holding by £82,000. I am
pleased to say that we have not found it necessary to make any further
provisions in respect of our unquoted portfolio. The value of the AIM portfolio
has, however, declined in the period by £344,000 and recent turmoil in the
financial markets has not been helpful to the value of our AIM holdings since
the end of the period.
Whilst operational progress is being made within portfolio companies which we
expect to result in significant growth in sales and profitability, there are no
particular developments which we would draw to shareholders' attention at this
stage. However, one event which we believe will assist the development of the
portfolio and hence the Company is the launch by The Share Centre of the
Sharemark Primary Fundraising Service which is targeted at SMEs seeking to raise
up to £5million - more details can be found onwww.sharemark.com - we believe
that this development will also assist the Company's shareholders wishing to
sell their shares find buyers via Sharemark.
I am pleased to report that recent indications from DxS indicate that we will
shortly receive a further payment in respect of the earnout provisions in the
sale agreement. At present it is not possible to accurately estimate the quantum
and so, to be prudent, we have made no further accrual for these receipts.
 However we have made an accrual for £300,000 (included in the accounts for the
year to 31 December 2010) in respect of the second tranche of the escrow monies
which we expect to receive next month.
Further information regarding the portfolio, can be found on our website
atwww.hygeavct.com.
Shares
We will continue to communicate the underlying strength of the Company's shares
together with the attractive tax free yield which they offer particularly 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
The economic situation continues to challenge the SME market but we remain
confident that, against a backdrop of austerity, the opportunities for MedTech
companies conforming to the Company's investment template (i.e. they assist the
delivery of better patient outcomes at lower total cost) become even more
attractive. In order to retain our ability to partake in fundraisings of those
companies in our portfolio which we believe show good promise, as well as honour
our dividend commitments, we have arranged a modest bank loan until we receive
further monies from DxS. We are considering maintaining our bank facility into
the future to give us flexibility as the timing of liquidity events is difficult
to predict.
We are pleased that despite the fund's reduction in net asset value over the
last two years, largely accounted for by dividends amounting to 20p per share,
we have maintained a low operating cost base with a total expense ratio of below
3%.
James Otter
Chairman
15 August 2011
Investment Review
Investment Portfolio
Movement in
Carrying the six
Unrealised value at months to
Unquoted Investment at profit/(loss) 30 June 30 June
Investments cost (£'000) (£'000) 2011 (£'000) 2011 (£'000)
--------------------------------------------------------------------------------
ImmunoBiology -
Limited 818 244 1,062
--------------------------------------------------------------------------------
Hallmarq Veterinary -
Imaging Limited 1,116 (257) 859
--------------------------------------------------------------------------------
Insense Limited 509 (112) 397 -
--------------------------------------------------------------------------------
Freehand 2010 -
Limited 280 - 280
--------------------------------------------------------------------------------
Freehand Surgical -
Limited (holding
company of
Prosurgics Limited) 1,225 (1,225) -
--------------------------------------------------------------------------------
Exosect Limited 250 - 250 -
--------------------------------------------------------------------------------
Axon Limited 150 82 232 82
--------------------------------------------------------------------------------
Arecor Limited 114 - 114 -
--------------------------------------------------------------------------------
Eykona Technologies -
Limited 100 - 100
--------------------------------------------------------------------------------
Glide -
Pharmaceutical
Technologies
Limited 306 (206) 100
--------------------------------------------------------------------------------
Wound Solutions -
Limited 350 (262) 88
--------------------------------------------------------------------------------
Archimed LLP 72 - 72 -
--------------------------------------------------------------------------------
Purely Proteins
Limited 372 (372) -
--------------------------------------------------------------------------------
Total unquoted 82
investments 5,662 (2,108) 3,554
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Quoted Investments
--------------------------------------------------------------------------------
Scancell plc 1,061 (155) 906 (178)
--------------------------------------------------------------------------------
EKF Diagnostics plc 260 62 322 (90)
--------------------------------------------------------------------------------
Omega Diagnostics (41)
plc 356 (53) 303
--------------------------------------------------------------------------------
EpiStem Holdings
plc 66 120 186 (6)
--------------------------------------------------------------------------------
Reneuron plc 50 (2) 48 (15)
--------------------------------------------------------------------------------
Tristel plc 55 (9) 46 (14)
--------------------------------------------------------------------------------
York Pharma plc 90 (90) - -
--------------------------------------------------------------------------------
Total quoted (344)
investments 1,938 (127) 1,811
--------------------------------------------------------------------------------
Total investments 7,600 (2,235) 5,365 (262)
--------------------------------------------------------------------------------
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. Â 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. Â 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. Â 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 31 of the 2010 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 |Six months to 30 June Year to 31 December
 | 2011 | 2010 2010
| |
 |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 | - - -| - 41 41 - 896 896
| |
 |    |
| |
Loss on | |
valuation of | |
fixed asset | |
investments | - (262) (262)| - (93) (93) - (668) (668)
| |
 |    |
| |
Investment | |
income | 3 - 3| 27 - 27 37 - 37
| |
 |    |
| |
Other | |
expenses | (71) - (71)| (95) - (95) (171) - (171)
| |
 |    |
-------------+----------------------+--------------------------------------------
Return on | |
ordinary | |
activities | |
before tax | (68) (262) (330)| (68) (52) (120) (134) 228 94
| |
 | |
Taxation on | |
profit/(loss)| |
on ordinary | |
activities | - - -| - - - - - -
| |
 |    |
-------------+----------------------+--------------------------------------------
Return  on | |
ordinary | |
activities | |
after tax | (68) (262) (330)| (68) (52) (120) (134) 228 94
-------------+----------------------+--------------------------------------------
Earnings per | |
share - basic| |
and diluted | (0.8)p (3.2)p (4.0)p| (0.8)p (0.6)p (1.4)p (1.6)p 2.8p 1.2p
| |
 |    |
+----------------------+
* 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 | Six months to 30 Year to 31
 | June 2011| June 2010 December 2010
| |
 |  | £'000 £'000
------------------------+-----------------+-------------------------------------
Shareholders' funds at | |
start of period | 6,282| 7,404 7,404
| |
Return on ordinary | |
activities after tax | (330)| (120) 94
| |
Issue of equity | -| - -
| |
Dividends paid | (406)| (1,217) (1,216)
------------------------+-----------------+-------------------------------------
Shareholders' funds at | |
end of period | 5,546| 6,067 6,282
+-----------------+
Balance Sheet
+----------------+
| As at 30 June | As at 30 June As at 31 December
 | 2011 | 2010 2010
| |
 | £'000 £'000| £'000 £'000 £'000 £'000
-------------------------+----------------+-------------------------------------
 |  |
| |
Fixed asset investments* | Â 5,365| Â 5,463 Â 5,225
| |
Current assets: | Â Â |
| |
Debtors | 327 Â | 19 Â 323
| |
Cash at bank | (125) Â | 614 Â 764
-------------------------+----------------+-------------------------------------
 | 202  | 633  1,087
| |
Creditors: amounts | |
falling due within one | |
year | (21) Â | (29) Â (30)
-------------------------+----------------+-------------------------------------
Net current assets | Â 181| Â 604 Â 1,057
-------------------------+----------------+-------------------------------------
 |   |
-------------------------+----------------+-------------------------------------
Net assets | Â 5,546| Â 6,067 Â 6,282
-------------------------+----------------+-------------------------------------
 |   |
| |
Called up equity share | |
capital | 4,058 Â | 4,058 Â 4,058
| |
Share premium | 1,737 Â | 1,737 Â 1,737
| |
Special distributable | |
reserve | 1,660 Â | 1,660 Â 1,660
| |
Capital redemption | |
reserve | 38 Â | 38 Â 38
| |
Capital reserve - | |
gains/(losses) on | |
disposal | 1,288 Â | 839 Â 1,694
| |
             | |
 - holding gains/(losses)|(2,235)  |(1,398)  (1,973)
| |
Revenue reserve |(1,000) Â | (867) Â (932)
-------------------------+----------------+-------------------------------------
Total equity | |
shareholders' funds | Â 5,546| Â 6,067 Â 6,282
-------------------------+----------------+-------------------------------------
Net asset value per share|  68.3p|  74.8p  77.4p
+----------------+
*At fair value through profit and loss
Cash flow statement
+---------------+
| Six months to| Six months to Year to 31
 | 30 June 2011| 30 June 2010 December 2010
| |
 | £'000| £'000 £'000
-----------------------------+---------------+----------------------------------
 |  |
| |
Net cash outflow from | |
operating activities | (81)| (49) (418)
| |
 |  |
| |
Financial investment: | Â |
| |
Purchase of investments | (402)| (2,206) (2,743)
| |
Sale of investments | -| 50 1,105
| |
 |  |
| |
Dividends paid: | (406)| (1,217) (1,216)
| |
 |  |
| |
Financing: | Â |
| |
Issue of equity | -| - -
| |
 |  |
-----------------------------+---------------+----------------------------------
(Decrease)/increase in cash | |
resources at bank | (889)| (3,422) (3,272)
+---------------+
Reconciliation of net cash flow to movement in liquid resources
+------------------+
| Six months to 30 | Six months to 30 Year to 31 December
 | June 2011| June 2010 2010
| |
 | £'000| £'000 £'000
---------------------+------------------+---------------------------------------
Decrease in cash | |
resources at bank | (889)| (3,422) (3,272)
| |
Opening net liquid | |
resources | 764| 4,036 4,036
---------------------+------------------+---------------------------------------
Net funds at period | |
end | (125)| 614 764
+------------------+
Reconciliation of profit before taxation to cash flow from operating activities
+----------------+
| Six months to| Six months to Year to 31
 | 30 June 2011| 30 June 2010 December 2010
| |
 | £'000| £'000 £'000
-----------------------------+----------------+---------------------------------
Return on ordinary activities| |
before tax | (330)| (120) 94
| |
Gain on disposal of fixed| |
asset investments | -| (41) (896)
| |
Loss on valuation of fixed | |
asset investments | 262| 93 668
| |
(Increase)/decrease in | |
debtors | (4)| 10 (294)
| |
(Decrease)/increase in | |
creditors | (9)| 9 10
-----------------------------+----------------+---------------------------------
Net cash (outflow)/inflow | |
from operating activities | (81)| (49) (418)
+----------------+
Notes to the Half-Yearly Report
1.    Basis of preparation
The unaudited half-yearly results which cover the six months to 30 June 2011
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 2010, 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 2011 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 2010 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 2011 are calculated on the basis of 8,115,376
shares (31 December 2010: 8,115,376 and 30 June 2010: 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 2011 divided
by 8,115,376 (31 December 2010: 8,115,376 and 30 June 2010: 8,115,376) shares in
issue at that date.
5. Â Â Â Â 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 2010. The Company's principal risks
and uncertainties have not changed materially since the date of that report.
6. Â Â Â Â Related party transactions
The Board of the Company acts as the investment manager of the Company through
its Commercial Advisory Committee. Â During the period under review, no
remuneration was paid to the Board in their capacity as investment manager. Â 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 2010.
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 2012    -    Annual results for year to 31 December 2011
announced; Annual Report and accounts published
            May 2012        -    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). Â 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 2011) 46p 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. Â 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'). Â Matrix can
be contacted as follows:
Chris Lloyd      020 3206 7176               chris.lloyd@matrixgroup.co.uk
Paul Nolan       020 3206 7177        paul.nolan@matrixgroup.co.uk
Sharemark can be contacted as follows:
Sophie Douglas    01296 439432    sophie.douglas@share.co.uk
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 atwww.hygeavct.com.
Enquiries:
Charles Breese, Hygea VCT plc on 01280 703482 orlarpentnewton@btinternet.com
Roland Cornish, Beaumont Cornish Limited on 020 7628 3396
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. 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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