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Proven Health VCT (NHF)

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Friday 28 September, 2012

Proven Health VCT

Proven Health VCT Plc : Half-yearly report

Proven Health VCT Plc : Half-yearly report

ProVen Health VCT plc

Half-Yearly Report for the Six Months Ended 31 July 2012

Financial Summary

31 July
2012
31 July
2011
31 Jan
2012
Net asset value per share ("NAV") 39.9p 45.3p 44.2p
Dividends paid since launch 18.5p 17.5p 17.5p
Total return (NAV plus dividends paid since launch) 58.4p 62.8p 61.7p
Mid market share price  38.3p 41.3p 37.5p

 

Chairman's Statement

Introduction
 The half year report for the Company for the period to 31 July 2012 is set out below.  I would like to welcome those new shareholders who now hold shares in the Company as a result of the merger with Longbow Growth and Income VCT plc ("LGIV"). As well as completing the merger with LGIV, the Company also concluded an enhanced share buyback in April with gross proceeds of £1.2 million being re-invested in the Company. The shareholders also approved a change to the investment mandate with the result that the Company can now invest in a broad range of areas in addition to the health sector.

Net asset value and portfolio activity
As at 31 July 2012, the Company's net asset value per share ("NAV") stood at 39.9p. After adjusting for the dividend of 1p per share paid on 9 March 2012, this represents a decrease of 7.5% over the NAV at 31 January 2012.  The FTSE All Share Index was broadly unchanged over the same period whilst the FTSE All Share Total Return Index, which includes dividends reinvested, increased by 1.9%.

The total return (NAV plus cumulative dividends paid) to ordinary shareholders who invested at the outset of the Company was 58.4p per share at 31 July 2012 (31 January 2012: 61.7p per share).

During the half year, the Company made a further investment in APM Healthcare and by virtue of this holding received founder shares in Long Eaton Healthcare. The merger with LGIV resulted in an additional investment in Polytherics being transferred to the Company. Further sales proceeds were received in March 2012 from the sale of Biovex. The Investment Manager expects to complete the Company's first non-health investment shortly. Further detail on all investment activity is provided in the Investment Manager's Report on the following pages.     

Results and dividend
The Income Statement shows a loss on ordinary activities after taxation for the Company for the period of £768,000 (comprising a revenue loss of £57,000 and a capital loss of £711,000). The Company paid an interim dividend for the year to 31 January 2012 of 1p per share on 9 March 2012.  The Board is not, at this time, proposing an interim dividend for the year ending 31 January 2013. 

Changes in share capital
During the period, the Company completed a merger with LGIV under which LGIV transferred its net assets of £931,000 to the Company in consideration for which the Company issued new ordinary shares to the shareholders of LGIV. The Company also concluded an enhanced share buyback and an offer for subscription. Further details are provided in the notes to the accounts.

Under the Company's dividend re-investment scheme, 71,621 shares were issued on 15 March 2012, following the dividend payment on 9 March 2012. In addition to the enhanced share buyback, the Company also purchased 369,000 shares at an average price of approximately 39p per share (approximately equal to a 10% discount to the net asset value at the time of purchase). These shares were subsequently cancelled.

Investor presentation
The Investment Manager will be holding its annual VCT shareholder presentation on Monday 22 October 2012 at the Royal College of Surgeons, 35-43 Lincoln's Inn Fields,  London WC2A 3PE. This event provides shareholders with the opportunity to meet the Investment Manager, Board directors and other shareholders, and to hear directly from some of the portfolio companies. Shareholders should have received an invitation with the Company's annual report but if you have not and would like to attend, then please contact the Investment Manager at 39 Earlham Street, London WC2H 9LT or by telephone on 020 7845 7820.

The Board also welcomes shareholder feedback and comments outside formal events and meetings and can be contacted initially through the Investment Manager.

Charles Pinney

Chairman



Investment Manager's Report


Introduction

The broad economic backdrop has remained little changed for some time with funding for businesses remaining challenging. The change in investment mandate from a health focus to a wider remit was approved by shareholders in March 2012 and we expect the first non-health investment to complete shortly.

Portfolio performance and activity

At 31 July 2012, the Company's investment portfolio comprised holdings in 11 companies, of which 9 were unquoted and 2 were quoted, at a valuation of £4.8 million and original acquisition cost of £8.1 million. In addition, the Company held £3.5 million in cash and liquidity funds.


During the half year, the Company completed a further investment of £475,000 into APM Healthcare. APM Healthcare has now opened eight pharmacies in tandem with local GPs with further openings in the pipeline. The Company also received founder shares in April in Long Eaton Healthcare, a standalone pharmacy, by virtue of its investment in APM Healthcare. In addition, the Company now has a further £135,000 investment in Polytherics, as a result of the merger with Longbow Growth and Income VCT plc. The Company also received $134,000 (£83,000) in March from Biovex, being initial sales proceeds originally held in escrow following its original disposal in March 2011. After the period end, a further follow-on investment of £77,000 was made into Population Genetics Technologies.


The overall investment portfolio disappointingly showed a decrease in value of £736,000. This was principally due to further provisions being made against the valuations of Altacor, Population Genetics Technologies, Omni Dental Sciences and Digital Healthcare, offset by unrealised gains from the two quoted company holdings, Sinclair IS Pharma and Ventura Group. Whilst the focus of the fund has now shifted to later stage businesses and also to include non-health investments, we continue to work with these companies to maximise value for shareholders.

Outlook

We welcome both the change in the Company's investment mandate to allow non-health sector deals and the recent merger with Longbow Growth Income and VCT which has brought new funds for investment. We hope that these positive developments will enable us to deliver improved investment returns for shareholders over the medium term.

Beringea LLP

 

Summary of Investment Movements

for the six months ended 31 July 2012

 

Additions (at cost)

 

£'000
Polytherics Limited* 135
APM Healthcare Limited 475
Long Eaton Healthcare Limited** -
610

 

*Investment from Longbow Growth and Income VCT plc
**Founder shares at nominal value

 

Disposals

 

Market Realised
value at gain/
Cost 1 February 2012 Disposal proceeds Gain/(loss) against cost  (loss) in period
£'000 £'000  £'000  £'000  £'000
Biovex Inc - - 83 83 83
Omni Dental Sciences Limited 13 13 13 - -
13 13 96 83 83

 

 

Summary of Investment Portfolio
as at 31 July 2012 

         Cost
      Valuation
Unrealised gain/(loss) in the period % of portfolio
by value
£'000 £'000 £'000
Top venture capital investments
Population Genetics Technologies Limited 1,129 903 (225)   10.8%
Polytherics Limited 885 885 - 10.6%
APM Healthcare Limited *** 850 850 - 10.2%
Altacor Limited 1,020 815 (425) 9.8%
Sinclair IS Pharma plc ** 585 413 92 5.0%
Digital Healthcare Limited 1,010 384 (134) 4.6%
Vectura Group plc * 250 331 48 4.0%
Omni Dental Sciences Limited 737 230 (92) 2.8%
Long Eaton Healthcare Limited **** - - - 0.0%
6,466 4,811 (736) 57.8%
Other venture capital investments 1,647 - - 0.0%
8,113 4,811 (736) 57.8%
Current asset investments - liquidity funds 2,998 36.0%
Cash at bank and in hand 517 6.2%
Total investments 8,326 100.0%

All venture capital investments are unquoted unless otherwise stated.

*          Quoted on the Main Market
**       Quoted on AIM
***     APM Healthcare Limited is also held by ProVen VCT plc and ProVen Growth and Income VCT plc, both of which are managed by Beringea LLP
****  Long Eaton Healthcare Limited is also held by ProVen VCT plc, ProVen Growth and Income VCT plc and ProVen Planned Exit VCT plc 

 

Unaudited Balance Sheet
as at 31 July 2012 

31 July
2012
31 July
2011
31 Jan
2012
£'000 £'000 £'000
Fixed assets
Investments 4,811 5,110 4,951
Current assets
Debtors 84 15 83
Current investments 2,998 1,806 1,812
Cash at bank and in hand 517 1,931 1,772
3,599 3,752 3,667
Creditors: amounts falling due within one year (45) (82) (133)
Net current assets 3,554 3,670 3,534
Net assets 8,365 8,780 8,485
Capital and reserves
Called up share capital 210 194 192
Capital redemption reserve 436 401 404
Share premium account 9,593 7,428 7,427
Special distributable reserve 5,600 7,445 7,168
Capital reserve - realised (4,350) (3,581) (4,375)
Capital reserve - unrealised (2,178) (2,312) (1,442)
Revenue reserve (946) (795) (889)
Total equity shareholders' funds 8,365 8,780 8,485
Basic and diluted net asset value per share 39.9p 45.3p 44.2p

Unaudited Income Statement
for the six months ended 31 July 2012

Six months ended

31 July 2012

Six months ended

31 July 2011
Year ended
31 Jan 2012
Revenue Capital Total Revenue Capital Total Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Income 77 - 77 32 - 32 48
Losses on investments - (653) (653) - (220) (220) (286)
77 (653) (576) 32 (220) (188) (238)
Investment management fee (19) (58) (77) (21) (63) (84) (156)
Other expenses (115) - (115) (73) - (73) (165)
Loss on ordinary activities before taxation (57) (711) (768) (62) (283) (345) (559)
Tax on ordinary activities - - - - - - -
Loss attributable to equity shareholders (57) (711) (768) (62) (283) (345) (559)
Basic and diluted loss per share (0.3p) (3.4p) (3.7p) (0.3p) (1.5p) (1.8p) (2.9p)
               

  
Reconciliation of Movements in Shareholders' Funds

31 July
2012
31 July
2011
31 Jan
2012
£'000 £'000 £'000
Opening shareholders' funds 8,485 9,199 9,199
Proceeds from share issues 2,218 271 272
Share issue costs (2) (8) (9)
Purchase of own shares (1,376) (141) (222)
Total recognised loss for the period (768) (345) (559)
Dividends paid (192) (196) (196)
Closing shareholders' funds 8,365 8,780 8,485

Unaudited Cash Flow Statement
for the six months ended 31 July 2012

Six months ended
31 July 2012
Six months
ended
31 July 2011
Year
ended
31 Jan 2012
Note £'000 £'000 £'000
Net cash outflow from operating activities A (204) (167) (304)

Capital expenditure

Purchase of investments

(475) - (1,175)

Disposal of investments

96 692 1,960
Net cash (outflow)/inflow from capital expenditure (379) 692 785

 

Equity dividends paid

(161) (163) (163)

 

Net cash (outflow)/inflow before financing

(744) 362 318

 

Financing

Proceeds from share issues 2,053 238 239
Share issue costs (2) (8) (9)
Purchase of own shares (1,376) (107) (222)
Net cash inflow from financing 675 123 8
(Decrease)/increase in cashB (69) 485 326
Notes to the cash flow statement:
A    Net cash flow from operating activities
Loss on ordinary activities before taxation (768) (345) (559)
Losses on investments 653 220 286
Re-invested liquidity funds - (6) (12)
(Increase)/decrease in debtors (1) 6 (62)
(Decrease)/increase in creditors (88) (42) 43
  Net cash outflow from operating activities (204) (167) (304)
B    Analysis of net funds
Beginning of period 3,584 3,246 3,246
Net cash (outflow)/inflow (69) 485 326
Other non cash changes - 6 12
End of period 3,515 3,737 3,584
Net funds split as:
Beginning of period:
Cash at bank and in hand 1,772 1,446 1,446
Liquidity funds 1,812 1,800 1,800
Total funds at beginning of period 3,584 3,246 3,246
End of period:
Cash at bank and in hand 517 1,931 1,772
Liquidity funds 2,998 1,806 1,812
Total funds at end of period 3,515 3,737 3,584

Notes to the Unaudited Financial Statements


1.       The unaudited half yearly results cover the six months to 31 July 2012 and have been prepared in accordance with Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" revised January 2009 and in accordance with the accounting policies set out in the statutory accounts for the year ended 31 January 2012, which were prepared under UK Generally Accepted Accounting Practice.

2.     All revenue and capital items in the Income Statement derive from continuing operations.

3.     There are no recognised gains or losses other than those disclosed in the Income Statement.

4.     The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.

5.     The comparative figures were in respect of the period ended 31 July 2011 and the year ended 31 January 2012.

6.     Basic and diluted return per share for the period has been calculated on 20,691,343 shares, being the weighted average number of shares in issue during the period.

7.     Basic and diluted NAV per share for the period has been calculated on 20,975,364 shares, being the number of shares in issue at the period end.

8.     Dividends

  
Pence per share 31 July 2012
 £'000
31 Jan 2012
£'000
Paid in the period
2012 final dividend paid on 9 March 2012 1.0 192 -
2011 final dividend paid on 17 June 2011 1.0 - 196
192 196
Split as:
Paid directly to shareholders 161 163
Shares issued under dividend re-investment scheme 31 33
192 196
        


9.     Reserves

Capital redemption reserve Share
premium
account
Special reserve Capital
reserve - realised
Capital
reserve - unrealised
Revenue reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 1 February 2012 404 7,427 7,168 (4,375) (1,442) (889)
Issue of new shares - 2,168 - - - -
Share issue costs - (2) - - - -
Purchase of own shares 32 - (1,376) - - -
Expenses capitalised - - - (58) - -
Gains/(losses) on investments - - - 83 (736) -
Retained net loss - - - - - (57)
Dividends paid in the period - - (192) - - -
At 31 July 2012 436 9,593 5,600 (4,350) (2,178) (946)
        

At the period end there were £nil (31 Jan 2012: £462,000) of reserves available for distribution after taking into account net unrealised losses.


10.   The unaudited financial statements set out herein do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and have not been delivered to the Registrar of Companies. The figures for the year ended 31 January 2012 have been extracted from the financial statements for that year, which have been delivered to the Registrar of Companies; the Auditor's report on those financial statements was unqualified.


11.   Offer for subscription, enhanced share buyback and merger

Between 5 April 2012 and 13 April 2012, the Company issued 69,246 shares for consideration at approximately 45.9p per share, under an offer for subscription dated 10 February 2012. The aggregate consideration for the shares was £31,000 and share issue costs thereon amounted to £1,000 


Under the terms of an enhanced share buyback, outlined in a circular issued by the Company on 10 February 2012, the Company bought back and subsequently issued a number of shares on 5 April 2012 in the tax year 2011/12 and 13 April 2012 in the tax year 2012/13. On 5 April 2012, the Company purchased 1,804,994 shares for cancellation at a price of 43.3p per share and issued 1,721,418 shares at a price of 45.4p per share. On 13 April 2012, the Company purchased 1,025,322 shares for cancellation at a price of 43.3p per share and issued 977,859 shares at a price of 45.4p per share. Total funds of £1.2 million were re-invested in the Company with transaction costs of approximately £57,000 being incurred. Beringea LLP was entitled to a fee of £12,000 in respect of services provided in connection with the enhanced share buyback.


On 16 March 2012, following approval by the shareholders of both companies, the Company completed a scheme of reconstruction with Longbow Growth and Income VCT plc ("LGIV") (the "Scheme" or "Merger"). The terms of the Scheme were set out in a circular issued by the Company on 10 February 2012. The Scheme was effected by LGIV transferring its net assets to the Company, in consideration for which the Company issued 2,150,872 new ordinary shares to the shareholders of LGIV. Under the Scheme, LGIV was placed into members' voluntary liquidation. The number of new shares issued by the Company to the shareholders of LGIV was determined on the basis of the relevant net assets of LGIV and the Company at the close of business on 13 March 2012, in accordance with the terms of the Scheme. The new ordinary shares rank pari passu in all respects and form a single class with the existing ordinary shares.


The Merger resulted in the addition of net funds (including investments) of £931,000, an increase of 11% over the net assets of the Company at 31 January 2012. At the date of the Merger, LGIV held one venture capital investment, Polytherics Limited, in which the Company already had an investment. The Company's costs of the Merger were £75,000 and are recoverable from the Investment Manager over two years. £14,000 was repaid by the Investment Manager to the Company during the period.

             

12.   Risk and uncertainties

Under the Disclosure and Transparency Directive, the Board is required in the Company's half-yearly results, to report on the principal risks and uncertainties facing the Company over the remainder of the financial year.


The Board has concluded that the key risks facing the Company over the remainder of the financial year are as follows:


(i)      investment risk associated with investing in small and immature businesses;

(ii)     market risk arising from volatile stock market conditions and their potential effect on investment valuation particularly in the areas of investment permitted by VCT rules; and

(iii)    compliance risk in failing to maintain approval as a VCT.


In the case of (i), the Board is satisfied with the Company's approach. The Investment Manager follows a rigorous process in vetting and structuring new investments and, after an investment is made, close monitoring of the business.  In respect of (ii), the Company seeks to hold a diversified investment portfolio, albeit currently concentrated in the health sector.  The Board is confident that the Investment Manager's investment policy should help to limit this risk whilst remaining within the constraints of the VCT regulations.

 

As far as (iii) is concerned, the Company's compliance with the VCT regulations is continually monitored by the Investment Manager, who reports regularly to the Board on the current and forecast position.  The Company also retains PricewaterhouseCoopers to provide regular reviews and advice in this area.  The Board considers that this approach reduces the risk of a breach of the VCT regulations to an acceptable level.

 

13.   Going concern

The Directors have reviewed the Company's financial resources at the period end and conclude that the Company is well placed to manage its business risks.


The Board confirms that it is satisfied that the Company has adequate resources to continue in business for the foreseeable future. For this reason, the Board believes that the Company continues to be a going concern and that it is appropriate to apply the going concern basis in preparing the financial statements.


14.   The Directors confirm that, to the best of their 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 and the half-yearly financial report includes a fair review of the information required by: 

  1. 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, and a description of the principal risks and uncertainties for the remaining six months of the year; and  
  2. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.

15.   Copies of the unaudited half yearly results will be sent to shareholders. Further copies can be obtained from the Company's registered office and will be available for download from www.provenvcts.co.uk.




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: Proven Health VCT Plc via Thomson Reuters ONE

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