TIDMPPE
ProVen Health VCT plc
Half-Yearly Report for the Six Months Ended 31 July 2011
Financial Summary
31 July 31 July 31 January
2011 2010 2011
Net asset value per share ("NAV") 45.3p 46.9p 48.0p
Dividends paid since launch 17.5p 15.5p 16.5p
Total return (NAV plus dividends paid since launch) 62.8p 62.4p 64.5p
Mid market share price 41.3p 48.0p 42.0p
Chairman's Statement
Introduction
The first part of the Company's financial year to 31 January 2012 has continued
in the same vein as last year with economic uncertainty and volatility in global
stock markets. If anything the situation is slightly worse with signs of slowing
growth across many countries even before key austerity programmes are
implemented and with the problems in the Eurozone still to be resolved.
Against this backdrop, the Company's investment portfolio has seen a lot of
activity with two new investments, three full disposals, one partial disposal,
two portfolio companies merging and a significant acquisition by a further
portfolio company, in the period up to the date of this statement.
Net asset value and portfolio activity
As at 31 July 2011, the Company's net asset value per share ("NAV") stood at
45.3p. After adjusting for the dividend of 1p per share paid on 17 June 2011,
this represents a decrease of 3.5% over the NAV at 31 January 2011. The FTSE
All Share Index was broadly flat over the same period and the FTSE All Share
Total Return Index, which includes dividends reinvested, increased by a modest
1%. This, of course, excludes the impact of the wider stock market falls which
were experienced in August and September.
The total return (NAV plus cumulative dividends paid) to ordinary shareholders
who invested at the outset of the Company was 62.8p per share at 31 July 2011
(31 January 2011: 64.5p per share).
At 31 July 2011, the Company's investment portfolio comprised holdings in 9
companies, of which 7 were unquoted and 2 were quoted, at a valuation of GBP5.1
million and original acquisition cost of GBP7.4 million. In addition, the Company
held GBP3.7 million in cash and liquidity funds.
The two new additions, Community Pharmacy Limited and PolyTherics Limited, the
realisation of Onyx Scientific Limited and the partial disposal of Vectura Group
plc, occurred after the period end and are therefore not reflected in these
figures. They did not, however, have a material impact on the reported net asset
value.
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 GBP345,000 (comprising a revenue loss of GBP62,000 and a
capital loss of GBP283,000). The Company is not, at this time, proposing an
interim dividend for the year ending 31 January 2012.
Fundraising
Between 5 April 2011 and 26 May 2011, the Company issued 480,096 shares for
consideration at an average price of approximately 49.7p per share, under a 10%
top up offer dated 24 January 2011. The offer closes on 15 December 2011 or
earlier at the directors' discretion or if fully subscribed. Share issue costs
thereon amounted to GBP8,000. Under the Company's dividend reinvestment scheme,
75,495 shares were issued on 24 June 2011 following the final dividend payment
on 17 June 2011. At the date of this report the total number of shares in issue
was 19,380,664, including 85,000 shares purchased for cancellation which had not
settled at 31 July 2011.
Company strategy and development
Alongside good corporate governance and ensuring that the Company continues to
qualify as a VCT, the focus of the board is on delivering strong returns to
investors, through dividends and/or increases in net asset value. Since the new
investment manager took over on 1 February 2009, the investment portfolio has
delivered a net realised/unrealised gain. However, the effect of the expenses of
the fund (albeit capped at 3.6%), share buybacks and dividends, partially offset
by small top up fundraisings, have resulted in an overall reduction in net
assets from GBP9.95 million at 1 February 2009 to GBP8.78 million at 31 July 2011.
This reduction necessarily reduces the funds available for investment in
unquoted companies.
The Board and the Investment Manager have therefore been looking at ways of
increasing the size of the Company and are seeking shareholder input into the
process by way of a short survey which is being sent with the half year report.
Your responses to this survey would be greatly appreciated and so I would
encourage you to take a few minutes to answer the questions and return them to
the Company. In view of this survey, the Board has decided that it would be
appropriate to defer a decision on future dividend payments to shareholders and
a possible enhanced share buyback scheme until after the results of the survey
are known. The process will be completed by the end of November and I will be
informing shareholders of the outcome of the survey and the Board's discussions
in due course.
Investor presentation
The Investment Manager will be holding its annual VCT shareholder presentation
on Wednesday 2 November 2011 at RIBA, 66 Portland Place, London W1B 4AD. 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 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.
Risk and uncertainties
Under the Disclosure and Transparency Directive, your 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.
Your 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 extremely 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), your 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 concentrated in the healthcare sector. Your 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
your Board on the current and forecast position. The Company also retains
PricewaterhouseCoopers to provide regular reviews and advice in this area. Your
Board considers that this approach reduces the risk of a breach of the VCT
regulations to an acceptable level.
Outlook
The economic environment continues to provide challenges for consumers and
businesses of all sizes. Whilst the healthcare sector's defensive qualities are
well justified, companies in the sector face similar challenges to those firms
outside it. Quality, well-run companies should, however, perform well over the
economic cycle and there remains an external market for them, as the recent sale
of Onyx Scientific demonstrates. In addition to the continued development of the
existing portfolio, one of the key challenges facing the Company is how to
increase its size to take advantage of further investment opportunities. I look
forward to reporting to shareholders further in this regard following the
results of the shareholder survey and the Board's subsequent deliberations.
Charles Pinney
Chairman
Investment Manager's Report
Introduction
We have pleasure in presenting our half yearly report to 31 July 2011 for ProVen
Health VCT plc. Whilst the broader economic backdrop remains little changed from
that described in our full year report to 31 January 2011, with trading
conditions continuing to be challenging for both UK smaller companies and UK
consumers, the period up to the date of this report has seen a high level of
activity for the Company.
Portfolio performance and activity
At 31 July 2011, the Company's investment portfolio comprised holdings in 9
companies, of which 7 were unquoted and 2 were quoted, at a valuation of GBP5.1
million and original acquisition cost of GBP7.4 million. In addition, the Company
held GBP3.7 million in cash and liquidity funds. The two new additions, Community
Pharmacy Limited and PolyTherics Limited, the realisation of Onyx Scientific
Limited and the partial disposal of Vectura Group plc, occurred after the period
end and are therefore not reflected in these figures.
The disposals of Biovex Group Inc and Chromogenex Limited occurred in early
March and were disclosed in the 2011 Annual Report. The Company made a small
loss on the original investment in Biovex but there is an opportunity to
generate up to a further $2.1 million, and therefore a significant overall
profit, dependent on the achievement of future commercialisation and sales
milestones. As the acquirer Amgen Inc is listed on NASDAQ, we are restricted to
publicly available information and at present have no visibility over the
likelihood and/or potential timing of any of the additional payments.
Chromogenex concluded a financial restructuring which led to the Company's
ordinary shareholding being acquired by a new investor and proceeds of GBP31,000
being received (the holding was previously fully provided against).
In May, the Company's investment holdings were further reduced when two
portfolio companies, Sinclair Pharma plc and IS Pharma plc, merged. IS Pharma
shareholders received 2.6868 Sinclair Pharma shares for each IS Pharma share
held. The newly merged company was renamed Sinclair IS Pharma plc and
transferred its stock market listing to AIM in June. The merger has created an
international specialty pharmaceutical company with a market capitalisation of
over GBP100 million and a strong portfolio of products to treat wounds,
dermatological and oral diseases in both developed and emerging markets. The
increased size should make it more attractive to potential investors and
acquirers.
Excluding the impact of disposals, the overall investment portfolio showed a
decrease in value of GBP234,000. This was principally due to further provisions
being made against the valuations of Population Genetics Technologies and Omni
Dental Sciences. These were partially mitigated by increases in value for
Digital Healthcare and Vectura Group. Digital Healthcare's recent acquisition of
Orion Imaging, a leading provider of management software to the UK's diabetic
retinopathy screening programmes, consolidates its position in the sector and as
such we felt able to recommend to the Board an uplift to the company's
valuation. Vectura's share price made further good progress over the period,
increasing to over GBP1 a share at 31 July 2011. We took the opportunity to sell
just over one third of the Company's shareholding after the period end at over
GBP1 per share thereby crystallising a profit.
Post period end investment activity
Shortly after the period end, we completed a further three transactions: two new
acquisitions and the disposal of Onyx Scientific.
The first of the new investments was a GBP375,000 investment into Community
Pharmacy Limited (CPL) in August, alongside ProVen VCT plc and ProVen Growth and
Income VCT plc. CPL is seeking to establish a new chain of pharmacies and will
particularly focus on GP centre-based pharmacies, a fast growing segment in the
industry. The team is led by a very experienced founder and manager of pharmacy
chains. Further funding by ProVen Health VCT of up to GBP275,000 has been
committed to implement the rollout plan and will be drawn down against agreed
milestones.
In September, an investment of GBP750,000 was made into PolyTherics Limited.
PolyTherics is a biotechnology company that applies precision chemistry to
develop protein and peptide-based drugs. PolyTheric's technologies can extend
the duration of action of these classes of drugs so patients require fewer
injections, and can create more efficacious products. This reduces the cost of
treatment and improves patient compliance. The company was formed in 2002 with
technology that originated at the London School of Pharmacy and Imperial College
London.
In August, we concluded the sale of Onyx Scientific to Ipca Laboratories from
Mumbai. Onyx provides a range of chemical services to the life science industry,
in particular scaling up the synthesis of new chemical compounds for use by
pharmaceutical companies. The sale generated a capital gain of GBP140,000 on an
initial investment of GBP850,000.
Outlook
The high level of portfolio activity experienced in the period up to the date of
this report has happened against the background of considerable market
uncertainty and volatility. With wider economic imbalances still to be resolved,
we expect this uncertainty to continue. However, we remain optimistic about the
potential returns from the unquoted healthcare sector, based on recent portfolio
activity and observations of the wider market, both in the UK and the dominant
US market where we have an investment presence.
Beringea LLP
Summary of Investment Portfolio
as at 31 July 2011
Unrealised % of
gain/(loss) portfolio
in the by value
Cost Valuation period
GBP'000 GBP'000 GBP'000
Top ten venture capital investments
Altacor Limited 1,020 1,241 - 14.0%
Onyx Research Chemicals Limited 850 990 (7) 11.2%
Population Genetics Technologies Limited 1,079 811 (219) 9.2%
Vectura Group plc* 482 771 151 8.7%
Digital Healthcare Limited 1,010 518 137 5.9%
Sinclair Pharmaceuticals plc ** *** 585 440 (56) 5.0%
Omni Dental Sciences Limited 750 339 (240) 3.8%
5,776 5,110 (234) 57.8%
Other venture capital investments 1,646 - - 0.0%
7,422 5,110 (234) 57.8%
Current asset investments - 1,806 20.4%
liquidity funds
Cash at bank and in hand 1,931 21.8%
Total investments 8,847 100.0%
All venture capital investments are unquoted unless otherwise stated.
* Quoted on the Main Market
** Quoted on AIM
*** Sinclair IS Pharma plc was created from the merger of IS Pharma plc
and Sinclair Pharma plc in May 2011.
Summary of Investment Movements
for the six months ended 31 July 2011
Mergers (at cost)
GBP'000
IS Pharma plc (366)
Sinclair Pharma plc 366
-
Disposals
Market Realised
value at Gain/(loss) gain/
1 February Disposal against (loss) in
Cost 2011 proceeds cost period
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Biovex Group Inc 848 678 661 (187) (17)
Chromogenex Limited 253 - 31 (222) 31
1,101 678 692 (409) 14
Unaudited Balance Sheet
as at 31 July 2011
31 July 31 July 31 Jan
2011 2010 2011
GBP'000 GBP'000 GBP'000
Fixed assets
Investments 5,110 4,938 6,022
Current assets
Debtors 15 48 21
Current investments 1,806 1,795 1,800
Cash at bank and in hand 1,931 2,340 1,446
3,752 4,183 3,267
Creditors: amounts falling due within (82) (52) (90)
one year
Net current assets 3,670 4,131 3,177
Net assets 8,780 9,069 9,199
Capital and reserves
Called up share capital 194 193 192
Capital redemption reserve 401 396 398
Share premium account 7,428 7,147 7,170
Special distributable reserve 7,445 7,871 7,586
Capital reserve - realised (3,581) (2,561) (2,914)
Capital reserve - unrealised (2,312) (3,329) (2,500)
Revenue reserve (795) (648) (733)
Total equity shareholders' funds 8,780 9,069 9,199
Basic and diluted net asset value per 45.3p 46.9p 48.0p
share
Unaudited Income Statement
for the six months ended 31 July 2011
Six months ended
31 July 2011
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Income 32 - 32
Losses on investments - (220) (220)
32 (220) (188)
Investment management fee (21) (63) (84)
Other expenses (73) - (73)
Loss on ordinary activities before taxation (62) (283) (345)
Tax on ordinary activities - - -
Loss attributable to equity shareholders (62) (283) (345)
Basic and diluted loss per share (0.3p) (1.5p) (1.8p)
Six months ended Year ended
31 July 2010 31 Jan 2011
Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000
Income 21 - 21 44
Losses on investments - (675) (675) (136)
21 (675) (654) (92)
Investment management fee (20) (59) (79) (163)
Other expenses (86) - (86) (173)
Loss on ordinary activities before (85) (734) (819) (428)
taxation
Tax on ordinary activities - - - -
Loss attributable to equity (85) (734) (819) (428)
shareholders
Basic and diluted loss per share (0.4p) (3.8p) (4.2p) (2.2p)
Reconciliation of Movements in Shareholders' Funds
31 July 31 July 31 Jan
2011 2010 2011
GBP'000 GBP'000 GBP'000
Opening shareholders' funds 9,199 10,018 10,018
Proceeds from share issues 271 200 233
Share issue costs (8) (9) (18)
Purchase of own shares (141) (126) (219)
Total recognised loss for the period (345) (819) (428)
Dividends paid (196) (195) (387)
Closing shareholders' funds 8,780 9,069 9,199
Unaudited Cash Flow Statement
for the six months ended 31 July 2011
Six months Six months Year
ended ended ended
31 July 2011 31 July 2010 31 Jan 2011
Note GBP'000 GBP'000 GBP'000
Net cash outflow from operating A
activities (167) (199) (292)
Capital expenditure
Purchase of investments - (143) (688)
Disposal of investments 692 1,463 1,463
Net cash inflow from capital 692 1,320 775
expenditure
Equity dividends paid (163) (161) (321)
Net cash inflow before financing 362 960 162
Financing
Proceeds from share issues 238 166 166
Share issue costs (8) (15) (18)
Purchase of own shares (107) (129) (222)
Net cash inflow/(outflow) from 123 22 (74)
financing
Increase in cash B 485 982 88
Notes to the cash flow statement:
A. Net cash flow from operating
activities
Loss on ordinary activities (345) (819) (428)
before taxation
Losses on investments 220 675 136
Re-invested liquidity funds (6) (4) (9)
Decrease/(increase) in debtors 6 (39) (11)
(Decrease)/increase in creditors (42) (12) 20
Net cash outflow from operating (167) (199) (292)
activities
B. Analysis of net funds
Beginning of period 3,246 3,149 3,149
Net cash inflow 485 982 88
Other non cash changes 6 4 9
End of period 3,737 4,135 3,246
Net funds split as:
Beginning of period:
Cash at bank and in hand 1,446 1,358 1,358
Liquidity funds 1,800 1,791 1,791
Total funds at beginning of 3,246 3,149 3,149
period
End of period:
Cash at bank and in hand 1,931 2,340 1,446
Liquidity funds 1,806 1,795 1,800
Total funds at end of period 3,737 4,135 3,246
Notes to the unaudited Financial Statements
1. The unaudited half yearly results cover the six months to 31 July 2011 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 2011, 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 2010 and
the year ended 31 January 2011.
6. Basic and diluted return per share for the period has been calculated on
19,436,116 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
19,380,664 shares, being the number of shares in issue at the period end.
8. Dividends
Pence 31 July 31 Jan
per 2011 2011
share GBP'000 GBP'000
Paid in the period
2011 final dividend paid on 17 June 2011 1.0 196 -
2011 interim dividend paid on 26 November 2010 1.0 - 192
2010 final dividend paid on 11 June 2010 1.0 - 195
196 387
Split as:
Paid directly to shareholders 163 321
Shares issued under dividend re-investment scheme 33 66
196 387
9. Reserves
Capital Share Capital Investment
redemption premium reserve - holding
reserve account Special realised losses Revenue
reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 February 2011 398 7,170 7,586 (2,914) (2,500) (733)
Issue of new shares - 267 - - - -
Share issue costs - (9) - - - -
Purchase of own 3 - (141) - - -
shares
Expenses capitalised - - - (63) - -
Gains/(losses) on
investments - - - 14 (234) -
Realisation of
revaluations from
previous years - - - (422) 422 -
Transfer between - - - - - -
reserves
Retained net loss - - - - - (62)
Dividends paid in the - - - (196) - -
period
At 31 July 2011 401 7,428 7,445 (3,581) (2,312) (795)
Distributable reserves comprise the special reserve, capital reserve - realised
and revenue reserve. At the period end there were GBP757,000 (31 Jan 2011:
GBP1,439,000) of reserves available for distribution after deducting the capital
reserve - unrealised of GBP2,312,000 (31 Jan 2011: GBP2,500,000).
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 2011 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. 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:
a. 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
b. 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.
12. 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 Planned Exit VCT plc via Thomson Reuters ONE
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