ProVen Health VCT plc
Half-Yearly Report for the Six Months Ended 31 July 2009
Financial Summary
31 July 31 July 31 January
2009 2008 2009
Net asset value per share ("NAV") 55.7p 68.8p 51.5p
Dividends paid since launch 13.5p 13.5p 13.5p
Total return (NAV plus dividends paid 69.2p 82.3p 65.0p
since launch)
Mid market share price 28.0p 64.5p 40.0p
Highlights
* Follow on investments totalling £680,000 in Population Genetics
Technologies, Altacor and Amura
* Increase in Net Assets of £807,000, equivalent to 4.2p per share
* Realisation of AIM listed investments generating profits of
£257,000
* Declaration of an interim dividend of 1.0p per share
Chairman's Statement
Introduction
The six months to 31 July 2009 continued to provide a challenging
operating environment for both smaller companies and fund managers.
Broadly based stock market indices increased during the period under
review. The FTSE All Share Index (608 companies), for example, rose
by 13%. This, however, masks differences at the sector level and the
FTSE Health Care Index, comprising 22 companies, actually fell by 2%
over the same period.
The new investment manager, Beringea, took over management of the
portfolio on 1 February 2009 and the impact of their involvement is
already evident both at the individual portfolio company level and in
the broader positioning of the Company.
Net Asset Value and Portfolio Activity
As at 31 July 2009, the Company's Net Asset Value per share ("NAV")
stood at 55.7p, an increase of 4.2p per share or 8.1% since the year
end. The Company's performance relative to the broader stock market
reflects the high proportion of its investments held in low yielding
cash and liquidity funds (averaging almost 30% during the period) and
the early stage nature of many of the investments.
We are on the whole satisfied with the performance of the portfolio
during the period, particularly by comparison with the FTSE Health
Care Index. Further funding from the Company and/or other investors
in a difficult environment has provided scope for the continued
development of a number of companies and an increase in valuations.
Some companies, however, continue to feel the effects of the economic
slowdown, both in the UK and overseas. We continue to take a
cautious view of the prospects for economic recovery.
We have exited a number of the quoted investments generating a
combined profit of over £250,000 on Immunodiagnostics, Abcam,
Purecircle and Craneware. Disappointingly, we realised both our
largest quoted and unquoted holdings at a loss. More detail on all
investment activity is provided in the Investment Manager's Report.
Results
The Income Statement shows a return on ordinary activities after
taxation for the Company for the period of £807,000 (comprising a
revenue loss of £94,000 and a capital gain of £901,000).
Dividends
An interim dividend of 1p per share will be paid on 4 December 2009
to Shareholders on the register at 20 November 2009. The Board will
give consideration to paying a further dividend for the year ended 31
January 2010, subject to available cash and portfolio company funding
requirements, following completion of the annual report and accounts.
Following the payment of the interim dividend, Shareholders who
invested at the Company's outset will have received 14.5p per share
in dividends. Together with the current NAV (adjusted for the
interim dividend), this gives a total return since inception of 69.2p
per share, compared to an initial investment cost, net of income tax
relief, of 80p per share.
Share buybacks
The Company's share buyback policy was suspended in 2008 but I am
pleased to advise that the Board intends to recommence it on 2
November 2009. The Investment Manager is currently undertaking a
number of marketing initiatives involving the Company and the Board
felt it would be appropriate for Shareholders to hear about these
before recommencing buybacks. Shares will be repurchased at a
discount which will initially be set at 10% to the last published NAV
as adjusted for any dividends paid since publication but this will be
kept under review.
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 period 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; 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 careful structuring of 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. The Company's ability
to manage this risk is further limited due to the restrictions
arising from the VCT regulations.
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.
Outlook
Despite improvements in the stock market, concerns remain over the
broader UK economy. Unemployment is still increasing, lending is
relatively constrained at the business and personal level and
increased borrowing by the UK government will need to be addressed.
Against this backdrop, we are enthusiastic about the relatively
defensive qualities of the healthcare sector and the ability of the
Investment Manager to manage the existing portfolio and to source new
investments which will generate longer-term returns for shareholders.
Charles Pinney
Chairman
28 September 2009
Investment Manager's Report
Introduction
We have pleasure in presenting our first half yearly report for
ProVen Health VCT plc. We were appointed as the investment manager
from 1 February 2009 and will focus primarily on unquoted investments
in the healthcare sector in line with the Board's overall strategy.
We have taken the first steps in the pursuit of this strategy through
the realisation of a number of the unquoted investments in the
portfolio as further outlined below.
Portfolio performance
At 31 July 2009, the Company's investment portfolio comprised
holdings in 18 companies, of which 11 were unquoted and 7 were
quoted, at a valuation of £7.4 million and original acquisition cost
of £10.3 million. In addition, the Company held £3.3 million in cash
and liquidity funds.
Unquoted portfolio
The unquoted portfolio increased in value by £819,000 during the
period. The key movements contributing to this change were in the
investments in Altacor, deltaDOT, Digital Healthcare, Omni Dental
Sciences, Onyx Research Chemicals, Optasia Medical and Plum Baby.
The changes are the result of revaluing each portfolio investment in
line with International Private Equity and Venture Capital Valuation
Guidelines ("IPEVCVG"). These valuations have been approved by the
Board. IPEVCVG are intended to reflect the value of an investment as
at the reporting date (in this case 31 July 2009), rather than
anticipating any future changes in value through the development of
the company's products and services. This distinction is important as
we invest on behalf of the Company with a longer term view than can
usually be captured by a valuation at a point in time. The reasons
underlying the change can be numerous but include in the Company's
case:
* A change in the multiples of comparator companies used in the
valuation.
* A change in valuation methodology, such as a company being valued
on a basis other than cost for the first time.
* A change (actual or perceived) in the regulatory environment which
affects the timing of regulatory approval for a company's product.
* Funding provided by new (and existing) investors which provide
capital to the business and a revised valuation for the portfolio
company as a whole and the Company's holding.
* The trading performance of the portfolio company which may be
impacted by the external environment (particularly relevant given
the current economic environment) or by management
strategy/decisions.
Quoted portfolio
The quoted portfolio showed an overall increase of 17% over the
period on a like-for-like basis (excluding disposals). The key
holdings of IS Pharma and Vectura which now account for over 80% of
the value of the quoted portfolio (45% at 31 January 2009) both
increased by 23%. York Pharma, whose shares were suspended in March,
went into administration in July and has been fully written off.
Portfolio activity
During the period a total of £680,000 was invested into existing
companies. Investments at a cost of £2.1 million were realised
resulting in an overall loss of £992,000, although this includes
profits on a number of AIM investments as outlined below.
Unquoted portfolio
The company invested a further £520,000 into Population Genetics
Technologies in line with the original investment proposal. Follow on
funding of £100,000 into Altacor and £60,000 into Amura, both
alongside external investors, has enabled these two companies to
secure their immediate financial future. In June, the investment in
Inforsense was realised crystallising a loss of almost £800,000. This
is clearly a disappointing result for what was the largest investment
in the Company's portfolio. However, in view of the overall
performance of the company, the uncertain economic environment and
the reluctance of other investors to continue to support the
business, this was probably the best outcome that could be expected.
Quoted portfolio
No new quoted investments were made reflecting the refocusing of the
portfolio towards unquoted investments. There has, in any event, been
a lack of available new fundraisings on AIM which could count as
qualifying for the purposes of the VCT rules. Investments in Abcam,
Craneware, Immunodiagnostics Systems Holdings, Medigene and
PureCircle were realised. Medigene was the largest holding and was
sold at a loss but the others generated a profit of £257,000
(including a sale of the balance of the Craneware holding after the
period end). In other activity, Chromogenex was delisted from AIM and
now operates as a private company and Paion cancelled its UK listing
on AIM and is now traded only on the German stock market.
Outlook
We are broadly pleased with the performance of the portfolio since
becoming the investment manager. A number of the portfolio companies
have recently secured further funding in spite of the economic
difficulties. This is testimony to their underlying business
activities, and the efforts of both portfolio company management and
our own investment executives. Moving forward we will look to
increase the proportion of later stage investments in the portfolio
where we believe more shareholder value with a lower risk profile can
be generated. In the absence of any significant fundraising this will
be primarily from surplus cash from existing portfolio realisations.
Any new investments will, however, need to be balanced alongside the
competing demands of providing funding for existing businesses which
require support as part of their development process and providing
cash for non-investment activities.
Beringea LLP
28 September 2009
Unaudited Balance Sheet
as at 31 July 2009
31 July 31 July 31 Jan
2009 2008 2009
£'000 £'000 £'000
Fixed assets
Investments 7,410 9,768 6,868
Current assets
Debtors 140 130 431
Investments - liquidity fund 1,786 3,287 1,774
Cash at bank and in hand 1,544 176 945
3,470 3,593 3,150
Creditors: amounts falling due within one (123) (86) (68)
year
Net current assets 3,347 3,507 3,082
Net assets 10,757 13,275 9,950
Capital and reserves
Called up share capital 193 193 193
Capital redemption reserve 392 392 392
Share premium account 6,931 6,931 6,931
Special distributable reserve 8,458 8,458 8,458
Capital reserve - realised (1,848) 320 (775)
Investment holding losses (2,886) (2,651) (4,860)
Revenue reserve (483) (368) (389)
Equity shareholder's funds 10,757 13,275 9,950
Net asset value per share: 55.7p 68.8p 51.5p
Unaudited Income Statement
for the six months ended 31 July 2009
Six months ended
31 July 2009
Revenue Capital Total
£'000 £'000 £'000
Income 21 - 21
Gains/(losses) on investments - 980 980
21 980 1,001
Investment management fee (26) (79) (105)
Other expenses (89) - (89)
Return/(loss) on ordinary activities (94) 901 807
before taxation
Tax on ordinary activities - - -
Return/(loss) attributable to equity (94) 901 807
Shareholders
Basic and diluted return/(loss) per (0.5p) 4.7p 4.2p
Ordinary Share
Six months ended Year ended
31 July 2008 31 Jan 2009
Revenue Capital Total Total
£'000 £'000 £'000 £'000
Income 121 - 121 195
Gains/(losses) on - (1,468) (1,468) (4,760)
investments
121 (1,468) (1,347) (4,565)
Investment management fee (33) (99) (132) (149)
Other expenses (115) - (115) (205)
Return/(loss) on ordinary (27) (1,567) (1,594) (4,919)
activities before taxation
Tax on ordinary activities - - - -
Return/(loss) attributable (27) (1,567) (1,594) (4,919)
to equity Shareholders
Basic and diluted (0.1p) (8.2p) (8.3p) (25.5p)
return/(loss) per Ordinary
Share
Reconciliation of Movements in Shareholders' Funds
31 July 31 July 31 Jan
2009 2008 2009
£'000 £'000 £'000
Opening Shareholders' funds 9,950 14,498 14,498
Proceeds from share issues - 561 561
Share issue costs - (26) (26)
Purchase of own shares - (164) (164)
Total recognised gain/(loss) for the 807 (1,594) (4,919)
period
Closing Shareholders' funds 10,757 13,275 9,950
Unaudited Cash Flow Statement
for the six months ended 31 July 2009
Six Six months
months ended Year
ended 31 July ended
31 July 2008 31 Jan
2009 2009
Note £'000 £'000 £'000
Net cash outflow from operating A
activities (160) (104) (310)
Capital expenditure
Purchase of investments (640) (1,219) (1,797)
Disposal of investments 1,409 - 39
Net cash inflow/(outflow) from 769 (1,219) (1,758)
capital expenditure
Equity distributions paid - - -
Management of liquid resources
Purchase of current asset (10) (95) (165)
investments - liquidity funds
Withdrawal from liquidity funds - 751 2,335
Net cash inflow/(outflow) from (10) 656 2,170
liquid resources
Net cash inflow before financing 599 (667) 102
Financing
Proceeds from share issue - 551 551
Share issue costs - (14) (14)
Purchase of own shares - (164) (164)
Net cash inflow from financing - 373 373
Increase/(decrease) in cash B 599 (294) 475
Notes to the cash flow statement:
A Net cash flow from operating
activities
Return/(loss) on ordinary 807 (1,594) (4,919)
activities before taxation
(Gains)/ losses on investments (980) 1,468 4,760
(Increase)/decrease in debtors (3) 17 (138)
Increase/(decrease)/ in creditors 16 5 (13)
Net cash outflow from operating (160) (104) (310)
activities
B Analysis of net funds
Beginning of period 945 470 470
Net cash inflow/(outflow) 599 (294) 475
End of period 1,544 176 945
Summary of Investment Portfolio
as at 31 July 2009
Unrealised % of
gain/(loss) in portfolio
Cost Valuation the period by value
£'000 £'000 £'000
Top ten venture capital
investments
Altacor Limited 720 941 684 8.8%
Plum Baby Limited 749 941 192 8.8%
Amura Holdings Limited 1,047 920 (64) 8.6%
Population Genetics 867 867 - 8.1%
Technologies Limited
Onyx Research Chemicals 850 800 (65) 7.4%
Limited
Omni Dental Sciences 750 735 405 6.8%
Limited
Digital Healthcare 1,010 636 (198) 5.9%
Limited
Vectura Group plc ** 482 587 110 5.5%
IS Pharma plc * 366 397 75 3.7%
DeltaDOT Limited 599 213 213 2.0%
7,440 7,037 1,352 65.6%
Other venture capital 2,856 373 (365) 3.4%
investments
10,296 7,410 987 69.0%
Current asset investments 1,786 16.6%
- liquidity funds
Cash at bank and in hand 1,544 14.4%
Total investments 10,740 100.0%
All venture capital investments are unquoted unless otherwise stated.
* Quoted on AIM
** Quoted on London Stock Exchange full list
Summary of Investment Movements
for the six months ended 31 July 2009
Additions
£'000
Altacor Limited 100
Amura Holdings Limited 60
Population Genetics Technologies Limited 520
680
Disposals
Market
value at Realised
1
February Disposal Gain/(loss) gain/(loss)
Cost 2009 Proceeds against cost in period
£'000 £'000 £'000 £'000 £'000
Abcam plc 58 61 70 12 9
Craneware plc 107 183 192 85 9
Immunodiagnostic 118
Systems Holdings plc 42 148 106 30
Inforsense Limited 1,119 378 325 (794) (53)
Medigene AG 639 226 209 (430) (17)
Purecircle Limited 145 159 174 29 15
2,110 1,125 1,118 (992) (7)
Notes to the unaudited Financial Statements
1. The unaudited half yearly results cover the six months to 31 July
2009 and have been prepared in accordance with Statement of
Recommended Practice "Financial Statements of Investment Trust
Companies and Venture Capital Trusts" revised January 2009 ("SORP")
and in accordance with the accounting policies set out in the
statutory accounts for the year ended 31 January 2009, which were
prepared under UK Generally Accepted Accounting Practice ("UK GAAP").
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 2008 and the year ended 31 January 2009.
6. Return per share for the period has been calculated on 19,307,784
shares, being the weighted average number of shares in issue during
the period.
7. NAV per share for the period has been calculated on 19,307,784
shares, being the number of shares in issue at the period end.
8. An interim dividend of 1p per share will be paid on 4 December
2009 to Shareholders on the register at 20 November 2009. No
dividends were paid or declared for the year ended 31 January 2009.
9. Reserves
Capital Share Capital Unrealised
redemption premium Special reserve - holding Revenue
reserve account reserve realised losses reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 1 February 392 6,931 8,458 (775) (4,860) (389)
2009
Expenses - - - (79) - -
capitalised
Gains/(losses)
on investments - - - (7) 987 -
Realisation of
revaluations - - - (987) 987 -
from previous
years
Retained net - - - - - (94)
loss
At 31 July 2009 392 6,931 8,458 (1,848) (2,886) (483)
The Special Reserve, Capital Reserve - Realised and the Revenue
Reserve are all distributable reserves.
Investment Holding Losses Reserve includes losses of £3,299,000 which
are distributable.
Reserves available for distribution at the period end amounted to
£2,848,000.
10. The unaudited financial statements set out herein 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 figures for the year ended 31 January 2009 have
been extracted from the financial statements for that year, which
have been delivered to the Registrar of Companies; the auditors'
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.com and www.downing.co.uk.
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