For immediate release 24 July 2018
Hygea vct plc
Unaudited Half-Yearly Report
For the Six Months Ended 30 June 2018
Financial Headlines
| 62.3p | Net Asset Value per share at 30 June 2018 |
| | |
| 24.25p | Cumulative dividends paid to date |
| | |
| 86.55p | Total return per share since launch |
Financial Summary
| Six months to 30 June 2018 | Six months to 30 June 2017 | Year to 31 December 2017 | |
| Net assets (£'000s) | 5,053 | 5,225 | 5,180 |
| Return on ordinary activities after tax (£'000s) | (127) | (322) | (367) |
| Earnings per share | (1.5p) | (3.9p) | (4.5p) |
| Net asset value per share | 62.3p | 64.4p | 63.8p |
| Dividends paid to date | 24.25p | 24.25p | 24.25p |
| Total return per share | 86.55p | 88.65p | 88.05p |
| Dividends declared for the period | - | - | - |
Chairman's Statement
I present the unaudited results for the six months ended 30 June 2018. The Company's net asset value ('NAV') per share at 30 June 2018 was 62.3p compared to 63.8p at 31 December 2017 and 64.4p at 30 June 2017.
Results
The total negative return for the period amounted to 1.5p per share (June 2017: negative 3.9p) and is made up of a negative revenue return of 0.7p (June 2017: negative 0.7p) and a negative capital return of 0.8p (June 2017: negative 3.2p), net of performance fee reduction.
The value of our AIM portfolio has reduced in the period through the fall in the bid price of Omega Diagnostics Group PLC ('Omega') shares following publication of the results of the strategic review on 10 April 2018, albeit that, in the opinion of the Hygea Board, the actions resulting from the strategic review will strengthen Omega's business. Scancell Holdings Plc ('Scancell') shares have returned to the share price as reported in Hygea's 2017 accounts, despite the very encouraging third party endorsements of Scancell's science as reported in Hygea's 2017 accounts. Our unquoted portfolio remains as valued at 31 December 2017.
As previously reported, the overdraft facility of £200,000 has been converted to a formal loan of £200,000 following changes at RBS due to Ring-Fencing; the loan is due to be repaid by 30 September 2018.
Portfolio review
During the period we have realised 200,000 shares in Scancell at an average price of 15.7p to provide working capital to cover operating expenses.
The Company's holding in Scancell (13,049,730 shares) continues to represent approximately one third of the portfolio at 30 June 2018 and the shares have been valued at their bid price of 12.5p. As reported in our update on 3 May 2018, Scancell announced a placing and open offer to raise up to £8.9 million at 12p per share in which we were unable to partake and which successfully raised £8.7 million, and so our holding has been further diluted to 3.5%. This fundraising will allow further development of the Moditope and ImmunoBody platforms and other studies.
Following Omega's April 2018 announcement referred to above, the share price has recovered a little on recent news of the sale of the infectious disease business, enabling funds to be redeployed from a low growth business into projects with a much higher growth potential and which the company has been developing over a number of years.
We have reviewed the valuation of our unquoted portfolio and do not believe that any revaluations are necessary but overall we remain pleased with the development of that portfolio.
I have previously expressed some optimism regarding potential liquidity events in the portfolio and your Board remains of the view that such an event may occur before the Company's year-end.
Fundraising
As shareholders will be aware, we published a prospectus to raise £10 million in a new B share class (with an overallotment facility of a further £10 million) in May 2018. The funds raised for the B shares will be managed by Seneca Partners Limited ('Seneca'). I am pleased to say that, despite the challenges of fundraising so early in the new tax year, as at 30 June 2018 over £1.6 million of applications had been received and as at 20 July 2018 we have received a total of £2.4 million. Seneca, which is responsible for the fundraising, remains optimistic that the minimum fundraise of £3 million will be reached before 30 September 2018.
Presentation of half-year report
As previously noted, in order to simplify this report and to reduce costs, we have omitted details of the Company's objectives and investment strategy, its Advisers and Registrars and how to buy and sell shares in the Company. These details are all included in the latest Annual Report and in the Prospectus (which also refers to certain changes to the management of the Company and its Investment Policy and other matters which will be effective as soon as the minimum subscription has been reached and the first new B shares allotted). These can both be accessed on the Company's website at www.hygeavct.com.
Outlook
2017/18 was the second best fundraising year for VCTs and we foresee that the demand for the product in 2018/19 will outstrip supply in view of the fact that many VCTs have raised significant funds which will need to be invested in businesses which are at an earlier stage than many managers are experienced in. Seneca's experience fits the parameters for VCT investments well and we remain hopeful that our vision for both existing shareholders (who will be able to retain their ordinary shares at relatively low cost until liquidity events occur) and new B shareholders (who will have access to, effectively, a new fund building a portfolio of growth capital investments in UK SMEs run by an experienced manager) will be realised before too long.
We are grateful to all shareholders and other applicants who have applied for new B shares and will be updating you on the progress of the fundraising via RIS announcements during the coming months.
John Hustler
Chairman
23 July 2018
Enquiries:
John Hustler, Hygea vct plc at john.hustler@btconnect.com
Roland Cornish, Beaumont Cornish Limited on 020 7628 3396
Investment Portfolio
| Unquoted Investments | Equity Held (%) | Investment at cost (£'000) | Unrealised profit/(loss) (£'000) | Carrying value at 30 June 2018 (£'000) | Movement in the six months to 30 June 2018 (£'000) |
| Hallmarq Veterinary Imaging Limited | 10.2 | 1,116 | 913 | 2,029 | - |
| OR Productivity Limited | 11.1 | 765 | (101) | 664 | - |
| Fuel 3D Technologies Limited | <1.0 | 299 | (23) | 276 | - |
| Arecor Limited | 1.9 | 141 | 111 | 252 | - |
| Insense Limited | 4.6 | 509 | (388) | 121 | - |
| Exosect Limited | 1.3 | 270 | (150) | 120 | - |
| Microarray Limited | 1.8 | 132 | (65) | 67 | - |
| ImmunoBiology Limited | 2.0 | 868 | (868) | - | - |
| Glide Pharmaceutical Technologies Limited | 1.2 | 326 | (326) | - | - |
| Total Unquoted Investments | 4,426 | (897) | 3,529 | - | |
| | |||||
| Quoted Investments | Shares Held | Investment at cost (£'000) | Unrealised profit/(loss) (£'000) | Carrying value at 30 June 2018 (£'000) | Movement in the six months to 30 June 2018 (£'000) |
| Scancell plc | 13,049,730 | 790 | 841 | 1,631 | (25) |
| Omega Diagnostics plc | 2,293,868 | 328 | (57) | 271 | (108) |
| Total Quoted Investments | 1,118 | 784 | 1,902 | (133) | |
| Total Investments | 5,544 | (113) | 5,431 | (133) | |
Responsibility Statement of the Directors in respect of the half-yearly report
We confirm that to the best of our knowledge:
- the half-yearly financial statements have been prepared in accordance with the statement "Interim Financial Reporting" issued by the Financial Reporting Council;
- the half-yearly report includes a fair review of the information required by the Financial Services Authority Disclosure and Transparency Rules, being:
- an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements.
- a description of the principal risks and uncertainties for the remaining six months of the year.
- a description of related party transactions that have taken place in the first six months of the current financial year that may have materially affected the financial position or performance of the Company during that period and any changes in the related party transactions described in the last annual report that could do so.
On behalf of the Board:
John Hustler
Chairman
23 July 2018
Income Statement
| Six months to 30 June 2018 | Six months to 30 June 2017 | Year to 31 December 2017 | |||||||
| 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 | - | 6 | 6 | - | 26 | 26 | - | 19 | 19 |
| Loss on valuation of fixed asset investments | - | (108) | (108) | - | (368) | (368) | - | (359) | (359) |
| Performance fee | - | 32 | 32 | - | 80 | 80 | - | 91 | 91 |
| Investment income | - | - | - | - | - | - | - | - | - |
| Other expenses | (57) | - | (57) | (60) | - | (60) | (118) | - | (118) |
| Return on ordinary activities before tax | (57) | (70) | (127) | (60) | (262) | (322) | (118) | (249) | (367) |
| Taxation on loss on ordinary activities | - | - | - | - | - | - | - | - | - |
| Return on ordinary activities after tax | (57) | (70) | (127) | (60) | (262) | (322) | (118) | (249) | (367) |
| Earnings per share - basic and diluted | (0.7p) | (0.8p) | (1.5p) | (0.7p) | (3.2p) | (3.9p) | (1.5p) | (3.0p) | (4.5p) |
- 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 the results for the period as set out above. Accordingly a Statement of Comprehensive Income is not required.
| As at 30 June 2018 | As at 30 June 2017 | As at 31 December 2017 | ||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Fixed asset investments* | 5,431 | 5,575 | 5,564 | |||
| Current assets: | ||||||
| Cash received for B shares not yet allotted | 1,648 | - | - | |||
| Cash at Bank | 7 | - | - | |||
| Debtors | 10 | 9 | 7 | |||
| 1,665 | 9 | 7 | ||||
| Creditors: | ||||||
| Amounts falling due within one year | (63) | (72) | (67) | |||
| Cash received for B shares not yet allotted | (1,648) | - | - | |||
| Cash at Bank | - | (112) | (160) | |||
| Bank Loan | (200) | - | - | |||
| (1,911) | (184) | (227) | ||||
| Net current assets | (246) | (175) | (220) | |||
| Performance fee payable | (132) | (175) | (164) | |||
| Net assets | 5,053 | 5,225 | 5,180 | |||
| Called up equity share capital | 4,058 | 4,058 | 4,058 | |||
| Share premium | - | - | - | |||
| Special distributable reserve | 3,397 | 3,397 | 3,397 | |||
| Capital redemption reserve | 38 | 38 | 38 | |||
| Capital reserve - gains/(losses) on disposal | (381) | (38) | (432) | |||
| - holding gains/(losses) | (113) | (398) | 9 | |||
| Revenue reserve | (1,946) | (1,832) | (1,890) | |||
| Total equity shareholders' funds | 5,053 | 5,225 | 5,180 | |||
| Net asset value per share | 62.3p | 64.4p | 63.8p | |||
*At fair value through profit and loss | ||||||
Balance Sheet
Statement of Changes in Equity
| Share Capital | Special distributable reserve | Capital redemption reserve | Capital reserve gains/ (losses) | Capital reserve holding gains/ (losses) | Revenue reserve | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| As at 1 January 2017 | 4,058 | 3,397 | 38 | (121) | (53) | (1,772) | 5,547 |
| Revenue return on ordinary activities after tax | - | - | - | - | - | (60) | (60) |
| Performance fee allocated as capital expenditure | - | - | - | 80 | - | - | 80 |
| Current period gains on disposal | - | - | - | 26 | - | - | 26 |
| Current period losses on fair value of investments | - | - | - | - | (368) | - | (368) |
| Prior years' unrealised losses now realised | - | - | - | (23) | 23 | - | - |
| Balance as at 30 June 2017 | 4,058 | 3,397 | 38 | (38) | (398) | (1,832) | 5,225 |
| As at 1 January 2017 | 4,058 | 3,397 | 38 | (121) | (53) | (1,772) | 5,547 |
| Revenue return on ordinary activities after tax | - | - | - | (118) | (118) | ||
| Performance fee allocated as capital expenditure | - | - | - | 91 | - | - | 91 |
| Current period gains on disposal | - | - | - | 19 | - | - | 19 |
| Current period losses on fair value of investments | - | - | - | - | (359) | - | (359) |
| Prior years' unrealised losses now realised | - | - | - | (421) | 421 | - | - |
| Balance as at 31 December 2017 | 4,058 | 3,397 | 38 | (432) | 9 | (1,890) | 5,180 |
| Revenue return on ordinary activities after tax | - | - | - | - | - | (57) | (57) |
| Performance fee allocated as capital expenditure | - | - | - | 32 | - | - | 32 |
| Current period gains on disposal | - | - | - | 6 | - | - | 6 |
| Current period losses on fair value of investments | - | - | - | - | (108) | - | (108) |
| Prior years' unrealised gains now realised | - | - | - | 13 | (13) | - | - |
| Balance as at 30 June 2018 | 4,058 | 3,397 | 38 | (381) | (112) | (1,947) | 5,053 |
Statement of Cash Flows
| Six months to 30 June 2018 | Six months to 30 June 2017 | Year to 31 December 2017 | |
| £'000 | £'000 | £'000 | |
| Cash flows from operating activities | |||
| Return on ordinary activities before tax | (127) | (322) | (367) |
| Adjustments for: | |||
| Increase in debtors | (3) | (5) | (3) |
| Decrease in creditors | (36) | (63) | (79) |
| Gain on disposal of fixed asset investments | (6) | (26) | (19) |
| Loss on valuation of fixed asset investments | 108 | 368 | 359 |
| Cash from operations | (64) | (48) | (109) |
| Income taxes paid | - | - | - |
| Net cash used in operating activities | (64) | (48) | (109) |
| Cash flows from investing activities | |||
| Purchase of fixed asset investments | - | - | - |
| Sale of fixed asset investments | 31 | 121 | 134 |
| Total cash flows from investing activities | 31 | 121 | 134 |
| Cash flows from financing activities | |||
| Cash raised for B shares not yet allotted | 1,648 | - | - |
| Bank loan | 200 | - | - |
| Total cash flows from financing activities | 1,848 | - | - |
| Increase in cash and cash equivalents | 1,815 | 73 | 25 |
| Opening cash and cash equivalents | (160) | (185) | (185) |
| Closing cash and cash equivalents | 1,655 | (112) | (160) |
Notes to the Half-Yearly Report
1. Basis of preparation
The unaudited half-yearly results which cover the six months to 30 June 2018 have been prepared in accordance with the Financial Reporting Council's (FRC) Financial Reporting Standard 104 Interim Financial Reporting ('FRS 104') and the Statement of Recommended Practice (SORP) for Investment Companies re-issued by the Association of Investment Companies in November 2014. Details of the accounting policies and valuation methodologies are included within the Annual Report on Pages 43-46.
2. Publication of non-statutory accounts
The unaudited half-yearly results for the six months ended 30 June 2018 do not constitute statutory accounts within the meaning of Section 415 of the Companies Act 2006. The comparative figures for the year ended 31 December 2017 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, in accordance with chapter 3, part 16 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 2018 are calculated on the basis of 8,115,376 shares (31 December 2017 8,115,376 and 30 June 2017: 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 2018 divided by 8,115,376 (31 December 2017: 8,115,376 and 30 June 2017: 8,115,376) shares in issue at that date.
5. 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 2017. The Company's principal risks and uncertainties have not changed materially since the date of that report.
6. Related party transactions
The Board of the Company acts as the investment manager of the Company through its Commercial Advisory Committee. 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 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 2017.
The Commercial Advisory Committee is entitled to receive a performance incentive fee, of up to 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. 24.25p, but excluding any sums returned to shareholders from HMRC in the year of subscription). Full details are included in the Directors' Remuneration Report and in Note 5 of the 2017 Annual Report and Accounts, which can be viewed on the Company's website.
7. Events after the Balance Sheet Date
As at 20 July 2018, subscriptions totalling £2.4 million have been received in relation to the Company's Offer for new B shares. No B shares have yet been allotted, as the Company needs to have raised a minimum of £3 million before it can allot any new B shares.
8. Copies of this statement are available from the Registrar's office at Neville House, 18 Laurel Lane, Halesowen, B63 3DA, and on the company's website - www.hygeavct.com.