Seneca Growth Regulatory News (HYG)

24 Mar 2006 16:19

BioScience VCT plc24 March 2006 BioScience VCT plc24 March 2006 Preliminary Results for the year ended 31 December 2005 Financial summary for the year ended 31 December 2005 31 December 2005 31 December 2004 (restated)**Net assets £5,679,000 £6,295,000Net revenue before tax £(324,000) £(6,000)Revenue loss per share* (4.3)p (0.1)pNet asset value per share 74.8p 82.9p BioScience VCT plc is a Venture Capital Trust. The investment manager is OctopusAsset Management Limited ("Octopus") The Company was launched in October 2001and raised over £7 million (£6.8 million net of expenses) through an offer forsubscription. The Company invests in unquoted and quoted bioscience companiesand aims to provide attractive long term returns to shareholders. * based on the weighted average of 7,596,393 (2004: 7,535,445) shares in issuein the year. ** Comparative figures have been extracted from the statutory accounts for theyear ended 31 December 2004 and have been restated in accordance with UKFinancial Reporting Standard 26 in respect of the valuation of quotedinvestments as disclosed in note 1 to the annual results. This restatement hadno material effect on the net asset value per share at 31 December 2004. Chairman's statement I am pleased to present my first annual report to shareholders in BioScience VCTplc. Board During the year there were several changes to the composition of the Board. Ijoined the Board in the summer of 2005 and became Chairman on 31 August 2005following the resignation of Dr Paul Nicholson. In November 2005, Professor AlexMarkham resigned from the Board. Paul and Alex resigned from the Board as aresult of time pressures from their other commitments. I would like to take thisopportunity to thank Paul and Alex for their considerable contribution duringtheir time on the Board. Investment Policy Following the completion of a number of investments in unquoted and AIM-listedcompanies during the last twelve months, BioScience VCT is now approximately77% invested in VCT qualifying holdings. As at 31 December 2005, theportfolio included holdings in 8 unquoted and 11 AIM-listed businesses. We willcontinue to seek out further good opportunities, while at the same time managingthe existing portfolio of investments in order to generate as much value aspossible for shareholders during the coming years. The Board is taking an active role in managing the portfolio. This involvesactive support of investee companies by providing them with advice and contacts,as well as working with them to ensure that they achieve the progress that willbe required in order for them to obtain the funding that may be needed for thenext stage of their development. Investment Environment Despite isolated examples of the acquisitions of UK-based bioscience companiesby larger biotechnology or pharmaceutical companies from around the world, thegeneral environment for UK-based bioscience companies remains challenging,characterised by a poor overall availability of capital for companies in theearlier stages of their development. Although some commentators have suggested that 2006 may be a good year forquoted biotech companies, it is clear that the UK stock market is not at presentprepared to ascribe the same value to companies with pipelines of products underdevelopment as investors in US biotech companies. If this differential is notclosed by share price movements, it is possible that certain UK-based biotechcompanies may become acquisition targets for their US rivals, providing UKinvestors with a good exit route. NAV The Net Asset Value per share ("NAV") as at 31 December 2005 was 74.8p. Despitegood progress by a number of our unquoted holdings, we are not able to writethese valuations up at this stage under our valuation policy and the BritishVenture Capital Association guidelines. These guidelines ensure prudence, andcorrectly do not allow advanced discussions around licensing or sale to bereflected in the values for the unquoted investee companies that we show in theaccounts. In addition, the NAV has been negatively impacted by the requirement for us toadopt certain new Financial Reporting Standards. These changes in accountingstandards, which have been implemented as part of the process of bringing UKaccounting practices into line with international standards, mean that we arenow required to value our AIM-listed holdings at bid prices, rather than midprices. This has a particularly significant impact on funds such as BioScienceVCT, which have holdings in small AIM-listed companies where the differencebetween the bid and mid prices can be meaningful (bid prices are always lowerthan mid prices). The introduction of the new accounting standards has resultedin an NAV as at 31 December 2005 that is approximately 1.6p lower than it wouldhave been under previous accounting standards. We are working hard as a team togenerate value from our portfolio of investments and drive the NAV upwards. As a result of the substantial level of investment in underlying holdings inbioscience companies, the Fund had £1,369,000 held in cash and money marketfunds at the end of 2005, a figure that is expected to reduce in the future as asmall number of additional investments are completed. As a result of this, theincome that is generated for the Fund from the cash and money market holdingswill remain low for the foreseeable future. In addition, as a result of thenature of the underlying investments, the income that is generated from theunquoted and AIM-listed investee companies is expected to be small, as few ofthem pay dividends at present. The impact of this is that the Fund does notgenerate sufficient income to defray the overall running costs, which has anegative impact on NAV. The Board is focused on identifying ways in which the Fund's ongoing runningcosts can be reduced, in order to limit their impact on the Fund's overallperformance. Investment Process As a result of the number and type of investments that have already been madeand the reduction in the anticipated level of future investment activity, theBoard has reviewed the Fund's investment process and strategy. As we are nearlyfully invested we have a reduced ongoing requirement for the specialist duediligence services that have been provided since the launch of the fund byMedical Marketing International Group plc ("MMI"). The Board announced on 9 March 2006 that, by mutual consent, it had reachedconditional agreement with MMI for the termination of the Technology Advisercontract. The agreement is conditional on BioScience VCT shareholders agreeingto a change of name (see below) and to settlement of amounts due to MMI underthe agreement. In addition, under the terms of the agreement, MMI will forego its entitlementto any future payments of performance fees, and BioScience VCT has agreed toindemnify and hold MMI harmless from and against any liabilities arising out ofor in connection with the services that it has performed for BioScience VCT,except for investment decisions made by the Fund after relying on due diligenceperformed by MMI. The Board has also agreed to table a resolution at the Annual General Meeting tobe held on 19 April 2006 concerning a change of name of BioScience VCT (as thename "BioScience" is associated with MMI). The Board strongly recommends thatshareholders vote in favour of the resolution to change the name of the Fund toHygea VCT plc. On an ongoing basis, a simpler investment decision-making process is in placewhereby future investment proposals from the Investment Manager will be referredto the full Board for approval. The impact of this is that the InvestmentCommittee and the Scientific Advisory Board (as described in the prospectus) nolonger operate. When necessary the Board will seek specific scientific andtechnical input regarding potential investee companies from appropriatespecialist external experts. This change should reduce the Fund's overallongoing running costs, while allowing the Board access to appropriate specialistadvice that is relevant to the specific investment opportunity underconsideration. Share Premium Account I am pleased to be able to report that on 7 December 2005 the High Courtapproved our application for permission to change our balance sheet structurethrough the cancellation of part of the share premium account. This wasregistered at Companies House on 15 December 2005. This now provides us with thelegal ability to carry out share buybacks which had previously been restrictedby the lack of distributable reserves. Investors in VCTs sometimes need to sell their shares at a fairly early stage ofthe VCT's life because of probate or other events. As 'second hand' VCT sharesdo not qualify for upfront income tax relief, there tend to be few purchasers ofthese shares. For this reason the sale of even a small number of VCT shares canforce the quoted share price well below the NAV. Although the Board sees the use of share buy backs as a mechanism of last resortto close the gap between the share price and the underlying NAV, our preferenceis to focus on generating real value from the investee companies in order tostimulate interest in the shares. VCT Qualifying Status PricewaterhouseCoopers LLP continues to provide the Board with advice on theongoing compliance with HM Revenue & Customs rules and regulations concerningVCTs. The Board has been advised that BioScience VCT is in compliance with theconditions laid down by HM Revenue & Customs for maintaining approval as a VCT. Outlook We are in the process of adapting the BioScience VCT's structure and cost baseto reflect its more mature position in the investment process. The bioscience sector still provides exciting opportunities and, given skill,support and patience, successful bioscience companies can amply reward theirinvestors. We have been encouraged by the progress that has been made in recentmonths by some of our unquoted holdings. In addition, we hope that as weprogress through 2006 investors will adopt a more positive approach to quotedbiotech companies, which should result in benefits for our portfolio ofAIM-listed companies. We look forward to updating you on the progress of our portfolio of investmentsin due course. James OtterChairman 24 March 2006 Income Statement Year ended 31 December 2005 Year ended 31 December 2004 Revenue Capital Total Revenue Capital Total £000's £000's £000's £000's £000's £000'sRealised gain on investments - 8 8 - - -Unrealised loss on investments - (123) (123) - (675) (675)Income 34 - 34 222 - 222Investment management fees (59) (177) (236) (52) (157) (209)Other expenses (299) - (299) (176) - (176)Loss on ordinary activities before tax (324) (292) (616) (6) (832) (838)Tax on ordinary activities - - - - - -Loss on ordinary activities after tax (324) (292) (616) (6) (832) (838)Loss per share (4.3)p (3.8)p (8.1)p (0.1)p (11.0)p (11.1)p Reconciliation of movements in shareholders' funds Year ended Year ended 31 December 2005 31 December 2004 £000's £000'sShareholders' funds at start of year 6,299 6,911Middle market price to bid price valuation movement (4) (6)Restated shareholders' funds at start of year 6,295 6,905Loss on ordinary activities after tax (616) (838)Net proceeds of share issue - 232Cost of share buyback - (4)Shareholders' fund at end of year 5,679 6,295 Balance Sheet 31 December 2005 31 December 2004 (restated) £000's £000's Fixed asset investments 4,428 1,383Current assets:Debtors 13 210Cash at bank 1,369 4,742 1,382 4,952 Creditors: amounts falling due within one (131) (40)year Net current assets 1,251 4,912 Net assets 5,679 6,295 Called up equity share capital 3,798 3,798Share premium 1,722 3,422Special distributable reserve 1,700 -Capital redemption reserve 5 5Capital reserve - realised (534) (365) - unrealised (680) (557)Revenue reserve (332) (8)Total equity shareholders' funds 5,679 6,295 Net Asset Value Per Share 74.8p 82.9p Cash Flow Statement Year ended Year ended 31 December 2005 31 December 2004 £000's £000's £000's £000's Net cash outflow from operating activities (213) (454) Financial investment:Purchase of investments (3183) (1207)Sale of investments 23 -Net cash outflow from financial investment (3160) (1207) Net cash inflow from management of liquid - 5,969resources Dividends paid - equity - (37) Net cash (outflow)/inflow before financing (3373) 4,271 Financing:Issue of ordinary shares - 244Share issue expenses - (12)Repurchase of own shares - (4) Total financing - 228 (Decrease)/Increase in cash resources (3373) 4,499 Notes to the preliminary announcement Fixed asset investments Unlisted AIM-listed Listed Total investments investments investmentsBook cost as at 1 January 2005 1,613 312 15 1,940Restatement from middle market to bid price - (4) - (4)Unrealised appreciation at 1 January 2005 (456) (102) 5 (553) Valuation at 1 January 2005 1,157 206 20 1,383Movements in the year:Purchases at cost 1,495 1,688 - 3,183Disposals - - (23) (23)Transfers (119) 119 - -Net realised gain - - 8 8Decrease in unrealised appreciation (118) - (5) (123)Valuation at 31 December 2005 2,415 2,013 - 4,428Comprising:Book cost at 31 December 2005 2,657 2,451 - 5,108Unrealised appreciation at 31 December 2005 (242) (438) - (680) Investment Portfolio Summary 31 December 2005 Total Cost Carrying Value £000's £000'sUnlisted investmentsBioAnaLab Ltd 250 250Caretek Medical Ltd 100 100DxS Ltd 263 262Hallmarq Veterinary Imaging Ltd 500 500ImmunoBiology Ltd 300 300Insense Ltd 148 181Purely Proteins Ltd 371 222Scancell Ltd 725 600 2,657 2,415AIM-listed investmentsAbcam plc 44 66Angel Biotechnology Holdings plc 750 378BBI Holdings plc 62 65Cobra Bio-manufacturing plc 137 72DawMed Systems plc 101 63Evolutec Group plc 347 334NeutraHealth plc 360 428Phoqus Group plc 150 150ReNeuron Group plc 150 144Stem Cell Sciences plc 250 206York Pharma plc 100 107 2,451 2,013 5,108 4,428 The above summary of results for the year ended 31 December 2005 does notconstitute statutory financial statements within the meaning of section 240 ofthe Companies Act 1985 and has not been delivered to the Registrar of Companies. Statutory financial statements will be filed with the Registrar of Companies indue course; the auditors report on those financial statements under S235 of theCompanies Act 1985 is unqualified and does not contain a statement under S237(2) or (3) of the Companies Act 1985. A copy of the full annual report and financial statements for the year ended 31December 2005 is expected to be posted to shareholders shortly and will beavailable to the public at the registered office of the company at 8 AngelCourt, London, EC2R 7HP. ENDS This information is provided by RNS The company news service from the London Stock Exchange