Last checked at 
28 Aug 2008 07:00
FOR IMMEDIATE RELEASE 7.00am 28 August 2008
Hygea VCT plc
Unaudited Interim Report for the six months ending 30 June 2008
Hygea VCT plc ("Hygea", "Company" or "Fund") is a Venture Capital Trust ("VCT") which aims to provide shareholders with attractive long-term returns by investing in quoted and unquoted MedTech companies.
The Board manages the Company. The Company was launched in October 2001 and raised over £7.0 million (£6.8 million net of expenses) through an offer for subscription.
Financial Highlights
| Six months to 30 June 2008 | Six months to 30 June 2007 | Year to 31 December 2007 | |
| Net assets (£'000) | £4,619 | £4,535 | £4,608 |
| Net total return/(loss) before tax (£'000) | £(65) | £241 | £314 |
| Net asset value per share | 60.1p | 60.2p | 61.2p |
| Revenue return/(loss) per share* | (0.9)p | (1.2)p | (2.2)p |
| Total return/(loss) per share* | (0.8)p | 3.2p | 4.2p |
* based on a weighted average of 7,596,691 (June 2007: 7,530,191 and December 2007: 7,530,191) shares in issue in the period.
Chairman's Statement
I am pleased to present the results for the six months ended 30 June 2008. The Company's net asset value per share at 30 June 2008 was 60.1p compared to 61.2p at 31 December 2007 and 60.2p at 30 June 2007 - the drop in net asset per share during the six months ended 30 June 2008 is based on a net increase of £6,000 in the value of investments offset by net expenses of £71,000.Your Board is pleased that the net asset value has remained relatively stable over the period, following a modest increase in the overall value of the unquoted portfolio and despite the need to write down the AIM portfolio. Annual running costs remain less than our target of 3% per annum of net asset value after allowing for the costs of the share issue, which are shown in the profit and loss account.
Portfolio review
(a) Investing
At 30 June 2008, the Fund consisted of 16 holdings, 6 AIM quoted companies and 10 unquoted companies.
During the period the Company subscribed for further shares in Prosurgics Limited (a leading surgical robotics company) at a total cost of £100,000. We have now written up our shareholding in line with that fundraising and Prosurgics is currently in the process of seeking further funds at a significantly higher value.
We have also subscribed a further £100,000 in Hallmarq Veterinary Imaging Limited. The company's order book is developing well and the company is currently engaged in a further fundraising at a significantly higher value than we paid earlier this year, thus leading to the prospect of an increase in our carrying value later this year.
We identified an opportunity to invest £25,000 in Immunodiagnostic Holdings PLC, an AIM quoted company, which has subsequently been sold realising a profit of some £10,000. We also invested a further £37,000 in Insense Limited during the period.
DxS Limited continues to perform well and we have taken the opportunity to increase our valuation in line with that ascribed by the lead investor. Glide Pharmaceutical Technologies Limited has recently completed a fundraising and we have increased our valuation in line with the current share price. However, whilst Scancell Limited has completed assembling investors for its current fundraising (completion of which will coincide with listing on PlusMarkets), prevailing market conditions dictated that the pre-money value was below that previously ascribed and so we have reduced the value of our holding accordingly.
(b) Selected operational highlights
Selected examples of developments within portfolio companies which give your board confidence concerning the underlying value building within the portfolio are:
DxS Limited (www.dxsdiagnostics.com) - personalised medicine based on the use of molecular diagnostic products to aid doctors and drug companies select therapies for patients predominantly in the field of cancer. In the last year, contracts have been won from, inter alia, Amgen and Roche Diagnostics. The unaudited management accounts for the year to June 2008 show a transition from being lossmaking into profitability.
Hallmarq Veterinary Imaging Limited (www.hallmarq.net) - developed the world's first MRI scanner for equine vets to use on standing horses. The Key Performance Indicator is the increase in scan fees, which provide recurring revenue - scan fees for the 11 months to July 2008 were £491,000, an increase of more than 40% over the same period for 2007 and representing about 43% of overheads. Version 2 of the instrument, which was launched in early 2007, delivers greater performance and reliability, and a high percentage of sales prospects have now been converted into orders - which will, in turn, generate additional scan fees.
Shareholders seeking further information on portfolio companies can do so by visiting www.hygeavct.com, clicking on Investee Companies and then following the appropriate links.
Shares
We have been pleased by the response to our 10% top up offer which has now officially closed, although we can still issue shares within the limits of the top up as we come across interested investors. We have raised a total of £129,000 following the allotment of 258,000 shares at 50p each. In addition to the issue of new shares we have also seen a small but significant number of transactions in the secondary market and we will continue to take steps to communicate the potential of our portfolio. We remain committed to our policy of not buying back shares, since we do not believe that this is the best use of the Fund's limited resources.
Value added tax
HM Revenue & Customs have recently agreed that Investment Company management fees are not subject to VAT and that this situation should apply retrospectively. This will have no effect on your Company for the future since the Fund is now managed by the Board, but it is likely that VAT on investment management fees paid in the previous three years may be reclaimable. We are currently working with Octopus Investments Limited with regard to the reclaim but it is not presently possible to be certain as to its value and therefore no credit has been taken in these accounts.
VCT qualifying status
PricewaterhouseCoopers LLP continues to provide the Board with advice on the ongoing compliance with HM Revenue & Customs rules and regulations concerning VCTs. The Board believes that Hygea VCT continues to comply with the conditions laid down by HM Revenue & Customs for maintaining approval as a VCT.
Outlook
Notwithstanding the reduction in investor confidence which has affected much of the microcap sector in particular, we are encouraged by the performance of many of our investee companies and also the progress some are making towards flotation. We are pleased that a number of portfolio companies have successfully raised funds in this very challenging climate. We remain confident that the portfolio will deliver value to shareholders over the three to five year period referred to in the annual report based on positive operating developments within the portfolio.
James Otter
Chairman
28 August 2008
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors confirm that to the best of their knowledge the half-yearly financial report has been prepared in accordance with the Disclosure and Transparency rules and in accordance with applicable accounting standards, and includes a fair review of the information required by 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.
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 2007. The Company's principal risks and uncertainties have not changed materially since the date of that report.
Related Party Transactions
The Board of Hygea VCT plc acts as the investment manager ("Commercial Advisory Committee") of the Company. 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 VCT plc 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 2007.
The Commercial Advisory Committee shall be entitled to receive a performance incentive fee which shall be calculated as 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. 1.25p, but excluding any sums returned to shareholders from HMRC in the year of subscription).
| Profit and Loss Account | |||||||||
| Six months to 30 June 2008 | Six months to 30 June 2007 | Year to 31 December 2007 | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Gain/(loss) on disposal of fixed asset investments | - | 3 | 3 | - | (364) | (364) | - | 124 | 124 |
| (Loss)/gain on valuation of fixed asset investments | - | 2 | 2 | - | 716 | 716 | - | 378 | 378 |
| (Loss)/gain on valuation of current asset investments | 1 | 1 | - | - | - | - | 4 | 4 | |
| Income | 6 | - | 6 | 2 | - | 2 | 1 | - | 1 |
| Investment management fees | - | - | - | (8) | (23) | (31) | (10) | (28) | (38) |
| Other expenses | (77) | - | (77) | (82) | - | (82) | (155) | - | (155) |
| (Loss)/profit on ordinary activities before tax | (71) | 6 | (65) | (88) | 329 | 241 | (164) | 478 | 314 |
| Taxation on (loss)/profit on ordinary activities | - | - | - | - | - | - | - | - | - |
| (Loss)/profit on ordinary activities after tax | (71) | 6 | (65) | (88) | 329 | 241 | (164) | 478 | 314 |
| Revenue and capital (loss)/return per share - basic and diluted | (0.9)p | 0.1p | (0.8)p | (1.2)p | 4.4p | 3.2p | (2.2)p | 6.4p | 4.2p |
Each total column of this statement is the profit and loss account of the Company
All revenue and capital items in the above statement derive from continuing operations
The accompanying notes are an integral part of the interim financial information
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 securities.
| Reconciliation of Movements in Shareholders' Funds | |||
| Six months ended 30 June 2008 | Six months ended 30 June 2007 | Year to 31 December 2007 | |
| £'000 | £'000 | £'000 | |
| Shareholders' funds at start of period | 4,608 | 4,294 | 4,294 |
| (Loss)/profit on ordinary activities after tax | (65) | 241 | 314 |
| Issue of equity | 76 | - | - |
| Shareholders' funds at end of period | 4,619 | 4,535 | 4,608 |
| Balance Sheet | ||||||
| As at 30 June 2008 | As at 30 June 2007 | As at 31 December 2007 | ||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Fixed asset investments | 4,616 | 4,375 | 4,358 | |||
| Current assets: | ||||||
| Debtors | 17 | 11 | 3 | |||
| Cash at bank | 15 | 198 | 272 | |||
| 32 | 209 | 275 | ||||
| Creditors: amounts falling due within one year | (29) | (49) | (25) | |||
| Net current assets | 3 | 160 | 250 | |||
| Net assets | 4,619 | 4,535 | 4,608 | |||
| Called up equity share capital | 3,841 | 3,765 | 3,765 | |||
| Share Premium | 1,722 | 1,722 | 1,722 | |||
| Special distributable reserve | 1,660 | 1,660 | 1,660 | |||
| Capital redemption reserve | 38 | 38 | 38 | |||
| Capital reserve - realised | (1,471) | (901) | (1,474) | |||
| - unrealised | (437) | (1,163) | (440) | |||
| Revenue reserve | (734) | (586) | (663) | |||
| Total shareholders' funds | 4,619 | 4,535 | 4,608 | |||
| Net asset value per share | 60.1p | 60.2p | 61.2p | |||
| Cash flow statement | |||
| Six months to 30 June 2008 | Six months to 30 June 2007 | Year to 31 December 2007 | |
| £'000 | £'000 | £'000 | |
| Net cash outflow from operating activities | (80) | (30) | (122) |
| Financial investment : | |||
| Purchase of investments | (262) | (291) | (713) |
| Sale of investments | 9 | 425 | 1,013 |
| Financing : | |||
| Issue of own shares | 76 | - | - |
| (Decrease)/ increase in cash resources | (257) | 104 | 178 |
| Reconciliation of net cash flow to movement in liquid resources | |||
| Six months to 30 June 2008 | Six months to 30 June 2007 | Year to 31 December 2007 | |
| £'000 | £'000 | £'000 | |
| (Decrease)/ increase in cash resources | (257) | 104 | 178 |
| Movement in liquid resources | - | - | - |
| Opening net liquid resources | 272 | 94 | 94 |
| Net cash at end of period | 15 | 198 | 272 |
| Reconciliation of operating profit before taxation to cash flow from operating activities | |||
| Six months to 30 June 2008 | Six months to 30 June 2007 | Year to 31 December 2007 | |
| £'000 | £'000 | £'000 | |
| (Loss)/profit on ordinary activities before tax | (65) | 241 | 314 |
| (Profit)/loss on disposal of investments | (3) | 364 | (124) |
| (Increase)/decrease in debtors | (14) | 66 | 74 |
| Increase/(decrease) in creditors | 4 | 15 | (8) |
| Gain on valuation of investments | (2) | (716) | (378) |
| Outflow from operating activities | (80) | (30) | (122) |
| Investment Portfolio as at 30 June 2008 | |||
| Cost | Valuation | ||
| Ten largest investments by value | £'000 | £'000 | |
| ImmunoBiology Limited | 600 | 844 | |
| DxS Limited | 325 | 636 | |
| Scancell Limited | 725 | 585 | |
| Prosurgics Limited | 490 | 509 | |
| Hallmarq Veterinary Imaging Limited | 885 | 438 | |
| Glide Pharmaceutical Technologies Limited | 105 | 370 | |
| Wound Solutions Limited | 350 | 350 | |
| Insense Limited | 282 | 341 | |
| BioAnaLab Limited | 279 | 279 | |
| EpiStem Holdings plc | 62 | 89 | |
| 4,103 | 4,441 | ||
| Other AIM quoted investments | 583 | 175 | |
| Other unquoted investments | 371 | - | |
| 5,057 | 4,616 | ||
Enquiries:
Charles Breese, Hygea VCT plc on 01280 703482 or larpentnewton@btinternet.com
Roland Cornish, Beaumont Cornish Limited on 020 7628 3396