Last checked at 
21 Apr 2017 07:00
INTERNATIONAL BIOTECHNOLOGY TRUST PLC (the Company)
Half Yearly Report for the six months ended 28 February 2017
This announcement contains regulated information.
Chairman's Statement
Summary
In the six months to 28 February 2017, the Net Asset Value (NAV) per Ordinary share of the Company rose from 575.1p to 656.7p, including a currency gain of £11.6m, equivalent to 30.9p per share. The NAV per share returned 16.2% including the first dividend payment of 11.5p per share, which was announced in December 2016. Over the same period, the Ordinary share price of the Company increased by 21.1%. This compares to a rise in the NASDAQ Biotechnology Index (NBI) of 12.2% and a gain in the FTSE All-Share Index of 8.6%. All figures are on a total return basis and are sterling-adjusted. The quoted portfolio has performed very strongly, outperforming the benchmark combined with a 0.5% hurdle by 9.6% as at 28 February 2017.
After a period of volatility for biotechnology stocks, many of the uncertainties surrounding the US political environment and drug pricing have been resolved, resulting in a return to growth for the sector. The outlook is more fully explained in the Investment Manager's Report.
Longer-term results
The Company's performance since our lead investment manager, Carl Harald Janson, joined the SVLS team in September 2013 has been very impressive. Over the last three years, the Company has significantly outperformed the NBI on both a NAV and share price basis, with an outperformance of 22.3% and 29.3% respectively. Shareholders will also be pleased by our very substantial outperformance of the broader UK equity market, as measured by the FTSE All-Share Index. Over the last three years, our NAV is up by 75.2%, versus a return of 20.2% from the UK market as a whole.
Unquoted portfolio
Following the approval of Shareholders granted at the general meeting held on 29 September 2016, allowing us to invest directly into unquoted, including venture, funds, we made a commitment of $30.0m into SV Life Sciences Fund VI (SV Fund VI), of which $9.3m (£7.5m) was invested at the outset. Investing directly into the venture fund allows us a broad diversified access to a wider range of unquoted investments. Our investment in SV Fund VI will increase slowly over the investment period and overlap with the exits of our existing unquoted companies. The Board expects the unquoted portfolio to remain within the guideline range of 10-15% of total investments.
Dividends, buybacks and discount
I am pleased to report that our first dividend payment was made to our Shareholders on 31 January 2017 at a rate of 11.5p per share. The dividend will be 4% of NAV as at 31 August 2016, paid in two equal tranches in January and August. As anticipated, the underlying growth of our investments is more than sufficient to support the payment of the dividend out of capital growth.
The Company bought back 125,000 shares at a cost of £0.6m during this six month period, as part of discount management for the benefit of Shareholders. This enhanced the NAV per share by 0.3p because the shares were bought at a discount to NAV that averaged approximately 13.9%.
Since the announcement of our policy changes and the introduction of the dividend in September 2016, no further buybacks have been required to maintain our discount control policy. Indeed, the discount narrowed to 10.2% from 13.5% at the previous year end. It is the Board's long-term intention to continue to reduce the discount and its volatility as market conditions allow.
Performance fee
As noted above, the exceptional outperformance versus the benchmark has given rise to a current performance fee accrual of £1.9m. The final position of any performance fee will be determined at the year end, 31 August 2017.
Prospects
The Investment Manager has successfully outperformed the market in varying conditions, in both rising and falling markets. Drug pricing and political concerns have prevented the sector from participating in the broader market rally which I believe gives investors an excellent opportunity to gain exposure to a sector with exciting growth prospects. It is clear that the larger names within the biotechnology sector are seeing their growth rates slow. The Investment Manager has taken action by tilting the Company away from these names and into the higher growth mid-sized companies by investing in the next generation of businesses with newly launched drugs and innovative pipelines. I am optimistic that exposure to the sector through a fund managed by medical experts can identify such names and generate returns for our Shareholders.
Alan Clifton
Chairman
20 April 2017
Investment Manager's Review
Summary
In the six months ended 28 February 2017, the Company's NAV per share rose by 16.2% including the dividend. The NBI increased by 12.2%, and the FTSE All-Share Index rose by 8.6%. All figures are on a total return basis and are sterling-adjusted.
By subsector, 80% of the portfolio was invested in therapeutics, 10% in specialty pharmaceuticals, 4% in life science tools, diagnostics and services, 4% in medical devices and 3% in a venture capital fund, SV Fund VI. SV Fund VI makes investments into unquoted companies across three sectors; biotechnology (40%), healthcare services and IT (40%) and medical devices (20%). Cash and other net assets were -1% of NAV.
Quoted and Unquoted performance
At 28 February 2017, for financial reporting the quoted portfolio represented 90.4% of NAV at £224.6m. The unquoted portfolio represented 9.6% of NAV at £23.7m. Companies that were first invested in from the unquoted pool and have now become quoted but continue to be managed by the unquoted investment managers are included within the unquoted portfolio for the purposes of performance measurement. Based on the classification of the investments as adjusted for performance measurement, the quoted portfolio was 87.7% of the portfolio, whilst the unquoted portfolio represented 12.3%.
Quoted Portfolio
The return on the quoted portfolio was 23.2%, which outperformed the benchmark index, the NBI, by 9.9% compared on a geometric basis with the NBI total return of 12.2%. On an arithmetic basis, the quoted portfolio outperformed the NBI by 11.0%. The relative geometric performance is used for the purpose of calculating the performance fee.
Three portfolio holdings were the subjects of successful bids during the period under review, Ariad, Actelion and CoLucid.
The largest contributor to performance was Ariad Pharmaceuticals which was acquired by Takeda on 9 January for $24 per share, a 75% premium to the share price at the close of the previous day. Ariad had been identified as a potential M&A target and the Company held a 3.6% position, resulting in a gain of £6.5m on our holding.
Eli Lilly announced the acquisition of a portfolio company CoLucid for $960m in an all cash transaction. CoLucid is a neurology company that had a late-stage acute migraine drug in development and Eli Lilly paid a 30% premium to the previous closing share price.
Actelion, a Swiss biotechnology company and a long-term holding of the Company, was acquired by Johnson and Johnson for $30bn, a major acquisition which was announced in late January.
The Company had a significant position in Tesaro whose drug niraparib was approved by the FDA on 27 March 2017. Niraparib is a PARP inhibitor which is a potential new treatment for ovarian cancer. Due to the exciting data that has been generated in late stage trials, Tesaro has been in discussions with acquirers. News of the bid speculation helped boost the share price and the Investment Manager chose to lock in profits at that point in time.
Another oncology company, Exelixis is in the launch phase of its kidney cancer drug Cabometyx. The launch has been stronger than expected, beating analyst estimates. As with Tesaro, the Investment Manager chose to take profits towards the end of the period to lock in the gains.
Incyte, a biopharmaceutical company specialising in oncology product development, increased by £6.2m after upping the guidance on sales of its lead product, Jakafi, and M&A speculation.
Genmab, a Danish company that has been a long-term holding of the Company, contributed to performance with the strong launch of their lead asset Darzalex for multiple myeloma (partnered with Johnson and Johnson).
FX gains also added to the value of quoted portfolio, with a gain of £11.0m, or 29.3p per share in the period.
Unquoted Portfolio
The return for the unquoted portfolio over the six months ended 28 February 2017 was a fall of £4.7m or 16.1%. The combined effect of gains and losses on the unquoted investments was to decrease the NAV by 12.5p per share. This is due to several factors which are explained below. The previous unquoted investments experience higher volatility, as larger investments are made in fewer companies. Our change in the strategy of investing through a more diversified venture capital fund is designed to reduce the volatility of the unquoted portfolio in future periods.
As at 28 February 2017, the Company held investments in nine unquoted portfolio companies, one investment in a venture fund, SV Fund VI, and interests in five further companies that have been sold, but where there are further receipts dependent on reaching drug development or financial milestones set at the point when those companies were sold. The Company also holds investments in three previously unquoted companies that are now listed, but which, as described above, are still reported for performance purposes within the unquoted portfolio.
Summary of unquoted investments
| Number of investments | Fair value at 28 Feb 2017 (£'m) | Percentage of NAV |
Unquoted | 9 | 11.6 | 4.7% |
Exited with contingent milestones | 5 | 4.6 | 1.9% |
SV Fund VI | 14* | 7.5 | 3.0% |
Total unquoted | 28 | 23.7 | 9.6% |
Previously unquoted, now listed | 3 | 6.6 | 2.7% |
Total unquoted for performance measurement | 31 | 30.3 | 12.3% |
\* The number of investments listed within SV Fund VI represents the number of investments into underlying individual portfolio companies.
Following the approval of the change to the investment policy at the general meeting on 29 September 2016, a new investment was made into SV Fund VI. The draw down on the commitment of $30.0m to date is £7.5m ($9.3m), with further amounts due to be drawn down over the investment period. SV Fund VI's investee companies continue to be diversified between biotechnology, healthcare services & IT and medical devices similar to our existing unquoted investments, but with smaller allocations to each individual company, allowing for greater diversification.
Kalvista Pharmaceuticals completed a reverse merger in the period into Carbalyn Therapeutics on 23 November and is now listed on the NASDAQ Stock Market. The valuation of Kalvista fell by £0.9m following the listing whilst the company establishes itself. For performance measurement purposes, it remains in the unquoted portfolio, as do Entellus and Transenterix.
Entellus completed a secondary equity offering in January 2017 and we sold 15.3% of our holding in the secondary listing for £0.8m. Following the secondary offering, the earnings missed analyst expectations and the share price fell, decreasing our valuation by £1.2m at the period end. We believe the fundamentals of the company remain strong with commercial activities ramping up.
In January 2017, Merck notified us that they would be discontinuing development of the assets acquired with OncoEthix due to toxicity concerns. The contingent milestones relating to this investment were written off in full, with an impact on the NAV of £1.2m. Although no further proceeds will be received relating to this investment, the overall return was a multiple of 2.4x.
EBR Systems was written down by £1.2m in February based on the latest financing term sheet. A significant financing round is required to finance the clinical trial for the wireless heart pacemaker which is resulting in earlier investments being down valued.
Atopix was sold to Chiesi Farmaceuticals in November 2016, and we received upfront proceeds of £0.5m. Contingent milestones relating to the commercialisation of the CRTH2 antagonist are currently valued at £0.6m. A recapitalisation of NCP Holdings led to a sale of 47.5% of our holdings for proceeds of £1.2m.
The decreases in the valuations in the period were partially offset by an FX gain of £0.6m, or 0.6p per share
Outlook
The biotechnology sector went into a tail spin back in September 2015 when the sector was trading at more than 30% above current levels due to political uncertainty surrounding drug pricing, sparked by Hillary Clinton's comments. The sector is yet to fully recover almost two years later.
After the setback, the NBI remained in a trading range throughout 2016, held back by the uncertainty of the upcoming US election.
Initially, despite the surprise Republican "clean sweep", investors remained cautious as Trump's comments surrounding drug pricing continued downward pressure on valuations. However, since his win, this has become a lesser area of concern and share prices have begun to recover, due to the long held assumption that "business friendly" Republicans are unlikely to vote for price controls or industry unfriendly ideas.
In practice, drug pricing growth is being 'controlled' to an extent already within the private sector through various mechanisms. Diseases which benefit from multiple treatment options offer insurance companies an opportunity to negotiate lower prices with the pharmaceutical and biotechnology companies supplying them. Despite the relatively recent political spotlight on drug pricing, this private sector negotiation on drug pricing is not a new phenomenon. By investing in companies focused on unmet medical needs and producing unique life changing drugs, investors can gain a degree of protection from such pressures.
Large pharmaceutical companies and more recently, large biotechnology companies, have seen their revenue growth rates reduce as current innovative therapies face greater competition and their R&D productivity in creating new drugs has decreased. Despite lower growth rates, their ability to generate cash from successful blockbuster drugs has continued, and many companies have significant cash resources. In addition, the new administration's polices look likely to increase cash holdings further. These policies include a potential lowering of corporate tax rates in the US and a one-off tax rate for 'repatriation of funds' which are locked overseas by some companies in order to avoid a 35% US corporate tax rate.
This combination of factors has led to increasing pressure on large cap companies in the sector to carry out M&A, and acquire companies with faster growing products to boost their revenue growth. Companies bought in M&A activity are often bought at 30-60% above the stock market values in the period immediately before acquisition, providing a strong source of returns for investors in the companies acquired. Frequently, these exiting investors seek to reinvest the proceeds in the biotech sector helping to further boost returns. The Investment Manager has taken steps to change the Company's holdings and reduce its exposure to the more established companies in favour of the faster growing mid-cap names which are ripe for acquisition.
We believe the sector remains good value at P/E of 13x 2017. However, it looks even more attractive on a relative basis when you consider the S&P 500's run and valuation of 18x 2017. We believe the fundamentals of the sector are intact, valuations are attractive and the concerns over Trump's administration are overdone, providing a good entry point for investors.
SV Life Sciences Managers LLP
Investment Manager
20 April 2017
Directors' Responsibility Statement
In respect of the Half Yearly Report for the six months ended 28 February 2017, we confirm that, to the best of our knowledge:
- the condensed set of Financial Statements contained within, which have been prepared in accordance with IAS 34, "Interim Financial Reporting", gives a true and fair view of the assets, liabilities, financial position and profit and loss of the Company as at 28 February 2017 as required by the UK Listing Authority's Disclosure Guidance and Transparency Rule 4.2.4R;
- the Chairman's Statement and Investment Manager's Review include a fair review, as required by Disclosure Guidance and Transparency Rule 4.2.7R, of important events that have occurred during the six months ended 28 February 2017 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 financial year; and
- the Chairman's Statement and Investment Manager's Review includes a fair review of the information concerning related party transactions as required by Disclosure Guidance and Transparency Rule 4.2.8R.
The Half Yearly Report has not been reviewed or audited by the Company's auditors.
The Half Yearly Report for the six months ended 28 February 2017 was approved by the Board and the above Responsibility Statement has been signed on its behalf by:
Alan Clifton
Chairman
20 April 2017
Statement of Comprehensive Income
for the six months ended 28 February 2017
|
| (Unaudited) | (Unaudited) | (Audited) | ||||||
|
| For the six months ended | For the six months ended | For the year ended | ||||||
|
| 28 February 2017 | 29 February 2016 | 31 August 2016 | ||||||
|
| Company | Company | Company | ||||||
|
| Revenue | Capital |
| Revenue | Capital |
| Revenue | Capital |
|
|
| return | return | Total | return | return | Total | return | return | Total |
| Notes | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Gains/(losses) on investments held at fair value through profit or loss |
| - | 38,057 | 38,057 | - | (39,027) | (39,027) | - | (1,725) | (1,725) |
Exchange losses on currency balances |
| - | (539) | (539) | - | (1,438) | (1,438) | - | (2,333) | (2,333) |
Income | 2 | 203 | - | 203 | 334 | - | 334 | 676 | - | 676 |
Expenses |
|
|
|
|
|
|
|
|
|
|
Management fees* |
| (274) | - | (274) | (999) | - | (999) | (1,894) | - | (1,894) |
Performance fee |
| - | (1,901) | (1,901) | - | - | - | - | (575) | (575) |
Administrative expenses
|
| (568) --------- | - --------- | (568) --------- | (550) --------- | - --------- | (550) --------- | (1,047) --------- | - --------- | (1,047) ---------- |
Profit/(loss) before finance costs and tax |
| (639) | 35,617 | 34,978 | (1,215) | (40,465) | (41,680) | (2,265) | (4,633) | (6,898) |
Finance costs |
|
|
|
|
|
|
|
|
|
|
Interest payable |
| (84) -------- | - --------- | (84) --------- | (129) ---------- | - ---------- | (129) --------- | (212) ---------- | - ---------- | (212) ---------- |
Profit/(loss) on ordinary activities before tax |
| (723) | 35,617 | 34,894 | (1,344) | (40,465) | (41,809) | (2,477) | (4,633) | (7,110) |
Taxation |
| (30) -------- | - --------- | (30) --------- | (52) ---------- | - ---------- | (52) --------- | (105) --------- | - ---------- | (105) ---------- |
Profit/(loss) for the period attributable to owners of the Company
|
| (753) --------- | 35,617 --------- | 34,864 --------- | (1,396) ---------- | (40,465) ---------- | (41,861) --------- | (2,582) --------- | (4,633) ---------- | (7,215) ---------- |
Earnings/(loss) per Ordinary share
| 3
| (2.01)p ====== | 94.85p ====== | 92.84p ====== | (3.52)p ======= | (101.96) p ======= | (105.48) p ======= | (6.63)p ====== | (11.89)p ====== | (18.52)p ====== |
The total column of this statement represents the Company's Statement of Comprehensive Income prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.
The Company does not have any other comprehensive income and hence the net (loss)/profit for the period, as disclosed above, is the same as the Company's total comprehensive income.
The revenue and capital columns are supplementary and are prepared under guidance published by the Association of Investment Companies (AIC).
*Following the investment into SV Fund VI on 3 October 2016, management fees are partially paid directly through the venture capital investment. Refer to note 6 related parties, for a reconciliation of the total amount paid.
The accompanying notes form part of these Financial Statements.
Balance Sheet
as at 28 February 2017
|
| (Unaudited) | (Unaudited) | (Audited) |
|
| 28 February 2017 | 29 February 2016 | 31 August 2016 |
|
| Company | Company | Company |
| Notes | £'000 | £'000 | £'000 |
Non-current assets |
|
|
|
|
Investments held at fair value through profit or loss
|
| 248,292 ---------- | 187,498 ----------- | 221,788 ------------ |
|
| 248,292 | 187,498 | 221,788 |
Current assets |
|
|
|
|
Receivables |
| 21,244 | 8,369 | 9,242 |
Cash and cash equivalents |
| 141 ---------- | 2,465 ----------- | 90 ------------ |
|
| 21,385 ---------- | 10,834 ----------- | 9,332 ------------ |
Total assets |
| 269,677 | 198,332 | 231,120 |
Current liabilities |
|
|
|
|
Borrowings |
| (6,267) | - | (11,813) |
Payables |
| (16,829) ----------- | (10,061) ------------ | (2,656) ------------ |
|
| (23,096) ----------- | (10,061) ------------ | (14,469) ------------ |
Net assets |
| 246,581 ----------- | 188,271 ------------ | 216,651 ------------ |
Equity attributable to equity holders |
|
|
|
|
Called up share capital |
| 10,336 | 10,723 | 10,409 |
Share premium account |
| 18,805 | 18,805 | 18,805 |
Capital redemption reserve |
| 31,481 | 31,094 | 31,408 |
Capital reserves | 4 | 218,866 | 158,617 | 188,183 |
Revenue reserve |
| (32,907) ----------- | (30,968) ----------- | (32,154) ------------ |
Total equity |
| 246,581 ----------- | 188,271 ---------- | 216,651 ------------ |
NAV per Ordinary share | 5
| 656.71p ======= | 481.66p ====== | 575.09p ======== |
The accompanying notes form part of these Financial Statements.
Statement of Changes in Equity
| Called up | Share | Capital |
|
|
|
Company | share | premium | redemption | Capital | Revenue |
|
For the six months ended | capital | account | reserve | reserves | reserve | Total |
28 February 2017 (Unaudited) | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Balance at 1 September 2016 | 10,409 | 18,805 | 31,408 | 188,183 | (32,154) | 216,651 |
Total Comprehensive Income: |
|
|
|
|
|
|
Profit/(loss) for the period | - | - | - | 35,617 | (753) | 34,864 |
Transactions with owners, recorded directly to equity: |
|
|
|
|
|
|
Shares bought back and held in treasury | - | - | - | (616) | - | (616) |
Shares cancelled from treasury | (73) | - | 73 | - | - | - |
Dividend paid in the period | - --------- | - ---------- | - ---------- | (4,318) ----------- | - ---------- | (4,318) ---------- |
Balance at 28 February 2017
| 10,336 ====== | 18,805 ======= | 31,481 ======= | 218,866 ======= | (32,907) ======= | 246,581 ======= |
| Called up | Share | Capital |
|
|
|
Company | share | premium | redemption | Capital | Revenue |
|
For the six months ended | capital | account | reserve | reserves | reserve | Total |
29 February 2016 (Unaudited) | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Balance at 1 September 2015 | 11,116 | 18,805 | 30,701 | 204,440 | (29,572) | 235,490 |
Total Comprehensive Income: |
|
|
|
|
|
|
Loss for the period | - | - | - | (40,465) | (1,396) | (41,861) |
Transactions with owners, recorded directly to equity: |
|
|
|
|
|
|
Shares bought back and held in treasury | - | - | - | (5,358) | - | (5,358) |
Shares cancelled from treasury
| (393) --------- | - ---------- | 393 ----------- | - ---------- | - ----------- | - ----------- |
Balance at 29 February 2016
| 10,723 ====== | 18,805 ====== | 31,094 ======= | 158,617 ====== | (30,968) ======= | 188,271 ======= |
| Called up | Share | Capital |
|
|
|
Company | share | premium | redemption | Capital | Revenue |
|
For the year ended | capital | account | reserve | reserves | reserve | Total |
31 August 2016 (Audited) | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Balance at 1 September 2015 | 11,116 | 18,805 | 30,701 | 204,440 | (29,572) | 235,490 |
Total Comprehensive Income: |
|
|
|
|
|
|
Loss for the year | - | - | - | (4,633) | (2,582) | (7,215) |
Transactions with owners, recorded directly to equity: |
|
|
|
|
|
|
Shares bought back and held in treasury | - | - | - | (11,624) | - | (11,624) |
Shares cancelled from treasury
| (707) -------- | - --------- | 707 ---------- | - ---------- | - ----------- | - ---------- |
Balance at 31 August 2016 | 10,409 ===== | 18,805 ====== | 31,408 ======= | 188,183 ====== | (32,154) ======= | 216,651 ====== |
The accompanying notes form part of these Financial Statements.
Cash Flow Statement
| (Unaudited) | (Unaudited) | (Audited) |
| For the six | For the six | For the |
| months ended | months ended | year ended |
| 28 February 2017 | 29 February 2016 | 31 August 2016 |
| Company | Company | Company |
| £'000 | £'000 | £'000 |
Cash flows from operating activities |
|
|
|
Profit/(loss) before tax | 34,894 | (41,809) | (7,110) |
Adjustments for: |
|
|
|
(Increase)/decrease in investments | (26,504) | 59,431 | 25,141 |
(Increase)/decrease in receivables | (12,002) | 6,087 | 5,214 |
Increase/(decrease) in payables | 14,173 | 5,734 | (1,671) |
Taxation | (30) --------- | (52) ---------- | (105) ----------- |
Net cash flows generated from operating activities
| 10,531 --------- | 29,391 ---------- | 21,469 ----------- |
Cash flows from financing activities |
|
|
|
Share repurchase costs | (616) | (5,358) | (11,624) |
Dividend paid | (4,318) ---------- | - ----------- | - ----------- |
Net cash used in financing activities
| (4,934) ---------- | (5,358) ----------- | (11,624) ----------- |
Net increase in cash and cash equivalents | 5,597 | 24,033 | 9,845 |
Cash and cash equivalents at beginning of period
| (11,723) ---------- | (21,568) ---------- | (21,568) ---------- |
Cash and cash equivalents at end of period
| (6,126) --------- | 2,465 --------- | (11,723) ---------- |
The accompanying notes form part of these Financial Statements.
Notes to the Financial Statements
1. Accounting policies
The Financial Statements have been prepared on a going concern basis, in accordance with International Accounting Standard 34 "Interim Financial Reporting" and the accounting policies set out in the statutory accounts of the Company for the year ended 31 August 2016. Where presentational guidance set out in the Statement of Recommended Practice (the SORP) for investment trusts issued by the AIC in November 2014 and updated in January 2017 with consequential amendments, is consistent with the requirements of IFRS, the accounts have been prepared on a basis compliant with the recommendations of the SORP.
The financial information for each of the six month periods ended 28 February 2017 and 29 February 2016 comprises non-statutory accounts within the meaning of Sections 434 - 436 of the Companies Act 2006 (the Act). The financial information for the year ended 31 August 2016 has been extracted from published accounts that have been delivered to the Registrar of Companies and on which the report of the auditors was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under Section 498(2) or (3) of the Act.
The Company has reviewed the guidance issued by the Financial Reporting Council (FRC) in order to determine whether the going concern basis should be used in preparing the Financial Statements for the six months ended 28 February 2017. The Directors have reviewed the likely operational costs and cashflows for the Company for the 12 months from the date of this Half Yearly Report, and are of the opinion that the Company has adequate resources to continue in operational existence for the foreseeable future. The Directors believe that it is appropriate to adopt the going concern basis in the preparation of the Financial Statements as there are no material uncertainties related to events or conditions that may cast significant doubt about the Company's ability to continue as a going concern.
The Company's principal risks and uncertainties remained unchanged to those described in the Annual Report for the year ended 31 August 2016. These include strategy/performance risks, investment-related risks, currency risks, operational risks and tax, legal and regulatory risks. These risks, and the way in which they are managed, are described in more detail under the heading "Principal risks and uncertainties" within the Strategic Report in the Company's Annual Report for the year ended 31 August 2016 as well as note 23 entitled "Financial Instruments and Risk Management".
2. Income
| (Unaudited) | (Unaudited) | (Audited) |
| For the six | For the six | For the |
| months ended | months ended | year ended |
| 28 February 2017 | 29 February 2016 | 31 August 2016 |
| Company | Company | Company |
| £'000 | £'000 | £'000 |
Revenue: |
|
|
|
Income from investments held at fair value through profit or loss: |
|
|
|
Unfranked dividends | 203 ---------- | 334 ---------- | 676 --------- |
| 203 ====== | 334 ====== | 676 ====== |
3. Net earnings/(loss) per Ordinary share
| (Unaudited) | (Unaudited) | (Audited) |
| For the six | For the six | For the |
| months ended | months ended | year ended |
| 28 February 2017 | 29 February 2016 | 31 August 2016 |
| Company | Company | Company |
| £'000
| £'000
| £'000
|
Net revenue loss | (753) | (1,396) | (2,582) |
Net capital profit/(loss) | 35,617 ----------- | (40,465) ------------ | (4,633) ----------- |
| 34,864 ======= | (41,861) ======== | (7,215) ======= |
Weighted average number of Ordinary shares in issue* | 37,549,044 | 39,687,223 | 38,959,794 |
Revenue loss per Ordinary share | (2.01)p | (3.52)p | (6.63)p |
Capital profit/(loss) per Ordinary share
| 94.85p ------------ | (101.96)p ------------- | (11.89)p ------------ |
Total earnings/(loss) per Ordinary share
| 92.84p ======= | (105.48)p ======== | (18.52)p ======== |
*Excluding those held in treasury.
4. Capital reserves
The capital reserve account comprises both realised gains on investments sold and unrealised gains and losses on investments held, which are analysed as follows:
| (Unaudited) | (Unaudited) | (Audited) |
| For the six | For the six | For the |
| months ended | months ended | year ended |
| 28 February 2017 | 29 February 2016 | 31 August 2016 |
| Company | Company | Company |
| £'000
| £'000 | £'000 |
Capital reserve - on investments sold | 200,176 | 159,580 | 168,447 |
Capital reserve - on investments held | 18,690 ----------- | (963) ---------- | 19,736 ----------- |
| 218,866 ======= | 158,617 ======= | 188,183 ======= |
5. Net asset value per Ordinary share
| (Unaudited) | (Unaudited) | (Audited) |
| 28 February 2017 | 29 February 2016 | 31 August 2016 |
| Company | Company | Company |
Net assets attributable to Ordinary Shareholders (£'000) | 246,581 | 188,271 | 216,651 |
Ordinary shares in issue at end of period | 37,547,663 | 39,087,663 | 37,672,663 |
NAV per Ordinary share | 656.71p | 481.66p | 575.09p |
6. Related party transactions
There have been no related party transactions that have materially affected the financial position or the performance of the Company during the six months ended to 28 February 2017.
(a) Transactions with the Investment Manager
Details of the management fee arrangement are given in the Directors' Report on page 19 of the Annual Report for the year ended 31 August 2016. Following the investment into the SV Fund VI venture capital fund on 3 October 2016, a portion of the management fee has been paid via fees due on this investment, with the remaining fees charged directly to the Company. The initial fee on the SV Fund VI investment was significantly higher than it will be on an ongoing basis to reflect the catch-up fees to equalise the position between the Company and earlier investors into the venture capital fund. The amounts paid can be seen in the table below and continue to total 0.9% of NAV. In the prior year, fees of £999,000 were paid in the six months ended 29 February 2016.
Fees paid to the Investment Manager | £ |
Venture Capital Fees paid through SV Fund VI investment | 728,577 |
Management fee paid by the Company directly to the Investment Manager | 274,054 ------------- |
Total | 1,002,631 ======== |
Due to the outperformance at 28 February 2017 vs the NBI benchmark plus 0.5% of 9.6%, a performance fee of £1,900,410 has been accrued. Performance is measured on an accrual basis and no amounts will be due or paid in respect of any outperformance until the release of the audited accounts for 31 August 2017.
(b) Related party transactions
The Directors of the Company are key management personnel. The total remuneration payable to Directors in respect of the six months ended 28 February 2017 was £79,500, of which £39,750 was outstanding at the period end.
7. Half Yearly Report
The Company's Half Yearly Report for the six months ended 28 February 2017 will be posted to Shareholders in April 2017. Copies of the Half Yearly Report will shortly be available from the Registered Office of the Company at 10 Harewood Avenue, London NW1 6AA and on the website, www.ibtplc.com, which is a website maintained by the Company's Investment Manager, SV Life Sciences Managers LLP. A copy of the Half Yearly Report for the six months ended 28 February 2017 has been submitted to the National Storage Mechanism of the UK Listing Authority and will shortly be available for inspection at: www.Hemscott.com/nsm.do. This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulations.
For further information, please contact:
Carl Harald Janson
Investment Manager
SV Life Sciences Managers LLP
Telephone: 020 7421 7070
Susan Gledhill
Company Secretary
BNP Paribas Secretarial Services Limited
Telephone: 020 7410 5971
21 APRIL 2017