Preliminary Announcement of Results
NEWS RELEASE
18 November 2011
WORLDWIDE HEALTHCARE TRUST PLC
Unaudited Preliminary Results for the six months ended 30 September 2011
Worldwide Healthcare Trust PLC today announces its interim results for the six
months ended 30 September 2011.
Performance
Six months to One year to
30 September 31 March
2011 2011
Share price (total return)# +3.1% -0.9%
Net asset value per share (total -0.9% +4.0%
return)#
Benchmark index (total return)* -0.3% +2.5%
30 September 31 March Six months
% Change
2011 2011
Shareholders' funds £332.3m £344.8m -3.6
Net asset value per share - 745.0p 773.5p -3.7
diluted
(dilution for subscription shares)
Share price 693.0p 686.0p +1.0
Discount of share price to diluted 7.0% 11.3% -
net asset value per share
Benchmark Index * 83.89 84.11 -0.3
Gearing ** 15.4% 13.3% -
Total expense ratio (excluding 1.1% 1.0% -
performance fees)
# Source - Morningstar. Net asset value diluted for subscription shares and
treasury shares.
* With effect from 1 October 2010, the performance of the Company is measured
against the MSCI World Health Care Index on a total return, sterling adjusted
basis. Prior to this date, performance was measured against the Datastream
World Pharmaceutical & Biotechnology Index (total return, sterling adjusted).
Historical data, therefore, consists of a blended figure containing both
indices.
**Calculated using the Association of Investment Companies' definition (prior
charges as a percentage of net assets).
Attached: * Chairman's Statement
* Review of Investments
* Contribution by Investment - Excluding Options
* Income Statement
* Reconciliation of Movements in Shareholders' Funds
* Balance Sheet
* Cash Flow Statement
* Notes to the Financial Statements
For further information please contact:
Martin Smith, Worldwide Healthcare Trust PLC 020 3 008 4913
Mark Pope, Frostrow Capital LLP 020 3 008 4913Chairman's Statement
Performance
Volatility was the primary characteristic of a difficult period for markets
that saw the MSCI World Index (measured in sterling terms on a total return
basis) fall by 13.7%. However, the defensive qualities of the Healthcare sector
helped it to achieve a substantial outperformance of the wider market with the
Company's benchmark, the MSCI World Healthcare Index (measured in sterling
terms on a total return basis) falling by just 0.3% over the same period. I am
pleased to report that the Company's net asset value total return of -0.9% was
broadly in line with its benchmark with the Company's share price performing
significantly better with a total return of +3.1% over the same period. The
average discount of the Company's share price to the diluted net asset value
per share during the period was 6.0%, in line with the Board's stated target.
Further information on investment performance and the outlook for the Company
is given in the Review of Investments.
Capital
The Board regularly reviews its discount policy where it seeks to maintain the
discount to the net asset value per share at which the Company's shares are
quoted on the London Stock Exchange at no greater than 6% over the long-term,
subject to adverse market conditions. There can be no guarantee, however, that
the Board's discount policy will always be successful or capable of being
implemented. I am pleased to report that due to continued demand for the
Company's shares only 25,000 were repurchased for treasury during the period
and to the date of this report, at a cost of £174,000 (including expenses),
compared to 358,607 shares, at a cost of c.£2,500,000, in the previous six
months. This perhaps reflects the performance of the Healthcare sector relative
to wider markets.
On 28 July 2011, a total of 358,607 shares held in treasury were cancelled. The
Board has confirmed that any shares held in treasury will be cancelled on or as
soon as practicable following the Annual General Meeting each year.
During the period and to the date of this report a total of 380,652
subscription shares were exercised at an exercise price of 638p per share
raising c.£2,400,000 of additional funds for the Company. The next subscription
date will be 31 January 2012 at a subscription price of 638p per share.
Revenue and Dividends
The revenue return for the period was £3,314,000 (six months ended 30 September
2010: return of £2,196,000) and no interim dividend is declared (six months
ended 30 September 2010: nil).
The Board expects that, on the basis of revenue estimates for the full year,
the Company's dividend will be greater than in the previous year. The Board
reminds shareholders that it remains the Company's policy to pursue capital
growth for shareholders and to pay dividends to the extent required to maintain
investment trust status. The amount of the dividend for the full year to 31
March 2012 is expected to be announced in May 2012.
Outlook
While previous falls in equity markets could be explained by overvaluation, the
issue this time appears to be the market's faith, or lack of it, in the
governments that underpin our economies. The Healthcare sector, however,
continues to play to its strengths as investors are increasingly looking for
high quality, defensive, and in some cases dividend yielding stocks.
On a global basis, China, India and Brazil are predicted to be the fastest
growing among developing countries. Also, an ageing population, the growth of
chronic diseases, increased levels of merger and acquisition activity and an
acceleration of new product approvals will continue to be major drivers for the
growth in the sector. Your Board believes that we are well positioned to take
advantage of this encouraging outlook for Healthcare.
Although we will continue to take advantage of high yielding securities, where
they can be purchased at attractive prices, our focus remains on the selection
of stocks with strong prospects for capital enhancement and we continue to
believe that the long term investor in our sector will be well rewarded.
Martin Smith
Chairman
Review of Investments
Performance
During the half year global equity markets experienced extreme turmoil and
broad market performance in the period was characterised by an August sell off
as concerns over sovereign defaults and weak economic data swept across the
markets worldwide, and equity markets remained weak into the end of September.
The MSCI World Total Return Index was down 13.7% in sterling term in the
period. Healthcare stocks performed significantly better than the broader
market, partly reflecting their defensive nature, as the MSCI World Healthcare
Total Return Index declined only 0.3%.
The Company outperformed the broader market and in line with the healthcare
specific index, with a share price total return of +3.1% and a net asset value
total return of -0.9%. The primary drivers of this outperformance included both
stock specific factors and healthcare sub-sector allocation decisions. The
central investment focus remains on biotechnology companies, selective exposure
to pharmaceutical firms, and diversification across other healthcare sectors
with compelling growth rates (such as generic drug companies), attractive
valuations (such as specialty pharmaceutical companies), or both (such as
managed care organisations).
With respect to biopharmaceutical companies, our most compelling investments
often involve a new product launch. If successful, a product launch can lead to
dramatic revenue and earnings growth, valuation expansion, and strong share
price performance. This is exemplified by the period's top contributor to the
Company's performance, the Japanese specialty pharmaceutical company,
Mitsubishi Tanabe Pharma. The company is one year into the launch by its
licensee of the first ever oral therapy for the treatment of multiple
sclerosis. The product, known as Gilenya (fingolimod), was licensed to Novartis
for U.S. and European markets. Recently, Novartis management described the
roll-out of Gilenya as "one of the best specialty care launches ever in the
industry". Mitsubishi Tanabe Pharma enjoys a double-digit royalty on sales of
Gilenya by Novartis, a product we expect to reach mega-blockbuster status. The
company has several other new product opportunities, including a novel therapy
for the treatment of hepatitis C, for which the company owns the rights for
both the Japanese and Chinese markets (notable, because China has the largest
prevalence of hepatitis C in the world). Mitsubishi Tanabe Pharma also
discovered a novel, oral treatment for diabetes, called canagliflozin. This
drug has been licensed to Johnson and Johnson for global development. Depending
on the outcome of ongoing clinical trials, this drug may have a best-in-class
profile and be the next blockbuster to emerge from the company's pipeline. As
these new compounds gain additional visibility with investors and begin to
generate revenues, we expect strong share price performance to continue. This
stock remains a core holding.
Another new product launch story comes from the company Pharmasset Inc. This
company has developed a breakthrough therapy for the treatment of hepatitis C.
Recently, this company, based in New Jersey, unveiled additional clinical data
for their lead drug, known as PSI-7977, which is now considered to be the
best-in-class compared to all similar therapies. The successful 2011 launch of
a different drug in this disease area, Incivek from Vertex Pharmaceuticals, has
validated the hepatitis C market as multi-billion dollar opportunity with low
barriers to both treatment and reimbursement for innovative new therapies. As
enthusiasm and visibility rises for PSI-7977, Pharmasset's share price
performance should remain strong. We also view Pharmasset Inc. as a high
probability acquisition target. The stock remains a core holding.
In the large capitalisation pharmaceutical sector, two top contributors to
performance this period exemplify the importance of stock selectivity in this
area. The first is Bristol-Myers Squibb, a company that we believe to possess
the best pipeline in the industry, as exemplified by their drug Yervoy
(ipilimumab), a novel "immuno-therapy" for melanoma that has seen a successful
commercial launch over the past six months. Development of this drug in other
tumor types continues. Nulojix (belatacept), a first-in-class therapy for
transplant rejection, was approved by the U.S. Food and Drug Administration
(FDA). Eliquis (apixaban), a drug for stroke prevention, was shown to have
superior efficacy and safety compared to the current gold standard of care, and
will be filed for approval later this year. Dapagliflozin, another drug from
Bristol-Myers Squibb, is a best-in-class treatment for diabetes already under
regulatory review at the FDA. This rich pipeline of new drug candidates is a
sign of unparalleled research and development productivity at Bristol-Myers
Squibb. While many investors are concerned over the company's "patent cliff" in
2012 and 2013 (i.e., a large number of drugs with patent expirations during
those years), we believe the new product growth potential will overwhelm losses
from the patent expirations. Despite some opportunistic trimming, the stock
remains a core holding.
The second large capitalisation pharmaceutical company that generated strong
performance is Roche, a company that experienced a plethora of disappointments
in 2010 and early 2011, leading to a significant decline in stock price. At
those levels we took a contrarian perspective and viewed the stock as
compelling due to its attractive valuation, despite the setbacks. Subsequently,
the stock rebounded off its lows and became a top performance contributor in
the period. Beyond its attractive valuation, we view the pipeline as
undervalued by investors, and we are also less concerned than others about
potential competition for Roche's impressive portfolio of oncology drugs from
"bio-similar" generic competitors. Thus, the stock remains in the portfolio.
Rounding out the top five positive contributors is Sawai Pharmaceutical, a
Japanese generic drug maker. Our long-term investment thesis for Sawai remains
intact: government-backed legislation for increased generic drug usage in
Japan, the most underpenetrated generic drug market in the world, will lead to
accelerating revenues and earnings for Sawai and other generic drug companies
in Japan. Sawai has benefitted handsomely from this changing market dynamic in
recent years. While some of the "low hanging fruit" of generic drug growth has
now been picked, the remainder of 2011 should be full of news flow about the
next round of pro-generic drug government initiatives to be launched in the
coming years.
Performance detractors during the period were as diverse as the contributors.
The largest detractor to performance in the period was Human Genome Sciences
Inc., an emerging biotechnology company in the midst of a new product launch.
In March of 2011, the company, with partner GlaxoSmithKline, launched Benlysta
(belimumab), a new biologic for the treatment of Lupus, a long-term autoimmune
disorder that affects the skin, joints, kidneys, brain, and other organs.
Expectations for the product were high at approval at the company given that it
had been decades since a new therapy had approved for this indication. When
early uptake was sluggish, the stock fell in sympathy when another
biotechnology company with a new product launch (albeit in a totally different
therapeutic category) reported disappointing sales in August. The market was
suddenly wary of new biological launches. We view the stock as attractively
priced.
Pfizer, like most of its pharmaceutical peers, was an underperformer during the
period. The stock had enjoyed tremendous momentum beginning with the
appointment of a new CEO, Ian Read, at the end of 2010. His vision for a "new
Pfizer" involved breaking up the company, which resonated well with investors
through the first half of 2011. However, when he began to backtrack on this
reorganisation, investor sentiment turned decidedly negative and the stock
began to decline, ultimately selling off further during the market turmoil of
August/September. While a negative contributor to absolute performance during
the period, the Company was actually underweight relative to its benchmark.
Thus this position contributed to positive relative returns versus the
benchmark.
Sector Developments
In 2010, the Obama Administration oversaw the passage of the Patient Protection
and Affordable Care Act (PPACA) into law, changing multiple aspects of the
private and public health insurance systems in the U.S. The principal goal of
the legislation is to provide additional healthcare coverage to individuals who
currently do not have access to or the ability to afford health insurance. We
hailed the passage of the law as a positive for the healthcare industry for two
reasons. First, it removed an uncertainty from the sector. Second, it will
provide coverage for an additional 30 million people, primarily through the
private sector, which we expect to increase consumption of drugs and services
in the future.
However, the new coverage will not be available until 2014 but monies to
partially offset the cost were required immediately. Thus, industry players
have been negatively impacted, primarily large drug and biotechnology
companies, as a result of required increased rebates to Medicaid, expanded drug
coverage for Medicare, and through an annual industry fee. Medical device
companies have been similarly affected by an excise tax. Without any
incremental revenues to offset these new costs, the net immediate impact of
healthcare reform has created a roughly 1-3% headwind to earnings for 2011.
The PPACA has also created, unexpectedly and unintentionally, a new overhang on
parts of the healthcare industry, primarily the private health insurers.
Specifically, the PPACA has been besieged with constitutional challenges. It is
uncertain if the law or parts of the law will remain in effect. The crux of the
argument against the reform is the belief by some that fining individuals for
failing to buy insurance is not within the scope of Congress's taxing powers
and is thus unconstitutional. We expect the Supreme Court of the United States
to rule on the matter in 2012. Ultimately, we believe the law will be upheld in
its entirety and repeal is unlikely, but the froth of uncertainty could be
troublesome for the sector.
Additional pricing pressures across Europe relating to the sovereign debt
crisis have created another headwind. The companies most exposed are
multi-national players and regional drug makers. In the U.S., the debt crisis
and general economic malaise has generated uncertainty for the healthcare
sector due to the formation of the "Joint Select Committee on Deficit
Reduction" or the so-called "Super committee". The group of 12 consists equally
of House and Senate members and Democrats and Republicans and is charged with
finding additional cost reductions aimed at reducing the U.S. federal deficit.
Most concerning is the potential of the committee to not fully agree on
reductions and hit gridlock, which will trigger a sequestration of $1.2
trillion, starting on January 2, 2013, unless Congress changes the law. Thus,
if the committee fails to agree on a package or the full Congress fails to pass
it, this "trigger mechanism" of automatic spending cuts, would result in a risk
of new discounts and/or rebates for drugs and devices sold to Medicare and
Medicaid. This would be a blow to the industry.
With respect to the FDA, there has been a welcome acceleration in the pace of
new product approvals. So far this year, 21 so-called "New Chemical Entities"
have been approved, compared to just 15 for all of calendar year 2010. New
Chemical Entities are innovative pharmaceutical drugs (i.e., not generic drugs,
biologics, or re-formulations). We expect another half-dozen or so such
approvals, for a full year total of 26, an increase of over 70% compared to the
prior year. Similarly, with respect to new biological therapies, the FDA has
already approved six, equaling the total from all of last year. The FDA has
even turned more constructive on cardiovascular, diabetes and obesity drugs,
which have been difficult areas in recent years to garner approvals.
The period experienced a lower than anticipated amount of mergers and
acquisition ("M&A") activity in the healthcare sector. We do not think this a
break in trend; rather, it is likely a product of a turbulent market. But one
positive outcome from the market declines is that M&A activity is likely to
reaccelerate. Acquisition targets have become dramatically more affordable for
large companies, and our conversations with business development teams and
intermediaries suggest a significant increase in active M&A projects.
Strategy Review
The Company's investment mandate remains to invest broadly in the most
compelling opportunities across all areas of healthcare, from pharmaceuticals
to biotechnology, medical device and healthcare services companies. We believe
this broad mandate allows the Company to seek attractive returns while
potentially lowering volatility relative to more concentrated investment
approaches.
Overall, we have continued our strategy of being highly selective in large
capitalisation pharmaceutical stocks as the headwinds for this sub-sector
remain challenging for most, however a few exceptional companies with new
product flow and contrarian deep value opportunities do exist. While our
enthusiasm for biotechnology stocks in general remains high, we have become
less sanguine about several of the large capitalisation biotechnology stocks,
preferring smaller biotechnology stocks in many cases. Growth for large
capitalisation biotechnology stocks has become increasingly challenging, as the
headwinds impacting large pharmaceutical companies have started to impact the
large biotechnology companies also. Conversely, we see emerging biotechnology
companies as critical sources of innovation, high growth, and significant M&A
interest. Our relative positioning in these sub-sectors reflects this view.
Additionally, we see resurgent growth in generic drug companies as a result of
patent expirations on a number of drugs and also opportunities in emerging
markets. Specialty pharmaceutical companies are an important segment for the
Company where low valuations, quality companies, fewer headwinds and niche
therapeutic opportunities form the basis of our excess allocation.
We also perceive managed care companies as attractive, in particular health
maintenance organisations (HMOs), which are trading at historically low
valuations. These stocks are not riskless given political uncertainty, but we
believe the medium-term landscape for them will remain positive.
The medical device sector also offers low valuations, but negative utilisation
trends and poor pricing power constrains our enthusiasm for this sector, which
is also suffering from a dearth of innovation. We remain underweight the
medical device sector in general.
Overall, uncertainty appears to be the outlook for the markets for the
remainder of 2011. Macro concerns over global economies persist and the
domestic employment situation in the US continues to be debated. We are
optimistic that healthcare will remain defensive in such an environment. And
while uncertainty is an overhang for healthcare, it is so but to a much lesser
extent. Moreover, as the Republican Party continues to make gains in the House
and Senate, a potential tailwind looms for healthcare as we enter a new
election cycle in the U.S. in the coming year.
Samuel D Isaly
OrbiMed Capital LLC
Investment Manager
Contribution by Investment - Excluding Options
Top and bottom five contributors to net asset value performance over the six
months to 30 September 2011
Contribution Contribution
per Share (p)
*
for the six
months
£'000
Top Five contributors
Mitsubishi Tanabe Pharma 2,894 6.7
Pharmasset 2,534 5.9
Bristol-Myers Squibb 2,509 5.8
Roche 2,501 5.8
Sawai Pharmaceutical 2,111 4.9
12,549 29.1
Bottom Five contributors
Human Genome Sciences (2,655) (6.1)
Pfizer (2,446) (5.7)
Warner Chilcott (2,340) (5.4)
Sinopharm (2,276) (5.3)
Express Scripts (2,016) (4.7)
(11,733) (27.2)
*based on the weighted average number of shares in issue during the six months
ended 30 September 2011 (43,265,414)
Source: Frostrow Capital LLP
Income Statement
for the six months ended 30 September 2011
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 September 2011 30 September 2010 31 March 2011
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Return Return £'000 Return Return £'000 Return Return £'000
£'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains - (6,980) (6,980) - (3,790) (3,790) - 5,477 5,477
on investments
held at fair
value through
profit or loss
Exchange - (2,164) (2,164) - (40) (40) - 710 710
(losses)/gains
on currency
balances
Income from 4,274 - 4,274 3,059 - 3,059 9,125 - 9,125
investments
held at fair
value through
profit or loss
(note 2)
Investment (78) (2,398) (2,476) (72) (3,264) (3,336) (147) (2,658) (2,805)
management,
management and
performance
fees (note 3)
Other expenses (262) - (262) (304) - (304) (586) - (586)
Net return/ 3,934 (11,542) (7,608) 2,683 (7,094) (4,411) 8,392 3,529 11,921
(loss) before
finance
charges and
taxation
Finance (9) (166) (175) (4) (78) (82) (13) (247) (260)
charges
Net return/ 3,925 (11,708) (7,783) 2,679 (7,172) (4,493) 8,379 3,282 11,661
(loss) before
taxation
Taxation on (611) 235 (376) (483) 166 (317) (1,224) 239 (985)
ordinary
activities
Net return/ 3,314 (11,473) (8,159) 2,196 (7,006) (4,810) 7,155 3,521 10,676
(loss) after
taxation
Return/(loss) 7.7p (26.6)p (18.9)p 5.0p (16.1)p (11.1)p 16.5p 8.1p 24.6p
per share -
basic (note 4)
Return/(loss) 7.5p (25.9)p (18.4)p 5.0p (16.1)p (11.1)p 16.3p 8.1p 24.4p
per share -
diluted (note
4)
The "Total" column of this statement is the Income Statement of the Company.
The "Revenue" and "Capital" columns are supplementary to this and are prepared
under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing
operations.
The Company has no recognised gains and losses other than those shown above and
therefore no separate statement of total recognised gains and losses have been
presented.
No operations were acquired or discontinued during the period.
Reconciliation of Movements in Shareholders' Funds
(Unaudited) Ordinary Subscription Share Capital Capital Revenue Total £
share premium reserve redemption reserve '000
Six months ended share account £'000 reserve £ £'000
capital capital £'000 '000
30 September £'000
2011 £'000
At 31 March 2011 10,875 82 181,395 135,319 6,978 10,132 344,781
Net (loss)/ - - - (11,473) - 3,314 (8,159)
return from
ordinary
activities after
taxation
Dividend paid in - - - - - (6,473) (6,473)
respect of year
ended 31 March
2011
Subscription 93 (4) 2,267 4 - - 2,360
shares exercised
for ordinary
shares
Shares purchased (90) - - (174) 90 - (174)
to be held in
treasury and
treasury shares
cancelled
At 30 September 10,878 78 183,662 123,676 7,068 6,973 332,335
2011
(Unaudited) Ordinary Subscription Share Capital Capital Revenue Total £
share premium reserve redemption reserve '000
Six months ended share account £'000 reserve £ £'000
capital capital £'000 '000
30 September £'000
2010 £'000
At 31 March 2010 12,644 90 176,648 145,160 5,009 6,630 346,181
Net (loss)/ - - - (7,006) - 2,196 (4,810)
return from
ordinary
activities after
taxation
Dividend paid in - - - - - (3,653) (3,653)
respect of year
ended 31 March
2010
Subscription 172 (7) 4,045 7 - - 4,217
shares issued
Purchase of (1,969) - - (10,906) 1,969 - (10,906)
Company's own
shares including
expenses
At 30 September 10,847 83 180,693 127,255 6,978 5,173 331,029
2010
(Audited) Ordinary Subscription Share Capital Capital Revenue Total £
share premium reserve redemption reserve '000
Year ended share account £'000 reserve £ £'000
capital capital £'000 '000
31 March 2011 £'000
£'000
At 31 March 2010 12,644 90 176,648 145,160 5,009 6,630 346,181
Net return from - - - 3,521 - 7,155 10,676
ordinary
activities after
taxation
Dividends paid - - - - - (3,653) (3,653)
in respect of
year ended 31
March 2010
Subscription 200 (8) 4,747 8 - - 4,947
shares exercised
for ordinary
shares
Shares purchased (1,969) - - (13,370) 1,969 - (13,370)
to be held in
treasury and
treasury shares
cancelled
At 31 March 2011 10,875 82 181,395 135,319 6,978 10,132 344,781
Balance Sheet
as at 30 September 2011
(Unaudited) (Unaudited) (Audited)
30 September 30 September 31 March
2011 2010
2011
£'000 £'000
£'000
Fixed assets
Investments held at fair value through 380,978 398,645 385,869
profit or loss
Derivative - OTC swaps 7,141 - -
388,119 398,645 385,869
Current assets
Debtors 6,041 1,251 6,138
Derivative - financial instruments - 994 2,223
6,041 2,245 8,361
Current liabilities
Creditors: amounts falling due within (10,231) (31,320) (1,341)
one year
(424) - (2,223)
Derivative - financial instruments
(51,170) (38,541) (45,885)
Bank overdraft
(61,825) (69,861) (49,449)
Net current liabilities (55,784) (67,616) (41,088)
Total net assets 332,335 331,029 344,781
Capital and reserves
Ordinary share capital 10,878 10,847 10,875
Subscription share capital 78 83 82
Share premium account 183,662 180,693 181,395
Capital reserve 123,676 127,255 135,319
Capital redemption reserve 7,068 6,978 6,978
Revenue reserve 6,973 5,173 10,132
Total shareholders' funds 332,335 331,029 344,781
Net asset value per share - basic (note 764.2p 763.0p 799.2p
5)
Net asset value per share - diluted 745.0p 742.9p 773.5p
(note 5)
Net asset value per share - fully 745.0p 742.9p 772.8p
diluted (note 5)
Cash Flow Statement
for the six months ended 30 September 2011
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended
ended
30 September 30 September
31 March
2011 2010
2011
£'000 £'000
£'000
Net cash (outflow)/inflow from (654) 533 3,268
operating activities
Servicing of finance
Interest paid (175) (82) (260)
Taxation (69) 182 (202)
Taxation (suffered)/recovered
Financial investment
Purchases of investments and (171,355) (116,763) (274,348)
derivatives
Sales of investments and 173,419 124,037 273,089
derivatives
Net cash inflow/(outflow) from 2,064 7,274 (1,259)
financial investment
Equity dividends paid (6,473) (3,653) (3,653)
Net cash (outflow)/inflow before (5,307) 4,254 (2,106)
financing
Financing
Repurchase of own shares (174) (10,910) (13,374)
Subscription shares exercised for 2,360 4,217 4,947
ordinary shares
Net cash inflow/(outflow) from 2,186 (6,693) (8,427)
financing
Decrease in cash (3,121) (2,439) (10,533)
Reconciliation of net cash flow
movements to net debt
Increase in net debt resulting from (3,121) (2,439) (10,533)
cash flows
Exchange movements (2,164) (40) 710
Movement in net debt in the period (5,285) (2,479) (9,823)
Net debt at beginning of period (45,885) (36,062) (36,062)
Net debt at period end (51,170) (38,541) (45,885)
Notes to the Financial Statements
1. Accounting Policies
The condensed financial statements have been prepared under the historical cost
convention, modified to include the valuation of investments at fair value and
in accordance with United Kingdom Generally Accepted Accounting Practice and
with the Statement of Recommended Practice `Financial Statements of Investment
Trust Companies and Venture Capital Trusts' dated January 2009. All of the
Company's operations are of a continuing nature.
The same accounting policies used for the year ended 31 March 2011 have been
applied.
2. Income
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 September 30 September 31 March
2011 2010 2011
£'000 £'000 £'000
Investment income 4,273 3,059 9,118
Interest receivable 1 - 7
Total 4,274 3,059 9,125
3. Investment Management, Management and Performance Fees
4.
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 September 30 September 31 March
2011 2010 2011
£'000 £'000 £'000
Investment management fee 1,138 1,044 2,137
Management fee 429 397 803
Performance fee charged/ 909 1,895 (135)
(written back) in the period
/year*
Total 2,476 3,336 2,805
*In accordance with the performance fee arrangements described on page 18 of
the 2011 annual report, a performance fee of £nil was accrued at 30 September
2011 (2010:£4,654,000).
During the period, £3,533,000 was paid which related to a performance fee which
crystallised and became payable at 31 March and 30 June 2011.
Notes to the Financial Statements (continued)
4. Return/(Loss) Per Share
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended 30 ended 30
September 2011 September 2010 31 March 2011
£'000 £'000 £'000
The return/(loss) per share is
based on the following figures:
Revenue return 3,314 2,196 7,155
Capital (loss)/return (11,473) (7,006) 3,521
Total (loss)/return (8,159) (4,810) 10,676
Weighted average number of 43,265,414 43,497,098 43,342,727
shares in issue for the period -
basic
Revenue return per share 7.7p 5.0p 16.5p
Capital (loss)/return per share (26.6)p (16.1)p 8.1p
Total (loss)/return per share (18.9)p (11.1)p 24.6p
Weighted average number of 44,253,028 43,497,098 43,776,264
shares in issue for the period -
diluted
Revenue return per share 7.5p *5.0p 16.3p
Capital (loss)/return per share (25.9)p *(16.1)p 8.1p
Total (loss)/return per share - (18.4)p *(11.1)p 24.4p
diluted
* dilution not applicable
5. Net Asset Value Per Share
The net asset value per share is based on the assets attributable to equity
shareholders of £332,335,000 (30 September 2010: £331,029,000 and 31 March
2011: £344,781,000) and on the number of shares in issue at the period end of
43,486,450 (excluding 25,000 shares held in treasury) (30 September 2010:
43,385,916 and 31 March 2011: 43,141,611).
The diluted net asset value per share assumes that the 7,821,273 subscription
shares were exercised at 638p resulting in assets attributable to ordinary
shareholders of £382,235,000 and on 51,307,723 shares (30 September 2010:
384,018,000 and 51,691,330 shares and 31 March 2011: £397,040,000 and
51,332,723 shares).
The fully diluted net asset value per share for subscription shares and
treasury shares assumes that the 7,821,273 subscription shares were exercised
at 638p and 25,000 treasury shares were sold back to the market at 693p (the
prevailing share price as at 30 September 2011) resulting in assets
attributable to ordinary shareholders of £382,408,000 (30 September 2010:
384,018,000: 31 March 2011: £399,482,000) and on 51,332,723 shares (30
September 2010: 51,691,330 shares: 31 March 2011: 51,691,330 shares).
Notes to the Financial Statements (continued)
6. Transaction Costs
Purchase transaction costs for the six months ended 30 September 2011 were £
282,000 (six months ended 30 September 2010: £319,000; year ended 31 March
2011: £507,000).
Sales transaction costs for the six months ended 30 September 2011 were £
291,000 (six months ended 30 September 2010: £229,000; year ended 31 March
2011: £467,000).
These costs comprise mainly commission.
7. Subscription Shares
During the period ended 30 September 2011 a total of 369,839 subscription
shares were exercised for a total consideration of £2,359,573. At the period
end the Company's share capital included 7,821,273 subscription shares, which
are currently exercisable at 638p per share.
8. Publication of Non Statutory Accounts
The financial information contained in this preliminary announcement does not
constitute statutory accounts as defined in sections 434-436 of the Companies
Act 2006. The financial information for the half years ended 30 September 2011
and 30 September 2010 has not been audited or reviewed by the auditors.
The information for the year ended 31 March 2011 has been extracted from the
latest published audited financial statements. The audited financial statements
for the year ended 31 March 2011 have been filed with the Registrar of
Companies. The report of the auditors on those accounts was unqualified, did
not include a reference to any matters to which the auditors drew attention by
way of emphasis without qualifying the report, and did not contain statements
under section 498 of the Companies Act 2006.
Earnings for the first six months should not be taken as a guide to the results
for the full year.
Frostrow Capital LLP
Company Secretary
18 November 2011
Monday, 13th May 2024
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