TIDMPCGH TIDMPGHZ
RNS Number : 1749Z
Polar Capital Global Health Tst PLC
12 May 2023
POLAR CAPITAL GLOBAL HEALTHCARE TRUST PLC
(the "Company")
Unaudited Results Announcement for the Six Months to 31 March
2023
LEI: 549300YV7J2TWLE7PV84 12 May 2023
HIGHLIGHTS IN DETAIL
For the six For the year
months to to
31 March 30 September
Performance 2023 2022
-------------------------------------------------- ----------- -------------
Net asset value per Ordinary share (total return)
(note 1)* +2.09% 5.59%
Benchmark index
MSCI ACWI/Healthcare Index (total return in
sterling with dividends reinvested) +0.40% 6.93%
-------------------------------------------------- ----------- -------------
Since restructuring on 20 June 2017
-------------------------------------------------- ----------- -------------
Net asset value per Ordinary share (total return)
(note 2)* +64.15% 60.79%
Benchmark index total return since restructuring +64.71% 64.05%
-------------------------------------------------- ----------- -------------
Expenses*
-------------------------------------------------- ----------- -------------
Ongoing charges (note 3) 0.86% 0.84%
-------------------------------------------------- ----------- -------------
Financials (Audited)
(Unaudited) As at
As at 30 September Change
31 March 2023 2022
------------------------------------- -------------- -------------- --------
Total net assets (Group and Company) GBP411,952,000 GBP404,833,000 1.8%
Net asset value per Ordinary share 339.70p 333.83p 1.8%
Net asset value per ZDP share 118.64p 116.91p 1.5%
Price per Ordinary share 317.00p 315.00p 0.6%
Discount per Ordinary share 6.7% 5.6%
Price per ZDP share 114.00p 114.00p -
Net gearing 8.98% 7.41%
Ordinary shares in issue (excluding
those held in treasury) 121,270,000 121,270,000 -
Ordinary shares held in treasury 2,879,256 2,879,256 -
ZDP shares in issue 32,128,437 32,128,437 -
------------------------------------- -------------- -------------- --------
Amount
Dividends paid and declared per Ordinary Record Ex-Dividend Declared
in the period: Pay Date share Date Date date
The Company has paid the
following dividend relating
to the financial year 28 February 3 February 2 February 9 December
ended 30 September 2022: 2023 1.10p 2023 2023 2022
----------- ------------- ---------- ----------- ----------
Dividends for the current financial year ending 30 September 2023,
if declared, will be paid in August 2023 and February 2024.
All data sourced from Polar Capital LLP/HSBC.
Note 1 NAV total return is calculated as the change in NAV from the start of the period, assuming
that dividends paid to shareholders are reinvested on the payment date in Ordinary shares
at their net asset value.
Note 2 The Company's portfolio was restructured on 20 June 2017. The total return NAV performance
since restructuring is calculated by reinvesting the dividends in the assets of the Group
and Company from the relevant payment date.
Note 3 Ongoing charges represents the total expenses of the Company, excluding finance costs, transaction
costs, tax and nonrecurring expenses expressed as a percentage of the average daily net asset
value, in accordance with AIC guidance issued in May 2012. The ongoing charges figure as at
31 March 2023 is for the six month period from 30 September 2022 and is annualised for comparison
with the full year's calculation as at 30 September 2022.
*See Alternative Performance Measures below.
For further information Tracey Lago FCG Tel: 020 7227 2700
please contact: Company Secretary
Polar Capital Global Healthcare
Trust Plc
INTERIM MANAGEMENT REPORT
CHAIR'S STATEMENT
On behalf of the Board, I am pleased to provide to you the
Company's Half Year Report for the six-months to 31 March 2023.
PERFORMANCE AND OUTLOOK
Despite a continuing difficult market and economic backdrop, the
Company's NAV improved by 2.09% over the period under review,
outperforming its benchmark by 1.69%. The discount moved out
slightly from 5.64% to finish the period at 6.68%, resulting in a
modest increase in the share price. The outperformance over the
benchmark was driven by strong stock selection in the larger
capitalisation stocks, positive contributions from all major
geographical regions, as well as good sub sector allocation. The
key investment themes of increased utilisation, delivery disruption
and consolidation also appear to be gathering momentum, with
utilisation especially positive. Looking forward, we believe the
healthcare sector continues to be an attractive place to invest,
given its defensive characteristics, attractive valuations, and
opportunities for dynamic growth.
Further details are provided in the Investment Manager's report
below.
THE BOARD
There have been no changes to the membership of the Board in the
six months to 31 March 2023. The Directors' biographical details
are available on the Company's website and are provided in the
Annual Report.
As referenced in my Chair's statement in the Annual Report for
the year ended 30 September 2022, the Board is aware of the FCA's
Diversity and Inclusion Policy and notes that its current
composition does not meet the recommended requirements. We will
continue to keep this under consideration as part of the Board's
future succession plans and ahead of the Company's reconstruction.
Full disclosures will be provided in the next Annual Report as
required under the FCA's policy.
As a Board, we do recognise the value of diversity in the role
of governance, and we believe diversity can take many forms,
including desirable skill sets, background, and experience, as well
as gender and ethnicity. During the period under review, we
conducted a selection and interview process in collaboration with
'Board Apprentice', a not-for-profit organisation dedicated to
increasing diversity on boards by widening the pool of
non-executive, board-ready candidates, to identify a candidate.
Just after the period end, we welcomed our first board apprentice
who will be with us for a period of c.12 months. Our Board
apprentice will be invited to attend all Board and Committee
meetings as an observer and will be mentored through the process by
a Board member. Further details will be shared in the next Annual
Report.
PRINCIPAL RISKS AND UNCERTAINTIES
A detailed explanation of the Company's principal risks and
uncertainties, and how they are managed through mitigation and
controls, can be found on pages 34 to 36 of the Annual Report for
the year ended 30 September 2022. The principal risks and
uncertainties are categorised into four main areas: Portfolio
Management, Operational Risk, Regulatory Risk and Economic/Market
Risk. The Directors consider that, overall, the principal risks and
uncertainties faced by the Company for the remaining six months of
the financial year have not changed from those outlined within the
Annual Report.
Further detail on the Company's performance and portfolio can be
found in the Investment Manager's Report.
GOING CONCERN
As detailed in the notes to the financial statements, the Board
continually monitors the financial position of the Group and
Company and has undertaken an assessment in determining the
appropriateness of preparing the Financial Statements on a going
concern basis. Having carried out this assessment, the Directors
are satisfied that it is appropriate to continue to adopt the going
concern basis in preparing the financial results of the Group and
Company. In reaching this conclusion, the Board also considered the
Company's performance and its assessment of any material
uncertainties and events that might cast significant doubt upon the
Group and Company's ability to continue as a going concern.
RELATED PARTY TRANSACTIONS
In accordance with DTR 4.2.8R, there have been no new related
party transactions during the six-month period to 31 March 2023.
There have been no changes in any related party transaction
described in the last Annual Report that could have a material
effect on the financial position or performance of the Group or
Company in the first six months of the current financial year or to
the date of this report.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors of Polar Capital Global Healthcare Trust plc, who
are listed in the Shareholder Information Section, confirm to the
best of their knowledge that:
-- The condensed set of financial statements has been prepared
in accordance with UK-adopted International Accounting Standard 34
and gives a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company as at 31 March
2023; and
-- The Interim Management Report includes a fair review of the
information required by the Disclosure Guidance and Transparency
Rules 4.2.7R and 4.2.8R.
The half year financial report for the six-month period to 31
March 2023 has not been audited or reviewed by the Auditors. The
half year financial report was approved by the Board on 11 May
2023.
On behalf of the Board
Lisa Arnold
Chair
INVESTMENT MANAGER'S REVIEW
Executive summary
Over the six-month period to the end of March 2023, the
Company's NAV returned 2.09% versus 0.40% for the benchmark (MSCI
AC World Daily Total Return Net Health Care Index), both in
sterling terms. While modest in terms of absolute performance, the
period under review did offer stark contrasts in terms of market
dynamics that have not been easy to navigate. The first three
months were very much risk-off, with the market focused on high
levels of inflation and the threat of further interest rate
increases. That backdrop very much favoured large-capitalisation
stocks with defensive characteristics, with healthcare a
beneficiary. Come January 2023, however, the market's appetite for
risk switched materially with a significant rotation into higher
beta and more cyclical stocks, a switch that came at the expense of
late 2022's beneficiaries, including healthcare, due to economic
growth coming in better than expected. However, following the
Silicon Valley Bank and Credit Suisse meltdowns in March, fears of
slowing economic growth and a potential recession returned, driving
a positive turn in healthcare's relative performance, a trend that
could persist through the remainder of 2023.
Reflecting on the period, key drivers of outperformance were
strong stock selection in the large-capitalisation stocks,
consistently positive contributions across the majority of
geographies and good subsector positioning. More importantly, our
key investment themes of increased utilisation, delivery disruption
and consolidation appear to be gathering momentum, with utilisation
especially positive. With conviction in the industry's key growth
drivers increasing, we are optimistic that the healthcare sector
will deliver attractive revenue and earnings growth and could be a
very rewarding place to invest in the coming months and years.
Performance: 30 September 2022 to 31 March 2023
From 30 September 2022 to the end of March 2023, the Company's
NAV returned 2.09% versus 0.40% for the benchmark. The fourth
quarter of calendar year 2022 was very much characterised by a
risk-off market, with investors still worried about the risk of a
recession and high levels of inflation, thus favouring
large-capitalisation stocks with high gross and operating margins.
This trend reversed sharply in the first two months of 2023 when
small-capitalisation stocks and the more speculative pockets of the
market performed strongly. In another twist, March saw, once again,
a rotation into large-capitalisation companies, however this time
most of the buying activity was in less defensive sectors such as
information technology and communication services. Given the
Company's higher exposure to small and medium-capitalisation stocks
than its benchmark, the allocation effect was negative during the
period under review. However, strong stock-picking, particularly in
the large-capitalisation band, more than offset the poor allocation
effect.
Market capitalisation 31 March 2023 30 September 2022
at
Large (>US$10bn) 77.6% 78.5%
-------------- ------------------
Medium(US$5bn- US$10bn) 16.1% 16.0%
-------------- ------------------
Small (<US$5bn) 15.2% 12.8%
-------------- ------------------
Other net liabilities (8.9%) (7.3%)
-------------- ------------------
Source: Polar Capital as at 31 March 2023, average calculated
over the reporting period
From a geographical perspective, Europe was the largest
contributor, with the overweight in this region resulting in
positive allocation and currency effects. Japan was the second
strongest region, thanks to good selection. North America also
contributed favourably with good allocation (underweight) and stock
picking. All other regions were also positive, except for the
Middle East and Africa which was a marginal detractor. Cash and
others were a drag on performance. The level of gearing was
relatively stable during the period under review, although it was
increased to 8.98% in the final month. Net gearing at the end of
September 2022 was 7.41% and it was 8.98% by the end of March
2023.
In terms of subsectors, positive attribution was due to
allocation, with the most positive impact coming from healthcare
services. Also positive were healthcare equipment, managed care,
healthcare supplies and healthcare facilities. The remaining
sectors also contributed favourably, with the exception of
biotechnology where allocation and stock selection offset each
other, and healthcare distributors where stock-picking was a
negative contributor.
Stocks that contributed positively to the relative performance
over the period included Zealand Pharma, Roche Holding, Seagen,
Lonza Group and HCA Healthcare.
Zealand Pharma, a Danish biotechnology company, posted a strong
performance following positive phase two data for glepaglutide, a
peptide-based candidate for the treatment of short bowel disease.
There was also increased enthusiasm ahead of key trial results for
Zealand Pharma's pipeline of assets addressing metabolic disorders
(diabetes and obesity).
The lack of exposure to European pharmaceutical company Roche
Holding was a positive relative contributor with the stock
struggling due to the failure of a key asset for Alzheimer's
disease to demonstrate statistically significant benefits, with
investors further questioning the company's ability to deliver on
its pipeline.
Seagen delivered a strong end to its financial year, gave
reassuring 2023 guidance and also highlighted significant progress
and opportunities in the pipeline. However, the stock bounced in
late February on speculations that Pfizer was in talks to acquire
the company, speculations that were confirmed in mid-March when
Pfizer officially announced its bid for Seagen at a healthy
premium.
Lonza Group, a leading contract development and manufacturing
organisation, experienced positive momentum in response to a solid
set of 2022 financial results and 2023 guidance that allayed some
of the more bearish fears in the market driven by a slowing
biotechnology funding environment and excess bioprocessing
capacity.
Hospitals operator HCA Healthcare appreciated considerably over
the period: the company delivered on 2022 guidance and set an
outlook for 2023 that bracketed consensus. Additionally, the
company benefitted from expectations that the market backdrop for
facilities should improve materially, with an uptick in hospital
volumes and an easing of the labour-related cost challenges that
impacted most of 2022.
Stocks that impacted relative performance negatively over the
period were Cytokinetics, Novo Nordisk, Acadia Healthcare, Molina
Healthcare and Merck & Co.
Cytokinetics, a biotechnology company concentrating on diseases
where muscle performance is impaired, suffered from investors'
rotation from small-capitalisation stocks to more defensive names
in the first quarter of the fiscal year, concerns about
biotechnology funding and an underwhelming launch of Bristol-Myers
Squibb's Camzyos, a drug in the same therapeutic class as
Cytokinetic's lead asset aficamten.
Excitement about the market potential for Novo Nordisk's drugs
for diabetes and obesity gained pace during the first six months of
the financial year, as the company posted convincing sales
notwithstanding capacity restrictions and gave strong guidance for
2023. Despite not holding Novo Nordisk, the Company is exposed to
the diabetes and obesity therapeutics market with its positions in
Eli Lilly & Co and Zealand Pharma.
Acadia Healthcare, which operates a network of behavioural
health centres, struggled in December following a very strong
period of performance in November, with the stock further dropping
in February after highlighting continued wage inflation and
providing a second half-weighted 2023 outlook.
Molina Healthcare, a managed care organisation (MCO) with a
large presence in the Medicaid space, was negatively impacted by
the expected resumption of the so-called redetermination process,
whereby Medicaid enrolees must demonstrate that they continue to be
eligible for Medicaid coverage. Redetermination was stopped in 2020
as part of the US Public Health Emergency plan but is due to resume
in April 2023, creating uncertainty on how many members Molina
Healthcare will be able to retain in its Medicaid programme. The
stock was also caught in the sell-off in MCOs during the period,
both due to the market positioning into more speculative areas at
the start of calendar year 2023 but also due to the US Centre for
Medicare and Medicaid Services proposing disappointing Medicare
rates for 2024 in the February's Advance Notice.
The large relative underweight in Merck & Co hurt
performance; the US pharmaceutical company was rewarded for its
strong executing and was also buoyed by success for some pipeline
projects.
Relative contributors (%): 30 September 2022 to 31 March
2023
Average Stock Total Attribution
Stock Active Stock Return Effect
Top 10 Weight Weight Return vs BM
Zealand Pharma A/S 3.10 3.10 23.53 23.13 0.75
-------- --------- --------- -------- ------------------
Roche Holding AG 0.00 -3.15 -21.22 -21.62 0.74
-------- --------- --------- -------- ------------------
Seagen 2.17 1.90 33.97 33.58 0.71
-------- --------- --------- -------- ------------------
Lonza Group 1.53 0.99 9.91 9.52 0.64
-------- --------- --------- -------- ------------------
HCA Healthcare 3.05 2.31 29.90 29.50 0.63
-------- --------- --------- -------- ------------------
DexCom 2.74 2.15 30.61 30.21 0.61
-------- --------- --------- -------- ------------------
Pfizer 0.00 -3.50 -15.58 -15.98 0.57
-------- --------- --------- -------- ------------------
CVS Health Corp 0.00 -1.62 -29.45 -29.85 0.56
-------- --------- --------- -------- ------------------
UnitedHealth Group 3.55 -2.93 -15.28 -15.68 0.47
-------- --------- --------- -------- ------------------
AstraZeneca 4.57 1.83 12.95 12.55 0.45
-------- --------- --------- -------- ------------------
Average Stock Total Attribution
Stock Active Stock Return Effect
Bottom 10 Weight Weight Return vs BM
-------- --------- --------- -------- ------------------
Cytokinetics 2.86 2.86 -34.24 -34.64 -1.26
-------- --------- --------- -------- ------------------
Novo Nordisk A/S 0.00 -2.91 42.54 42.14 -1.08
-------- --------- --------- -------- ------------------
Acadia Healthcare 2.29 2.29 -16.33 -16.73 -0.43
-------- --------- --------- -------- ------------------
Molina Healthcare 1.55 1.30 -26.57 -26.97 -0.40
-------- --------- --------- -------- ------------------
Merck & Co 0.00 -3.63 11.85 11.45 -0.40
-------- --------- --------- -------- ------------------
Cash and Others -7.22 -7.22 0.00 0.00 -0.35
-------- --------- --------- -------- ------------------
Intelligent Ultrasound
Group 0.64 0.64 -40.82 -41.21 -0.34
-------- --------- --------- -------- ------------------
Johnson & Johnson 7.69 1.68 -14.09 -14.49 -0.33
-------- --------- --------- -------- ------------------
Indivior 0.40 0.40 -2.53 -2.93 -0.30
-------- --------- --------- -------- ------------------
Stryker Corp 0.00 -1.14 27.61 27.21 -0.29
-------- --------- --------- -------- ------------------
Source: Polar Capital as at 31 March 2023.
Near-term considerations: Slowing economic growth
Macroeconomic, geopolitical and operational factors continue to
drive a high degree of market uncertainty. On the one hand, there
is a reasonable argument for caution based on tightening financial
conditions, slowing economic activity and, ultimately, slowing
earnings growth for the broader market. In such a scenario, the
defensive qualities of the healthcare sector, offering a reasonable
level of earnings visibility, is highly appealing. By contrast, a
more optimistic stance might be based on the idea that stubbornly
low levels of unemployment, elevated levels of personal income and
excess savings could keep nominal consumer spending buoyant. In
that scenario, the more consumer-sensitive areas of the market,
including pockets of healthcare, might hold greater appeal for a
longer period than expected versus the consensus bearish view that
a recession (in the US) is imminent.
Importantly, the healthcare industry is composed of a broad and
diversified universe of businesses that range from pharmaceuticals
and biotechnology to medical equipment and supplies, medical
insurance, healthcare facilities, and life sciences tools and
services. This diversity, with many different end-markets and
operating models across the market-capitalisation spectrum, is one
of the reasons the sector can offer investors exciting investment
opportunities in any given economic, political and regulatory
environment.
Putting the opaque nature of the macroeconomic environment to
one side, it is worth reflecting on the near and medium-term
structural drivers in the healthcare industry that could yield
revenue and earnings upside. In the near term, a pick-up in
utilisation is a critical theme as more and more consumers engage
with healthcare systems now that we are learning to live with, or
even move beyond, COVID-19. Looking through a longer-term lens, the
disruption of the delivery of healthcare will continue to be a
central theme as healthcare systems globally look to satisfy an
ever-growing demand for their products and services. Last but not
least, consolidation will likely continue to be something that
captures investors' attention.
Key themes: Utilisation, delivery disruption and M&A
In last year's Annual Report we outlined three key investment
themes which offered the potential for significant returns. These
three themes remain equally relevant today. As a reminder these
themes are; Utilisation, Delivery disruption and Consolidation.
Utilisation appears to be picking up
After a sustained period of disruption and uncertainty,
healthcare systems are learning to live with COVID-19 via dynamic
staffing policies, increased capacity and the use of alternative
sites of delivery. These strategies, alongside a current COVID-19
virus that appears to be much milder than previous strains, is
having a positive effect on utilisation that benefits not just the
medical device companies that provide the equipment but also the
hospitals and facilities that treat the patients.
There is a high level of conviction that near-term utilisation
levels are accelerating globally, a scenario that has positive
implications for both medical device companies and hospital
providers. Looking further out, confidence in the durability of the
growth algorithm can be garnered from an ageing demographic that
will continue to need and demand access to healthcare services.
Delivery disruption still early
The disruption of delivery is critical given there is an acute
need globally to generate greater efficiencies and deliver more
healthcare to more people for less money. Investment in products
and services that drive efficiencies has been evident for some
time, and the concept is starting to gather momentum The use of
out-patient facilities and ambulatory surgery centres (ASCs) to
perform surgeries that might previously have been performed in a
more traditional hospital setting has accelerated, with the
alignment of incentives between the payers and the providers a key
driver. Cataract surgeries, endoscopies and colonoscopies have been
performed in out-patient settings/ASCs for a while, but there is a
clear drive to conduct more procedures, for example orthopaedic
surgery and cardiovascular intervention, in those facilities.
Standalone ASC businesses are an obvious beneficiary of the
delivery disruption theme but there are other ways to expose
investors to the opportunity including through diversified
healthcare systems and companies that offer home health products
and services such as infusions or medical equipment.
M&A very much a live debate
The healthcare sector operates in one of the most fragmented
industries, with consolidation a major long-term driver of
efficiencies for companies that operate in different parts of
healthcare. Unlike other industries, few subsectors see a small
number of companies dominating markets, but the benefits of such
scale do matter in healthcare. More recently, M&A activity has
been picking up between large-capitalisation pharmaceutical and
small/mid-capitalisation biotechnology companies, with the former
typically offering significant premiums to acquire the latter (see
table below).
There are several reasons for a pick-up in acquisitions. In
2020-21, following the wider market lows in March 2020, the
biotechnology subsector enjoyed a strong run of outperformance and
access to capital was relatively easy through IPOs and secondary
offerings. As such, small/mid-capitalisation biotechnology
companies did not need an exit strategy as they could easily access
capital to fund their research programmes. However, in the current
market environment access to funds has become much more
challenging, particularly with the market selloff in 2022. The
resulting collapse in prices for small/mid-capitalisation
biotechnology stocks has created a much more attractive environment
for the larger companies to consider M&A. Further, large
pharmaceutical companies are looking to bolster revenues in 2025-30
with patent expiries set to impact growth.
In summary, there appears to be a clear rationale for an
acceleration in M&A. If this comes to fruition, the innovation
part of the Company's portfolio could be the prime beneficiary of
potential deal flow.
Strategy and positioning
As a reminder, the objective of the Company is to achieve
long-term capital appreciation by investing in a portfolio of
global healthcare companies, to include, but not limited to,
pharmaceutical, biotechnology, medical device and healthcare
services companies. The aim is to identify companies where there is
a disconnect between valuations and intrinsic value. The Company is
a high-conviction (83.81% active share as of 31 March 2023),
actively managed investment vehicle that gives investors exposure
to the global healthcare universe. Stock-picking remains critical
to the process, but there will be a continued focus on the key
investment themes mentioned earlier, some of which appear to be
accelerating in the near term whilst also having medium-term
durability.
The Company's portfolio combines a growth at a reasonable price
(GARP) approach with the opportunity to invest in earlier-stage,
more disruptive companies. The Growth portfolio dominates, with
exposure to companies that sit further up the market-capitalisation
scale. This part of the portfolio consists of holdings where we see
a disconnect between the current share price and intrinsic value.
The positions also reflect, in part but not exclusively, the
investment themes where we have the highest conviction. This part
of the portfolio also drives the lower volatility of the Company
relative to other, more volatile areas of healthcare. The
innovation portfolio provides optionality through investments in
the most exciting small-capitalisation stocks we can find.
Period end positioning: Diverse but with high conviction
From a subsector perspective, there were material changes in
positioning during the six-month period under review, driven both
by allocation and stock-specific considerations. Starting from a
modest overweight at the start of the fiscal year, exposure to
managed care was taken negative on concerns that an uptick in
utilisation could dampen earnings growth for these companies. On
the flipside, an improvement in utilisation should benefit
healthcare equipment and supplies and healthcare facilities
subsectors; consequently, we increased the combined weightings in
these sectors.
The other significant moves in positioning were a decrease in
exposure to biotechnology and the reversal in life sciences tools
and services from an underweight to a meaningful overweight. The
change in the biotechnology weight was primarily for
company-specific reasons, for instance reducing risk ahead of
binary events, and diminished confidence in the commercial
opportunity of certain assets or companies being taken over. Our
stance in life sciences tools and services shifted more positive:
substantial derating in the sector offered compelling
opportunities, especially since we believed that some of the
apprehensions that led to the sell-off in this area (for instance,
dwindling early-stage biotechnology funding and excess inventory at
customers) were either temporary or overstated.
The largest underweight relative to the benchmark continues to
be in pharmaceuticals. After a strong performance in 2022,
pharmaceutical stocks suffered from a rotation in January and
February 2023 into more speculative areas of the market such as
smaller-capitalisation or information technology companies. March
saw another reversal, with investors again favouring "safer" assets
and the subsector performed well in the month. Although the
defensive profile of component companies remains an attractive
characteristic in an uncertain macroeconomic environment - and the
passing into law of the Inflation Reduction Act in the US has
removed the risk of further policy changes in the medium term - the
industry's sub-par growth profile and mature operating margins
leave our overall thesis that we can find more exciting
opportunities in other areas of the healthcare universe
unchanged.
Share prices in the biotechnology subsector posted a good
recovery during the period under review from the abrupt correction
experienced in late 2021/early 2022. However, the positive
performance of the overall subsector disguises a considerable
bifurcation in returns between late-stage or commercial
biotechnology companies and the early-stage biotechnology
companies, with the latter underperforming the former significantly
due to a less benign funding environment, higher interest rates and
the rippling effect of Silicon Valley Bank's failure in March, an
important institution that provided capital to a sizeable number of
innovative technology and healthcare companies. Despite this, we
are convinced the biotechnology sector's fundamentals remain
intact; these include an ever-deeper understanding of human biology
and the ability to utilise that knowledge in the clinic, and
ultimately bring it onto the market to improve patients'
outcomes.
Analogous to pharmaceuticals, managed care organisations were
also caught up in the market's rotation of the first two months of
2023, having outperformed the broader healthcare index in the
previous calendar year. As mentioned above, the sell-off in this
sector was also exacerbated by industry-wide concerns such as
Medicaid redetermination, an increase in utilisation pressuring
earnings growth and less favourable Medicare rates. Hence, we
maintain an underweight in the subsector.
Healthcare facilities were the best-performing stocks in the
first six months of the financial year, experiencing a rebound from
the sharp derating that affected the subsector in early 2022. The
derating was caused by various factors: staffing shortages and
COVID-19 still impacting hospital volumes and unprecedented labour
wage inflation putting downward pressure on margins. However, these
factors started to reverse, and component companies gave a more
upbeat outlook on their ability to grow both volumes and margins.
As already stated, delivery disruption and utilisation are key
themes in the near term and they should continue to be beneficial
to healthcare facilities, especially as they become more adept at
managing staffing issues and inflation.
An increase in utilisation should also be positive for
healthcare equipment and supplies, therefore we reduced the
combined underweight in these stocks. The subsectors posted
positive returns in the period under review after a period of
underperformance in the first half of 2022. Although the
subsectors' market conditions are improving, we remain very
selective in our stock-picking, preferring companies with new
product cycles, high levels of innovation or a high percentage of
revenues linked to chronic conditions.
Finally, life sciences tools and services followed a similar
trajectory to the healthcare equipment subsector, rebounding in the
first half of the financial year after months of weak returns
caused by worries around the biotechnology funding landscape,
excess inventory in the channel and revenue from COVID-19
diagnostics and therapeutics rolling off. The significant derating
in the subsector afforded us the opportunity to deploy capital in
new companies at an attractive entry level. As customers'
destocking eases, the COVID-19 revenue is "flushed out" from
investors' expectations and China's economic activity recovers
after the end of its zero-Covid policy, we would expect upside
revision in life sciences tools and services revenues and
earnings.
Stock selection is a key driver
The table below displays the Company's Top10 relative overweight
and underweights at the end of the reporting period, highlighting
the highest conviction ideas in the portfolio. While conviction is
the appropriate term to use when discussing positioning versus the
benchmark, it is important to stress that valuation inefficiencies
can be relatively short-lived, especially among well covered
large-capitalisation stocks. With opportunity cost also a key
decision driver as we look to maximise returns, the Company's Top10
relative overweight and underweight positions are subject to
change.
Top 10 overweight and Top 10 underweight positions relative to
the benchmark
Active Active
(%) (%)
Zealand Pharma A/S 3.41% UnitedHealth Group -5.99%
------- ------------------------- -------
Coloplast A/S 3.20% Merck & Co -3.66%
------- ------------------------- -------
DexCom 3.20% Novo Nordisk A/S -3.55%
------- ------------------------- -------
Lonza Group 2.92% Pfizer -3.11%
------- ------------------------- -------
HCA Healthcare 2.91% Thermo Fisher Scientific -3.06%
------- ------------------------- -------
Alcon 2.89% Roche -2.83%
------- ------------------------- -------
Bio-Rad Laboratories 2.58% Novartis -2.69%
------- ------------------------- -------
Intuitive Surgical 2.54% Abbott Laboratories -2.39%
------- ------------------------- -------
Legend Biotech Corp 2.51% Danaher -2.36%
------- ------------------------- -------
BioMerieux 2.43% Bristol Myers Squibb -2.00%
------- ------------------------- -------
Source: Polar Capital, as at 31 March 2023
Half the Top10 overweights relative to the benchmark have been
in the portfolio for some time, while Coloplast, Lonza Group,
Intuitive Surgical, Legend Biotech and BioMerieux were added during
the reporting period. Coloplast is a medical supplies company that
specialises in chronic care and surgical products, mainly in
ostomy, continence, woundcare and urology. Having derated
substantially in 2022, the contraction in the valuation presented
an opportunity to re-engage with a high-quality defensive business
that enjoys a high level of recurring revenues, solid margins and a
history of above market growth, which should additionally be
supported by an increase in utilisation from depressed levels. If
the utilisation thesis plays out, it should also benefit leading
surgical robotics company Intuitive Surgical, whose share price saw
a sharp correction in 2022 as investors moved away from
high-growth, highly valued companies on the back of rising interest
rates, with the downward movement further exacerbated by
company-specific concerns (a slowdown in hospital capital expenses
and procedural volumes, and anaemic growth in China). We believe
these microeconomic worries to be temporary and, as the penetration
of robotic surgery is still extremely low and new indications are
expected to expand the types of procedure addressable by robotic
surgery, Intuitive Surgical has the ability to continue to grow
strongly in the long term.
Legend Biotech is a commercial-stage biotechnology company, with
leading asset Carvykti approved for the treatment of a bone marrow
cancer called multiple myeloma. With the hope of further label
expansions to come, we believe the company's valuation carries
upside potential. French diagnostics company BioMerieux was heavily
sold off following the easing of COVID-19 testing revenues in
calendar 2022 but we believe consensus numbers could also carry
upside potential as patients return to the healthcare systems and
routine testing volumes normalise. We also like the focus of the
company on anti-microbial resistance and its ability to expand
testing menus and develop innovative diagnostics platforms.
Finally, we have already explained our rationale for adding Lonza
Group (see above discussion on Top10 contributors).
In the Innovation portfolio, new positions were started in Hikma
Pharmaceuticals, Indivior, Amvis Holdings and Global Health Limited
of India. We exited Axonics Modulation Technologies, Quotient and
Surgery Partners. The addition of generic manufacturer Hikma
Pharmaceuticals was based primarily on valuation and upside
potential from a slowdown in the pace of generics' price erosion
and better results in their injectables business. The holding in
Indivior reflects our enthusiasm for the long-term growth potential
of the company's lead asset Sublocade for the treatment of opioid
use disorders. Amvis Holdings manages home, hospice and home
nursing care businesses across Japan. With an ageing population and
low penetration of the hospice services offered by Amvis Holdings,
we believe the company is well positioned to capitalise on the
growth opportunities in this area. Global Health Limited is a
hospital chain in India, operating in a space that has many
structural growth drivers, including low levels of penetration and
rising access to health insurance. The company should also benefit
from an improving payer mix, increasing levels of occupancy and
brownfield expansions.
Given their size, stocks held in the Innovation portfolio have
the potential to be more volatile than their larger peers in the
Growth portfolio. Companies further down the market-capitalisation
scale also tend to be less well researched, increasing the chances
of valuation inefficiencies. It is that combination of volatility
and valuation inefficiency that we hope will yield interesting
ideas that could offer significant potential over the long
term.
Outlook for Healthcare: Delivering in an uncertain world
Conviction in the macroeconomic environment may well be hard to
come by in 2023 given the ongoing tug-of-war between the fear of
tightening financial conditions leading to a slowdown in economic
activity versus the optimism of an economy being driven by low
levels of unemployment and an upbeat consumer. That uncertainty
simply goes to underpin our view that the healthcare sector, with
its defensive characteristics, attractive valuations and dynamic
growth profile, should be a very attractive place to invest.
Further, with a number of key industry themes accelerating,
potentially leading to upwards revenue and earnings revisions,
there is building enthusiasm for the investment opportunities that
lie ahead.
James Douglas and Gareth Powell
Co-Managers
11 May 2023
PORTFOLIO AS AT 31 MARCH 2023
(Figures in brackets denote the comparative ranking as at 30
September 2022)
Ranking Stock Market Value % of total
Sector Country GBP'000 net assets
2023 2022 31 30 31 30
March September March September
2023 2022 2023 2022
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Johnson &
1 (1) Johnson Pharmaceuticals United States 30,510 35,964 7.4% 8.9%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
2 (3) Abbvie Biotechnology United States 25,185 24,932 6.1% 6.2%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
3 (5) Eli Lilly Pharmaceuticals United States 22,385 16,997 5.4% 4.2%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
4 (4) AstraZeneca Pharmaceuticals United Kingdom 18,094 19,761 4.4% 4.9%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
5 (18) DexCom Equipment United States 15,689 9,812 3.8% 2.4%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Intuitive Healthcare
6 (-) Surgical Equipment United States 15,488 - 3.8% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
7 (13) HCA Facilities United States 15,128 10,872 3.7% 2.7%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Life Sciences
8 (-) Lonza Tools & Services Switzerland 14,539 - 3.5% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
9 (-) Coloplast Supplies Denmark 14,058 - 3.4% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
10 (33) Zealand Pharma Biotechnology Denmark 14,044 7,437 3.4% 1.8%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Top 10 investments 185,120 44.9%
------------------- --------------- --------- ----------- -------- -----------
Healthcare
11 (10) Alcon Supplies Switzerland 13,896 12,040 3.4% 2.9%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
12 (9) Humana Managed Healthcare United States 13,148 13,908 3.2% 3.4%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Agilent Life Sciences
13 (-) Technologies Tools & Services United States 11,747 - 2.9% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Bio-Rad Life Sciences
14 (30) Laboratories Tools & Services United States 11,244 7,879 2.7% 1.9%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
15 (-) Merck Pharmaceuticals Germany 10,875 - 2.6% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
16 (-) Legend Biotech Biotechnology United States 10,495 - 2.6% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
17 (12) Daiichi Sankyo Pharmaceuticals Japan 10,370 11,459 2.5% 2.9%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
18 (-) BioMerieux Equipment France 10,250 - 2.5% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Life Sciences
19 (-) IQVIA Tools & Services United States 9,962 - 2.4% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Life Sciences
20 (17) Avantor Tools & Services United States 9,904 9,824 2.4% 2.4%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Top 20 investments 297,011 72.1%
------------------- --------------- --------- ----------- -------- -----------
21 (20) Astellas Pharma Pharmaceuticals Japan 9,838 9,701 2.4% 2.4%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
22 (15) Genmab Biotechnology Denmark 9,738 10,197 2.4% 2.5%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
23 (6) Cytokinetics Biotechnology United States 9,630 14,673 2.3% 3.6%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Life Sciences
24 (26) Sartorius Tools & Services Germany 9,198 9,070 2.2% 2.2%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Max Healthcare Healthcare
25 (-) Institute Facilities India 8,662 - 2.1% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
26 (16) Acadia Healthcare Facilities United States 8,482 10,082 2.1% 2.5%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
27 (11) Biovitrum Biotechnology Sweden 8,388 11,758 2.0% 2.9%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Revance
28 (31) Therapeutics Pharmaceuticals United States 8,077 7,647 2.0% 1.9%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Inspire Medical Healthcare
29 (-) Systems Equipment United States 8,046 - 2.0% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Option Care Healthcare
30 (28) Health Services United States 7,955 8,452 1.9% 2.1%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Top 30 investments 385,025 93.5%
------------------- --------------- --------- ----------- -------- -----------
Healthcare
31 (32) Tenet Healthcare Facilities United States 7,879 7,582 1.9% 1.9%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
United
32 (29) Therapeutics Biotechnology United States 7,604 8,060 1.8% 2.0%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
33 (27) Seagen Biotechnology United States 6,955 8,886 1.7% 2.2%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Hikma
34 (-) Pharmaceuticals Pharmaceuticals United Kingdom 6,438 - 1.6% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Metal, Glass
& Plastic
35 (22) Aptargroup Containers United States 6,268 9,623 1.5% 2.4%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
36 (39) Medley Technology Japan 4,597 2,901 1.1% 0.7%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
37 (34) Uniphar Distributors Ireland 4,040 4,171 1.0% 1.0%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
38 (23) Molina Healthcare Managed Healthcare United States 3,993 9,603 1.0% 2.4%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
39 (-) Indivior Pharmaceuticals United Kingdom 3,599 - 0.9% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
40 (-) Amvis Facilities Japan 3,068 - 0.7% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Top 40 investments 439,466 106.7%
------------------- --------------- --------- ----------- -------- -----------
Healthcare
41 (-) Global Health Facilities India 2,614 - 0.6% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
42 (38) Livanova Equipment United Kingdom 2,285 2,950 0.6% 0.7%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Intelligent Healthcare
43 (37) Ultrasound Technology United Kingdom 2,148 3,049 0.5% 0.8%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
44 (36) Ship Healthcare Distributors Japan 1,923 3,503 0.5% 0.9%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Total Equities 448,436 108.9%
------------------- --------------- --------- ----------- -------- -----------
Other Net Liabilities (36,484) (8.9%)
------------------- --------------- --------- ----------- -------- -----------
Net Assets 411,952 100.0%
------------------- --------------- --------- ----------- -------- -----------
Note - Sectors are from the GICS (Global Industry Classification
Standard).
PORTFOLIO REVIEW AS AT 31 MARCH 2023
30 September
Geographical Exposure at: 31 March 2023 2022
-------------------------------------- ----------------- ----------------
United States 64.6% 72.3%
Denmark 9.2% 4.3%
United Kingdom 8.0% 6.4%
Japan 7.2% 6.9%
Switzerland 6.9% 6.4%
Germany 4.8% 2.2%
India 2.7% -
France 2.5% 2.6%
Netherlands - 2.3%
Sweden 2.0% 2.9%
Ireland 1.0% 1.0%
Other net liabilities (8.9%) (7.3%)
----------------- ----------------
Total 100.0% 100.0%
================= ================
30 September
Sector Exposure at: 31 March 2023 2022
-------------------------------------- ----------------- ----------------
Pharmaceuticals 29.2% 31.3%
Biotechnology 22.3% 28.3%
Life Sciences Tools & Services 16.1% 4.3%
Healthcare Equipment 12.7% 12.1%
Healthcare Facilities 11.1% 7.4%
Healthcare Supplies 6.8% 2.9%
Managed Healthcare 4.2% 13.1%
Healthcare Services 1.9% 2.1%
Healthcare Technology 1.6% 1.5%
Metal, Glass & Plastic Containers 1.5% 2.4%
Healthcare Distributors 1.5% 1.9%
Other net liabilities (8.9%) (7.3%)
----------------- ----------------
Total 100.0% 100.0%
================= ================
Market Capitalisation breakdown 30 September
at: 31 March 2023 2022
------------------------------------ ----------------- ----------------
Large (>US$10bn) 77.6% 78.5%
Medium (US$5bn - US$10bn) 16.1% 16.0%
Small (<US$5bn) 15.2% 12.8%
Other net liabilities (8.9%) (7.3%)
100.0% 100.0%
================= ================
STATEMENT OF COMPREHENSIVE INCOME
For the half year ended 31 March 2023
Group Group Group
---------------------------- ---------------------------- ----------------------------
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 March 2023 31 March 2022 30 September 2022
---------------------------- ---------------------------- ----------------------------
Revenue Capital Total Revenue Capital Total Revenue Capital Total
return return return return return return return return return
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income 2 2,050 - 2,050 1,973 - 1,973 4,427 - 4,427
Other operating
income 2 50 - 50 2 - 2 26 - 26
-------------------- ------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Gains on
investments
held at fair
value - 10,416 10,416 - 20,201 20,201 - 22,985 22,985
-------------------- ------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Other currency
losses - (1,102) (1,102) - (214) (214) - (610) (610)
-------------------- ------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Total income 2,100 9,314 11,414 1,975 19,987 21,962 4,453 22,375 26,828
-------------------- ------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Expenses
-------------------- ------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment
management
fee (322) (1,290) (1,612) (291) (1,162) (1,453) (602) (2,406) (3,008)
-------------------- ------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Other
administrative
expenses (337) (13) (350) (317) (36) (353) (599) (59) (658)
-------------------- ------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Total expenses (659) (1,303) (1,962) (608) (1,198) (1,806) (1,201) (2,465) (3,666)
-------------------- ------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Profit before
finance costs
and tax 1,441 8,011 9,452 1,367 18,789 20,156 3,252 19,910 23,162
-------------------- ------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Finance costs (1) (561) (562) - (541) (541) - (1,096) (1,096)
-------------------- ------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Profit before
tax 1,440 7,450 8,890 1,367 18,248 19,615 3,252 18,814 22,066
-------------------- ------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Tax (242) (195) (437) (228) - (228) (535) - (535)
-------------------- ------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Net profit for
the period and
total
comprehensive
income 1,198 7,255 8,453 1,139 18,248 19,387 2,717 18,814 21,531
-------------------- ------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Earnings per
Ordinary share
(pence) 3 0.99 5.98 6.97 0.94 15.05 15.99 2.24 15.51 17.75
-------------------- ------ -------- -------- -------- -------- -------- -------- -------- -------- --------
The total column of this statement represents the Group's
Statement of Comprehensive Income, prepared in accordance with
UK-adopted International Accounting Standards.
The revenue return and capital return columns are supplementary
to this and are prepared under guidance published by the
Association of Investment Companies.
The Group does not have any other income or expense that is not
included in net profit for the period/year. The net profit for the
period/year disclosed above.
There are no dilutive securities and therefore the Earnings per
Share and the Diluted Earnings per Share are the same.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
in the period/year.
BALANCE SHEETS
For the half year ended 31 March 2023
Group Company
----- ------------------------------------------
(Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited) (Audited)
31 March 31 March 30 September 31 March 31 March 30 September
2023 2022 2022 2023 2022 2022
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----- ------------ ------------ -------------- ------------ ------------ --------------
Non-current assets
Investments held
at fair value 448,436 427,239 434,419 448,436 427,239 434,419
Investment in
subsidiary - - - 50 50 50
----------------------- ----- ------------ ------------ -------------- ------------ ------------ --------------
Current assets
Receivables 1,234 2,055 233 1,234 2,055 233
Overseas tax
recoverable 670 606 666 670 606 666
Cash and cash
equivalents 2,141 11,450 7,546 2,091 11,400 7,496
----------------------- ----- ------------ ------------ -------------- ------------ ------------ --------------
4,045 14,111 8,445 3,995 14,061 8,395
Total assets 452,481 441,350 442,864 452,481 441,350 442,864
----------------------- ----- ------------ ------------ -------------- ------------ ------------ --------------
Current liabilities
Payables (2,219) (440) (470) (2,219) (440) (470)
(2,219) (440) (470) (2,219) (440) (470)
----------------------- ----- ------------ ------------ -------------- ------------ ------------ --------------
Non-current liabilities
Zero dividend
preference
shares (38,118) (37,008) (37,561) - - -
Loan from subsidiary - - - (38,118) (37,008) (37,561)
Indian capital gains
tax provision (192) - - (192) - -
----------------------- ----- ------------ ------------ -------------- ------------ ------------ --------------
Total liabilities (40,529) (37,448) (38,031) (40,529) (37,448) (38,031)
----------------------- ----- ------------ ------------ -------------- ------------ ------------ --------------
Net assets 411,952 403,902 404,833 411,952 403,902 404,833
----------------------- ----- ------------ ------------ -------------- ------------ ------------ --------------
Equity attributable
to equity shareholders
Called up share
capital 31,037 31,037 31,037 31,037 31,037 31,037
Share premium reserve 80,685 80,685 80,685 80,685 80,685 80,685
Capital redemption
reserve 6,575 6,575 6,575 6,575 6,575 6,575
Special distributable
reserve 3,672 3,672 3,672 3,672 3,672 3,672
Capital reserves 288,046 280,225 280,791 288,046 280,225 280,791
Revenue reserve 1,937 1,708 2,073 1,937 1,708 2,073
----------------------- ----- ------------ ------------ -------------- ------------ ------------ --------------
Total equity 411,952 403,902 404,833 411,952 403,902 404,833
----------------------- ----- ------------ ------------ -------------- ------------ ------------ --------------
Net asset value
per Ordinary share
(pence) 4 339.70 333.06 333.83 339.70 333.06 333.83
Net asset value
per ZDP share (pence) 4 118.64 115.19 116.91 - - -
----------------------- ----- ------------ ------------ -------------- ------------ ------------ --------------
The parent company has taken advantage of section 408 of the
Companies Act 2006 and has not included its own income statement in
the financial statements. The parent company's profit for the half
year was GBP8,453,000 (31 March 2022: profit of GBP19,387,000 and
30 September 2022: profit of GBP21,531,000).
The notes to follow form part of these financial statements.
STATEMENTS OF CHANGES IN EQUITY
For the half year ended 31 March 2023
Group and Company
Half year ended 31 March 2023 (Unaudited)
-------------------------- -------------------------------------------------------------------------------
Called Capital Share Special
up share redemption premium distributable Capital Revenue Total
capital reserve reserve reserve reserves reserve Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total equity at 1 October
2022 31,037 6,575 80,685 3,672 280,791 2,073 404,833
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total comprehensive income:
--------------------------------------------------- -------- -------------- --------- -------- --------
Profit for the half
year ended 31 March
2023 - - - - 7,255 1,198 8,453
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Transactions with owners, recorded
directly to equity:
--------------------------------------------------- -------- -------------- --------- -------- --------
Equity dividends
paid - - - - - (1,334) (1,334)
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total equity at 31
March 2023 31,037 6,575 80,685 3,672 288,046 1,937 411,952
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Group and Company
Half year ended 31 March 2022 (Unaudited)
-------------------------- -------------------------------------------------------------------------------
Called Capital Share Special
up share redemption premium distributable Capital Revenue Total
capital reserve reserve reserve reserves reserve Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total equity at 1 October
2021 31,037 6,575 80,685 3,672 261,977 1,782 385,728
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total comprehensive income:
--------------------------------------------------- -------- -------------- --------- -------- --------
Profit for the half
year ended
31 March 2022 - - - - 18,248 1,139 19,387
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Transactions with owners, recorded
directly to equity:
--------------------------------------------------- -------- -------------- --------- -------- --------
Equity dividends
paid - - - - - (1,213) (1,213)
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total equity at 31
March 2022 31,037 6,575 80,685 3,672 280,225 1,708 403,902
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Group and Company
Year ended 30 September 2022 (Audited)
-------------------------- -------------------------------------------------------------------------------
Called Capital Share Special Capital Revenue Total
up share redemption premium distributable reserves reserve Equity
capital reserve reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total equity at 1 October
2021 31,037 6,575 80,685 3,672 261,977 1,782 385,728
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total comprehensive income:
--------------------------------------------------- -------- -------------- --------- -------- --------
Profit for the year
ended 30 September 2022 - - - - 18,814 2,717 21,531
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Transactions with owners, recorded
directly to equity:
--------------------------------------------------- -------- -------------- --------- -------- --------
Equity dividends
paid - - - - - (2,426) (2,426)
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total equity at 30
September 2022 31,037 6,575 80,685 3,672 280,791 2,073 404,833
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
CASH FLOW STATEMENTS
For the half year ended 31 March 2023
Group and Company
(Unaudited) (Unaudited)
Half year Half year (Audited)
ended ended Year ended
31 March 31 March 30 September
2023 2022 2022
GBP'000 GBP'000 GBP'000
------------------------------------------------ ----------- ----------- --------------
Cash flows from operating activities
Profit before finance costs and tax 9,452 20,156 23,162
Adjustment for non-cash items:
Gains on investments held at fair value
through profit or loss (10,416) (20,201) (22,985)
Adjusted (loss)/profit before tax (964) (45) 177
Adjustments for:
Purchases of investments, including transaction
costs (247,474) (245,517) (480,136)
Sales of investments, including transaction
costs 244,898 244,829 476,716
(Increase)/decrease in receivables (189) (130) 27
(Decrease)/increase in payables (88) 71 101
Indian capital gains tax 192 - -
Overseas tax deducted at source (441) (262) (629)
------------------------------------------------ ----------- ----------- --------------
Net cash used in operating activities (4,066) (1,054) (3,744)
------------------------------------------------ ----------- ----------- --------------
Cash flows from financing activities
Interest paid (5) (1) (2)
Equity dividends paid (1,334) (1,213) (2,426)
------------------------------------------------ ----------- ----------- --------------
Net cash used in financing activities (1,339) (1,214) (2,428)
------------------------------------------------ ----------- ----------- --------------
Net decrease in cash and cash equivalents (5,405) (2,268) (6,172)
Cash and cash equivalents at the end of
the period 7,546 13,718 13,718
------------------------------------------------ ----------- ----------- --------------
Cash and cash equivalents at the end of
the period 2,141 11,450 7,546
------------------------------------------------ ----------- ----------- --------------
NOTES TO THE FINANCIAL STATEMENTS
For the half year ended 31 March 2023
1. General Information
The consolidated financial statements comprise the unaudited
results of the Company and its wholly-owned subsidiary PCGH ZDP plc
(together referred to as the 'Group') for the six month period to
31 March 2023.
The Group and Company unaudited financial statements to 31 March
2023 have been prepared using the accounting policies used in the
Group and Company's financial statements to 30 September 2022.
These accounting policies are based on UK-adopted International
Accounting Standards ("UK-adopted IAS").
The financial information in this half year financial report
does not constitute statutory accounts as defined in section 434 of
the Companies Act 2006.
The financial information for the periods ended 31 March 2023
and 31 March 2022 have not been audited. The figures and financial
information for the year ended 30 September 2022 are an extract
from the latest published accounts and do not constitute statutory
accounts for that year. Full statutory accounts for the year ended
30 September 2022, prepared under UK-adopted IAS, including the
report of the auditors which was unqualified, did not draw
attention to any matters by way of emphasis and did not contain a
statement under section 498 of the Companies Act 2006, have been
delivered to the Registrar of Companies.
The Group and Company's accounting policies have not varied from
those described in the financial statements for the year ended 30
September 2022.
The Group and Company's financial statements are presented in
Pounds Sterling and all values are rounded to the nearest thousand
pounds (GBP'000), except where otherwise stated.
The Directors believe it is appropriate to adopt the going
concern basis in preparing the financial statements. The Board
continually monitors the financial position of the Group and
Company. The Directors have considered a detailed assessment of the
Group and Company's ability to meets its liabilities as they fall
due. The assessment took account of the Company's current financial
position, its cash flows and its liquidity position. In light of
the results of these tests, the Group and Company's cash balances,
and the liquidity position, the Directors consider that the Group
and Company have adequate financial resources to enable them to
continue in operational existence. Accordingly, the Directors are
satisfied that it is appropriate to continue to adopt the going
concern basis in preparing the financial results of the Group and
Company.
There were no new UK-adopted IAS or amendments to UK-adopted IAS
applicable to the current year which had any significant impact on
the Group and Company's Financial Statements.
2. DIVIDS and OTHER Income (Unaudited) (Unaudited) (Audited)
For the half For the half For the
year ended year ended year ended
31 March 31 March 30 September
2023 2022 2022
GBP'000 GBP'000 GBP'000
---------------------------------- ------------- ------------- -------------
Investment income
Revenue:
UK Dividend income 378 335 472
Overseas Dividend income 1,672 1,638 3,955
Total investment income allocated
to revenue 2,050 1,973 4,427
---------------------------------- ------------- ------------- -------------
Other operating income
Bank interest 50 226
-----------------------------
Total other operating income 50 226
-----------------------------
There were no dividends allocated to capital as at 31 March
2023
3. EARNINGS per ORDINARY share (Unaudited) (Unaudited) (Audited)
For the half For the half For the
year ended year ended year ended
31 March 31 March 30 September
2023 2022 2022
GBP'000 GBP'000 GBP'000
---------------------------------- ------------- ------------- -------------
Net profit for the period:
Revenue 1,198 1,139 2,717
Capital 7,255 18,248 18,814
---------------------------------- ------------- ------------- -------------
Total 8,453 19,387 21,531
---------------------------------- ------------- ------------- -------------
Weighted average number of shares
in issue during the period 121,270,000 121,270,000 121,270,000
Revenue 0.99p 0.94p 2.24p
Capital 5.98p 15.05p 15.51p
---------------------------------- ------------- ------------- -------------
Total 6.97p 15.99p 17.75p
---------------------------------- ------------- ------------- -------------
As at 31 March 2023 there were no potentially dilutive shares in
issue (31 March 2022 and 30 September 2022: nil).
4. Net asset value per share (Unaudited) (Unaudited)
For the half For the half (Audited)
year year For the year
ended ended ended
31 March 31 March 30 September
2023 2022 2022
------------------------------------ ------------- ------------- -------------
(i) Ordinary shares
Net assets attributable to Ordinary
shareholders (GBP'000) 411,952 403,902 404,833
Ordinary shares in issue at
end of period (excluding those
held in treasury) 121,270,000 121,270,000 121,270,000
Net asset value per Ordinary
share (pence) 339.70 333.06 333.83
------------------------------------ ------------- ------------- -------------
As at 31 March 2023 there were no potentially dilutive shares in
issue (31 March 2022 and 30 September 2022: nil).
(ii) ZDP shares
Calculated entitlement of ZDP
shareholders (GBP'000) 38,118 37,008 37,561
ZDP shares in issue at the
end of the year 32,128,437 32,128,437 32,128,437
Net asset value per ZDP share
(pence) 118.64 115.19 116.91
------------------------------ ---------- ---------- ----------
5. DIVIDS
Dividends for the current financial year ending 30 September
2023, if declared, will be paid in August 2023 and February
2024.
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 month period to 31 March 2023.
7. POST BALANCE SHEET EVENTS
There are no significant events that have occurred after the end
of the reporting period to the date of this report which require
disclosure.
ALTERNATIVE PERFORMANCE MEASURES (APMS)
In assessing the performance of the Company, the Investment
Manager and the Directors use the following APMs which are not
defined in accounting standards or law but are considered to be
known industry metrics:
Net Asset Value (NAV) and NAV per share
The NAV is the value attributed to the underlying assets of the
Company less the liabilities, presented either on a per share or
total basis.
The NAV is often expressed in pence per share after being
divided by the number of shares which have been issued. The NAV per
share is unlikely to be the same as the share price which is the
price at which the Company's shares can be bought or sold by an
investor. See Note 4 above for detailed calculations. The NAV per
Ordinary share is published daily.
NAV Total Return (APM)
The NAV total return shows how the net asset value has performed
over a period of time taking into account both capital returns and
dividends paid to shareholders. NAV total return is calculated as
the change in NAV from the start of the period, assuming that
dividends paid to shareholders are reinvested on the payment date
in Ordinary shares at their net asset value.
For the
half year
ended Year ended
31 March 30 September
2023 2022
-------------------------------- --------- ----------- --------------
Opening NAV per share a 333.83p 318.07p
Closing NAV per share b 339.70p 333.83p
Dividend reinvestment factor c 1.003243 1.00609
Adjusted closing NAV per share d=b*c 340.80p 335.86p
NAV total return for the year (d/a)-1 2.09% 5.59%
-------------------------------- --------- ----------- --------------
NAV Total Return Since Restructuring (APM)
The NAV total return shows how the net asset value has performed
over a period of time taking into account both capital returns and
dividends paid to shareholders. NAV total return is calculated as
the change in NAV from the start of the period, assuming that
dividends paid to shareholders are reinvested on the payment date
in Ordinary shares at their net asset value.
For the
half year
ended Year ended
31 March 30 September
2023 2022
--------------------------------------- --------- ----------- --------------
NAV per share at reconstruction a 215.85p 215.85p
Closing NAV per share b 339.70p 333.83p
Dividend reinvestment factor c 1.043031 1.039646
Adjusted closing NAV per share d=b*c 354.32p 347.07p
NAV total return since reconstruction (d/a)-1 64.15% 60.79%
--------------------------------------- --------- ----------- --------------
(Discount)/Premium (APM)
A description of the difference between the share price and the
net asset value per share usually expressed as a percentage (%) of
the net asset value per share. If the share price is higher than
the NAV per share the result is a premium. If the share price is
lower than the NAV per share, the shares are trading at a
discount.
31 March 30 September
2023 2022
----------------------------- --------- --------- -------------
Closing share price a 317.00p 315.00p
Closing NAV per share b 339.70p 333.83p
Discount per Ordinary share (a/b)-1 6.68% 5.64%
----------------------------- --------- --------- -------------
Ongoing Charges (APM)
Ongoing charges are calculated in accordance with AIC guidance
by taking the Company's annual ongoing charges, excluding
performance fees and exceptional items, if any, and expressing them
as a percentage of the average daily net asset value of the Company
over the year.
Ongoing charges include all regular operating expenses of the
Company. Transaction costs, interest payments, tax and nonrecurring
expenses are excluded from the calculation as are the costs
incurred in relation to share issues and share buybacks.
Where a performance fee is paid or is payable, a second ongoing
charge is provided, calculated on the same basis as the above but
incorporating the amount of performance fee due or paid.
The ongoing charges figure as at 31 March 2023 is for the six
month period from 30 September 2022 and is annualised for
comparison with the full year's calculation as at 30 September
2022.
For the Year ended
half year 30 September
ended 2022
31 March
2023
-------------------------------- ------------------- --------------- ---------------
Investment Management fee GBP1,612,000 GBP3,008,000
Other Administrative Expenses GBP350,000 GBP658,000
--------------- ---------------
a GBP1,962,000 GBP3,666,000
Average daily net assets value b GBP455,773,000 GBP433,884,000
Ongoing Charges excluding
performance fee (a/182*365)/bx100 0.86% 0.84%
Performance fee c - -
--------------- ---------------
d=a+c GBP1,962,000 GBP3,666,000
Ongoing charges including
performance fee (d/182*365)/bx100 0.86% 0.84%
-------------------------------- ------------------- --------------- ---------------
Net Gearing (APM)
Gearing is calculated in line with AIC guidelines and represents
net gearing, i.e. total assets less cash and cash equivalents
divided by net assets. The total assets are calculated by adding
back the structural gearing which is the ZDP value. Cash and cash
equivalents are cash and purchases and sales for future settlement
outstanding at the year end.
31 March 30 September
2023 2022
------------------------------ ------------- ---------------- ---------------
Net assets a GBP411,952,000 GBP404,833,000
ZDP loan value b GBP38,118,000 GBP37,561,000
---------------- ---------------
Total assets c=(a+b) GBP450,070,000 GBP442,394,000
Cash and cash equivalents
(including amounts awaiting
settlement) d GBP1,116,000 GBP7,546,000
Net gearing ((c-d)/a)-1 8.98% 7.41%
------------------------------ ------------- ---------------- ---------------
FORWARD LOOKING STATEMENTS
Certain statements included in this half-year financial report
incorporating the interim management report contain forward-looking
information concerning the Company's strategy, operations,
financial performance or condition, outlook, growth opportunities
or circumstances in the countries, sectors or markets in which the
Company operates. By their nature, forward-looking statements
involve uncertainty because they depend on future circumstances,
and relate to events, not all of which are within the Company's
control or can be predicted by the Company. Although the Company
believes that the expectations reflected in such forward-looking
statements are reasonable, no assurance can be given that such
expectations will prove to have been correct. Actual results could
differ materially from those set out in the forward-looking
statements. For a detailed analysis of the factors that may affect
our business, financial performance or results of operations, we
urge you to look at the principal risks and uncertainties included
in the Strategic Report section on pages 34 to 36 of the Annual
Report for the year ended 30 September 2022. No part of these
results constitutes, or shall be taken to constitute, an invitation
or inducement to invest in Polar Capital Global Healthcare Trust
plc or any other entity and must not be relied upon in any way in
connection with any investment decision. The Company undertakes no
obligation to update any forward-looking statements.
HALF YEAR REPORT
The Company has opted not to post half year reports to
shareholders. Copies of this announcement will be available from
the Company Secretary at the Registered Office, 16 Palace Street,
London, SW1E 5JD and from the Company's website at
www.polarcapitalglobalhealthcaretrust.co.uk
Neither the contents of the Company's website nor the contents
of any website accessible from the hyperlinks on the Company's
website (or any other website) is incorporated into or forms part
of this announcement .
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END
IR BIGDUIGBDGXB
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