Final Results
24 Marzo 2006 - 10:19AM
UK Regulatory
RNS Number:3894A
BioScience VCT plc
24 March 2006
BioScience VCT plc
24 March 2006
Preliminary Results for the year ended 31 December 2005
Financial summary for the year ended 31 December 2005
31 December 2005 31 December 2004
(restated)**
Net assets #5,679,000 #6,295,000
Net revenue before tax #(324,000) #(6,000)
Revenue loss per share* (4.3)p (0.1)p
Net asset value per share 74.8p 82.9p
BioScience VCT plc is a Venture Capital Trust. The investment manager is Octopus
Asset Management Limited ("Octopus") The Company was launched in October 2001
and raised over #7 million (#6.8 million net of expenses) through an offer for
subscription. The Company invests in unquoted and quoted bioscience companies
and aims to provide attractive long term returns to shareholders.
* based on the weighted average of 7,596,393 (2004: 7,535,445) shares in issue
in the year.
** Comparative figures have been extracted from the statutory accounts for the
year ended 31 December 2004 and have been restated in accordance with UK
Financial Reporting Standard 26 in respect of the valuation of quoted
investments as disclosed in note 1 to the annual results. This restatement had
no material effect on the net asset value per share at 31 December 2004.
Chairman's statement
I am pleased to present my first annual report to shareholders in BioScience VCT
plc.
Board
During the year there were several changes to the composition of the Board. I
joined the Board in the summer of 2005 and became Chairman on 31 August 2005
following the resignation of Dr Paul Nicholson. In November 2005, Professor Alex
Markham resigned from the Board. Paul and Alex resigned from the Board as a
result of time pressures from their other commitments. I would like to take this
opportunity to thank Paul and Alex for their considerable contribution during
their time on the Board.
Investment Policy
Following the completion of a number of investments in unquoted and AIM-listed
companies during the last twelve months, BioScience VCT is now approximately
77% invested in VCT qualifying holdings. As at 31 December 2005, the
portfolio included holdings in 8 unquoted and 11 AIM-listed businesses. We will
continue to seek out further good opportunities, while at the same time managing
the existing portfolio of investments in order to generate as much value as
possible for shareholders during the coming years.
The Board is taking an active role in managing the portfolio. This involves
active support of investee companies by providing them with advice and contacts,
as well as working with them to ensure that they achieve the progress that will
be required in order for them to obtain the funding that may be needed for the
next stage of their development.
Investment Environment
Despite isolated examples of the acquisitions of UK-based bioscience companies
by larger biotechnology or pharmaceutical companies from around the world, the
general environment for UK-based bioscience companies remains challenging,
characterised by a poor overall availability of capital for companies in the
earlier stages of their development.
Although some commentators have suggested that 2006 may be a good year for
quoted biotech companies, it is clear that the UK stock market is not at present
prepared to ascribe the same value to companies with pipelines of products under
development as investors in US biotech companies. If this differential is not
closed by share price movements, it is possible that certain UK-based biotech
companies may become acquisition targets for their US rivals, providing UK
investors with a good exit route.
NAV
The Net Asset Value per share ("NAV") as at 31 December 2005 was 74.8p. Despite
good progress by a number of our unquoted holdings, we are not able to write
these valuations up at this stage under our valuation policy and the British
Venture Capital Association guidelines. These guidelines ensure prudence, and
correctly do not allow advanced discussions around licensing or sale to be
reflected in the values for the unquoted investee companies that we show in the
accounts.
In addition, the NAV has been negatively impacted by the requirement for us to
adopt certain new Financial Reporting Standards. These changes in accounting
standards, which have been implemented as part of the process of bringing UK
accounting practices into line with international standards, mean that we are
now required to value our AIM-listed holdings at bid prices, rather than mid
prices. This has a particularly significant impact on funds such as BioScience
VCT, which have holdings in small AIM-listed companies where the difference
between the bid and mid prices can be meaningful (bid prices are always lower
than mid prices). The introduction of the new accounting standards has resulted
in an NAV as at 31 December 2005 that is approximately 1.6p lower than it would
have been under previous accounting standards. We are working hard as a team to
generate value from our portfolio of investments and drive the NAV upwards.
As a result of the substantial level of investment in underlying holdings in
bioscience companies, the Fund had #1,369,000 held in cash and money market
funds at the end of 2005, a figure that is expected to reduce in the future as a
small number of additional investments are completed. As a result of this, the
income that is generated for the Fund from the cash and money market holdings
will remain low for the foreseeable future. In addition, as a result of the
nature of the underlying investments, the income that is generated from the
unquoted and AIM-listed investee companies is expected to be small, as few of
them pay dividends at present. The impact of this is that the Fund does not
generate sufficient income to defray the overall running costs, which has a
negative impact on NAV.
The Board is focused on identifying ways in which the Fund's ongoing running
costs can be reduced, in order to limit their impact on the Fund's overall
performance.
Investment Process
As a result of the number and type of investments that have already been made
and the reduction in the anticipated level of future investment activity, the
Board has reviewed the Fund's investment process and strategy. As we are nearly
fully invested we have a reduced ongoing requirement for the specialist due
diligence services that have been provided since the launch of the fund by
Medical Marketing International Group plc ("MMI").
The Board announced on 9 March 2006 that, by mutual consent, it had reached
conditional agreement with MMI for the termination of the Technology Adviser
contract. The agreement is conditional on BioScience VCT shareholders agreeing
to a change of name (see below) and to settlement of amounts due to MMI under
the agreement.
In addition, under the terms of the agreement, MMI will forego its entitlement
to any future payments of performance fees, and BioScience VCT has agreed to
indemnify and hold MMI harmless from and against any liabilities arising out of
or in connection with the services that it has performed for BioScience VCT,
except for investment decisions made by the Fund after relying on due diligence
performed by MMI.
The Board has also agreed to table a resolution at the Annual General Meeting to
be held on 19 April 2006 concerning a change of name of BioScience VCT (as the
name "BioScience" is associated with MMI). The Board strongly recommends that
shareholders vote in favour of the resolution to change the name of the Fund to
Hygea VCT plc.
On an ongoing basis, a simpler investment decision-making process is in place
whereby future investment proposals from the Investment Manager will be referred
to the full Board for approval. The impact of this is that the Investment
Committee and the Scientific Advisory Board (as described in the prospectus) no
longer operate. When necessary the Board will seek specific scientific and
technical input regarding potential investee companies from appropriate
specialist external experts. This change should reduce the Fund's overall
ongoing running costs, while allowing the Board access to appropriate specialist
advice that is relevant to the specific investment opportunity under
consideration.
Share Premium Account
I am pleased to be able to report that on 7 December 2005 the High Court
approved our application for permission to change our balance sheet structure
through the cancellation of part of the share premium account. This was
registered at Companies House on 15 December 2005. This now provides us with the
legal ability to carry out share buybacks which had previously been restricted
by the lack of distributable reserves.
Investors in VCTs sometimes need to sell their shares at a fairly early stage of
the VCT's life because of probate or other events. As 'second hand' VCT shares
do not qualify for upfront income tax relief, there tend to be few purchasers of
these shares. For this reason the sale of even a small number of VCT shares can
force the quoted share price well below the NAV.
Although the Board sees the use of share buy backs as a mechanism of last resort
to close the gap between the share price and the underlying NAV, our preference
is to focus on generating real value from the investee companies in order to
stimulate interest in the shares.
VCT Qualifying Status
PricewaterhouseCoopers LLP continues to provide the Board with advice on the
ongoing compliance with HM Revenue & Customs rules and regulations concerning
VCTs. The Board has been advised that BioScience VCT is in compliance with the
conditions laid down by HM Revenue & Customs for maintaining approval as a VCT.
Outlook
We are in the process of adapting the BioScience VCT's structure and cost base
to reflect its more mature position in the investment process.
The bioscience sector still provides exciting opportunities and, given skill,
support and patience, successful bioscience companies can amply reward their
investors. We have been encouraged by the progress that has been made in recent
months by some of our unquoted holdings. In addition, we hope that as we
progress through 2006 investors will adopt a more positive approach to quoted
biotech companies, which should result in benefits for our portfolio of
AIM-listed companies.
We look forward to updating you on the progress of our portfolio of investments
in due course.
James Otter
Chairman
24 March 2006
Income Statement Year ended 31 December 2005 Year ended 31 December 2004
Revenue Capital Total Revenue Capital Total
#000's #000's #000's #000's #000's #000's
Realised gain on investments - 8 8 - - -
Unrealised loss on investments - (123) (123) - (675) (675)
Income 34 - 34 222 - 222
Investment management fees (59) (177) (236) (52) (157) (209)
Other expenses (299) - (299) (176) - (176)
Loss on ordinary activities before tax (324) (292) (616) (6) (832) (838)
Tax on ordinary activities - - - - - -
Loss on ordinary activities after tax (324) (292) (616) (6) (832) (838)
Loss per share (4.3)p (3.8)p (8.1)p (0.1)p (11.0)p (11.1)p
Reconciliation of movements in shareholders' funds Year ended Year ended
31 December 2005 31 December 2004
#000's #000's
Shareholders' funds at start of year 6,299 6,911
Middle market price to bid price valuation movement (4) (6)
Restated shareholders' funds at start of year 6,295 6,905
Loss on ordinary activities after tax (616) (838)
Net proceeds of share issue - 232
Cost of share buyback - (4)
Shareholders' fund at end of year 5,679 6,295
Balance Sheet 31 December 2005 31 December 2004
(restated)
#000's #000's
Fixed asset investments 4,428 1,383
Current assets:
Debtors 13 210
Cash at bank 1,369 4,742
1,382 4,952
Creditors: amounts falling due within one (131) (40)
year
Net current assets 1,251 4,912
Net assets 5,679 6,295
Called up equity share capital 3,798 3,798
Share premium 1,722 3,422
Special distributable reserve 1,700 -
Capital redemption reserve 5 5
Capital reserve - realised (534) (365)
- unrealised (680) (557)
Revenue reserve (332) (8)
Total equity shareholders' funds 5,679 6,295
Net Asset Value Per Share 74.8p 82.9p
Cash Flow Statement Year ended Year ended
31 December 2005 31 December 2004
#000's #000's #000's #000's
Net cash outflow from operating activities (213) (454)
Financial investment:
Purchase of investments (3183) (1207)
Sale of investments 23 -
Net cash outflow from financial investment (3160) (1207)
Net cash inflow from management of liquid - 5,969
resources
Dividends paid - equity - (37)
Net cash (outflow)/inflow before financing (3373) 4,271
Financing:
Issue of ordinary shares - 244
Share issue expenses - (12)
Repurchase of own shares - (4)
Total financing - 228
(Decrease)/Increase in cash resources (3373) 4,499
Notes to the preliminary announcement
Fixed asset investments Unlisted AIM-listed Listed Total
investments investments investments
Book cost as at 1 January 2005 1,613 312 15 1,940
Restatement from middle market to bid price - (4) - (4)
Unrealised appreciation at 1 January 2005 (456) (102) 5 (553)
Valuation at 1 January 2005 1,157 206 20 1,383
Movements in the year:
Purchases at cost 1,495 1,688 - 3,183
Disposals - - (23) (23)
Transfers (119) 119 - -
Net realised gain - - 8 8
Decrease in unrealised appreciation (118) - (5) (123)
Valuation at 31 December 2005 2,415 2,013 - 4,428
Comprising:
Book cost at 31 December 2005 2,657 2,451 - 5,108
Unrealised appreciation at 31 December 2005 (242) (438) - (680)
Investment Portfolio Summary 31 December 2005 Total Cost Carrying Value
#000's #000's
Unlisted investments
BioAnaLab Ltd 250 250
Caretek Medical Ltd 100 100
DxS Ltd 263 262
Hallmarq Veterinary Imaging Ltd 500 500
ImmunoBiology Ltd 300 300
Insense Ltd 148 181
Purely Proteins Ltd 371 222
Scancell Ltd 725 600
2,657 2,415
AIM-listed investments
Abcam plc 44 66
Angel Biotechnology Holdings plc 750 378
BBI Holdings plc 62 65
Cobra Bio-manufacturing plc 137 72
DawMed Systems plc 101 63
Evolutec Group plc 347 334
NeutraHealth plc 360 428
Phoqus Group plc 150 150
ReNeuron Group plc 150 144
Stem Cell Sciences plc 250 206
York Pharma plc 100 107
2,451 2,013
5,108 4,428
The above summary of results for the year ended 31 December 2005 does not
constitute statutory financial statements within the meaning of section 240 of
the Companies Act 1985 and has not been delivered to the Registrar of Companies.
Statutory financial statements will be filed with the Registrar of Companies in
due course; the auditors report on those financial statements under S235 of the
Companies Act 1985 is unqualified and does not contain a statement under S237
(2) or (3) of the Companies Act 1985.
A copy of the full annual report and financial statements for the year ended 31
December 2005 is expected to be posted to shareholders shortly and will be
available to the public at the registered office of the company at 8 Angel
Court, London, EC2R 7HP.
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
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