TIDMPCGH TIDMPGHZ
RNS Number : 1197N
Polar Capital Global Health Tst PLC
18 May 2020
POLAR CAPITAL GLOBAL HEALTHCARE TRUST PLC
Unaudited Results Announcement for the Six Months to 31 March
2020
LEI: 549300YV7J2TWLE7PV84 18 May 2020
HIGHLIGHTS IN DETAIL
For the year
For the six to
months to 30 September
Performance 31 March 2020 2019
-------------------------------------------------- -------------- -------------
Net asset value per ordinary share (total return)
(note 1) -5.97% -1.24%
Benchmark index
MSCI ACWI/Healthcare Index (total return in
Sterling with dividends reinvested) +0.34% 3.14%
-------------------------------------------------- -------------- -------------
Since restructuring on 20 June 2017
-------------------------------------------------- -------------- -------------
Net asset value per ordinary share (total return)
(note 2) +5.03% +11.69%
Benchmark index total return +17.08% +16.69%
-------------------------------------------------- -------------- -------------
Expenses
-------------------------------------------------- -------------- -------------
Ongoing charges (note 3) 1.01% 1.01%
-------------------------------------------------- -------------- -------------
Financials (Audited)
(Unaudited) As at
As at 30 September Change
31 March 2020 2019
------------------------------------- -------------- -------------- --------
Total net assets (Group and Company) GBP268,898,000 GBP288,447,000 -6.8%
Net asset value per ordinary share 221.73p 236.88p -6.4%
Net asset value per ZDP share 108.58p 106.99p +1.5%
Price per ordinary share 196.00p 218.00p -10.1%
Discount per ordinary share 11.6% 8.0%
Price per ZDP share 104.50p 108.50p -3.7%
Net gearing 10.16% 7.21%
Ordinary shares in issue (excluding
those held in treasury) 121,270,000 121,770,000 -0.4%
Ordinary shares held in treasury 2,879,256 2,379,256 +21.0%
ZDP shares in issue 32,128,437 32,128,437 -
------------------------------------- -------------- -------------- --------
Amount per
Dividends paid and declared Ordinary Ex-Dividend Declared
in the period: Pay Date share Record Date Date date
The Company has paid the
following dividend relating
to the financial year 28 February 7 February 6 February 19 December
ended 30 September 2019: 2020 1.10p 2020 2020 2019
----------- ---------- ----------- ----------- ------------
Dividends for the current financial year ending 30 September 2020,
if declared, will be paid in August 2020 and February 2021.
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 non-recurring expenses expressed as a percentage of the average daily net asset
value, in accordance with AIC guidance issued in May 2012. From 3 January 2018, the research
cost borne by the Company is included in the ongoing charges calculation.
For further information Tracey Lago FCG Tel: 020 7227 2700
please contact: Company Secretary
Polar Capital Global Healthcare
Trust Plc
INTERIM MANAGEMENT REPORT
CHAIRMAN'S STATEMENT
Dear Shareholders, I have the dubious honour of delivering my
first report to you as Chairman of the Company in the midst of the
economic and stock market fall-out from the global COVID-19
pandemic. This is a difficult time for all and above everything, we
hope that you and your families are safe and well. However, it
falls to us here to outline to you the performance of the Company
for the six-months to 31 March 2020 which includes the most
turbulent market time of this situation so far.
Performance
Within the Investment Manager's Review, the team outline a
reminder of the Company's investment strategy and provide some
insight into the stocks held, along with the winners and losers
over the six-month period. The early part of the period was
challenging for fundamental investors, as we grappled with
uncertainty over Brexit, a UK General Election and a ramping up of
the political rhetoric in the US. During this period, performance
was steady and marginally ahead of the benchmark. This was all
dwarfed in March as fear dominated financial markets, as
uncertainty as to the economic impact of COVID-19 took hold.
Healthcare did well against the overall market, but a sudden dash
for cash, liquidity and defensive positioning was very challenging
to navigate in those late weeks of the half-year. This caused a
marked drag on performance in March, dominating the half-year
performance numbers, as explained in some detail by the Managers in
their report below. We however remain confident that healthcare
remains an area which we believe should continue to offer great
growth opportunities as we weather and look beyond this current
phase of the crisis.
The Board
As reported in our Annual Report for the year ended 30 September
2019, the second phase of the Board's succession plan was completed
on 1 December 2019 with the appointments of Andrew Fleming and
Jeremy Whitley. All Directors were re-elected at the Annual General
Meeting held on 26 February 2020 at which James Robinson and Tony
Brampton stood down. I would like to express my personal thanks to
both James and Tony who were founding directors and gave their
support and guidance from launch to retirement. James led the
Company from launch as Chairman and I hope to fulfil the role as
positively going forward.
Fees
I am pleased to confirm that the Board has negotiated with Polar
Capital and has agreed that a side letter to the Investment
Management Agreement ("IMA") be put in place providing for a cap,
of 3.5% of the NAV on the date of crystallisation, on any
performance fee that may be earned under the current terms of the
IMA.
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 IAS34 as adopted by the European Union and gives
a true and fair view of the assets, liabilities, financial position
and profit or loss of the Company as at 31 March 2020; 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 2020 has not been audited or reviewed by the Auditors.
The half year financial report was approved by the Board on 15
May 2020.
On behalf of the Board
Lisa Arnold
Chairman
CORPORATE MATTERS
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 28 to 30 of the Annual Report for
the year ended 30 September 2019. The principal risks and
uncertainties are categorized into four main areas: Business,
Portfolio Management, Infrastructure and External. The Directors
consider that these principal risks and uncertainties remain
unchanged for the six months from 1 April 2020.
The uncertainty surrounding Brexit has now reduced as we move
into the transition phase. However, the COVID-19 pandemic is having
a very substantial impact on the global economy which will affect
the Company and the performance of its underlying investments. The
impact of the pandemic has varied between healthcare sub-sectors
but, overall, the healthcare sector outperformed the market during
March, which was the month when the main impact of the crisis was
felt in the UK. The Investment Manager has made some changes to the
portfolio in response to the differing fortunes of the various
sub-sectors. As the global economy begins to contemplate a recovery
from the impact of the pandemic, the outlook for the healthcare
sector is positive. Demand for healthcare products and services
will remain high and, in a period of general uncertainty, the
healthcare sector should be one of relatively few sectors offering
good prospects for resilient growth.
The Investment Manager and the Company's other third-party
service providers have successfully implemented business continuity
arrangements during the COVID-19 pandemic, and as a result the
Company has experienced no failures in service provision.
Going Concern
The Board continually monitors the financial position of the
Group and Company, and in connection with the new risks presented
by the COVID-19 pandemic, has refreshed the stress-testing which
was completed at the last year end, in order to confirm the
Company's ability to continue as a going concern under the current
conditions. These tests included a revised five-year cash flow
forecast which demonstrated the Company's ability to meet its
short-term and long-term obligations. Having conducted these
revised stress-tests, the Board is satisfied that it is appropriate
to continue to adopt the going concern basis in preparing the
financial results of the Group and Company.
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 2020.
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.
On behalf of the Board
Lisa Arnold
Chairman
INVESTMENT MANAGER'S REVIEW
The objective of Polar Capital Global Healthcare Trust plc (the
"Company") is to generate long-term capital appreciation by
investing in a globally diversified portfolio of healthcare
companies, to include, but not limited to, pharmaceutical,
biotechnology, medical device and healthcare services companies.
Stock selection is central to the process, looking to identify
companies where there is a disconnect between valuations and the
near and medium-term growth drivers. Whilst the Company primarily
focusses on leading healthcare companies with resilient,
medium-term growth profiles, it also has the opportunity to invest
in earlier-stage, more innovative and disruptive companies.
Structural debt, in the form of Zero Dividend Preference shares
with a repayment date of 19th June 2024, offers access to
additional liquidity and the opportunity to enhance returns
In terms of structure, the majority of the assets (calculated on
a gross basis and referred to as the Growth Portfolio) will be
invested in companies with a market capitalisation >$5bn at the
time of investment, with the balance invested in companies with a
market capitalisation <$5bn at the time of investment (a maximum
of 20% of gross assets and referred to as the Innovation
Portfolio). At the end of the reporting period, 31 investments were
in the Growth Portfolio comprising 98.9% of net assets and 12
investments were in the Innovation Portfolio, comprising 10.8% of
net assets.
Performance review
Over the six-month period to the end of March 2020 the
healthcare sector dramatically outperformed global stock markets.
For the 5 months from 1 October 2019 to 29 February 2020, the
Company was modestly ahead of the benchmark. The collapse in
markets in March, however, defined the performance period under
review. Over the full period, the Company lagged its benchmark
index returning -5.97% versus a gain of 0.34% for the index.
Further details are provided below. Due to the unprecedented global
situation, this is presented as a two-fold analysis, focussing
firstly on the 5 months from October 2019 to the end of February
2020 followed by the March period.
Performance -- October 2019 to February 2020
From the beginning of October 2019 to the end of February 2020,
the Company returned 1.25% versus 0.97% for the benchmark (MSCI All
Country World Index/ Healthcare (total return in Sterling)), a
difference of 0.28%. Over this period stock selection was a
positive driver whereas allocation was a negative driver of
relative performance Small and large-cap exposures were positive
over the period.
On a geographical basis exposure to the US and Europe was
positive with significant outperformance from the US and EU from
stock selection. Underweight positioning in Asia Pacific ex Japan
was negative as was the gearing which at the end of the period
under review was 10.16% having started the period at 7.21%.
In terms of sub-sectors, on allocation, overweight positions in
biotechnology and the underweight position in pharmaceuticals were
positives, whilst the overweight in medical devices was a negative.
Stock selection was positive for pharmaceuticals, healthcare
services, healthcare IT, healthcare facilities and healthcare
equipment. Stock selection was negative for biotechnology and
healthcare supplies.
Positive individual stocks over the period included Horizon
Therapeutics, UCB, Dexcom, Cigna and Humana. Horizon Therapeutics
outperformed driven by beating sales and earnings expectations, and
also showed progress with its drug pipeline. UCB also moved higher
due to operational progress and hopes of a turnaround from its drug
pipeline. US-based diabetes company, Dexcom, continued to surpass
even the most bullish expectations, with its continual glucose
monitoring technology the key driver. Cigna and Humana are both
leading managed care/healthcare services operators with the former
re-rating from a very attractive valuation and the latter
continuing to grow strongly given its entrenched position in the
fast-growing US Medicare marketplace. Negatives were Quotient,
Hill-Rom, Alexion, Beckton Dickinson and Iqvia. Quotient lagged due
to a major investor selling their position due to fund closure
whilst Hill-Rom underperformed due to uncertainties with the
near-term organic revenue growth outlook. Alexion was impacted by
concerns over intensifying competition, whilst Beckton Dickinson
was hit with a major product issue at the regulator. Lastly, CRO
Iqvia missed heightened growth expectations.
Performance -- March 2020
March was essentially a stock market crash with extreme fear
witnessed in the middle of the month. The healthcare sector
outperformed, but driven by defensive stocks, including large-cap
pharmaceutical and large-cap biotechnology. Also, any companies
attempting to develop drugs or diagnostics in relation to COVID-19
saw their stocks outperform. The Company lagged its benchmark by
6.50%, returning -7.13% versus -0.63% for the benchmark.
Asset allocation was a negative driver with the Company being
overweight in mid-capitalisation stocks on a relative basis, as was
stock selection in large-capitalisation securities. On a
geographical basis, overweight positioning in Europe and the US on
a relative basis was negative driven mainly by stock selection. On
a sub-sector basis, being overweight in biotechnology was a
positive in terms of allocation, with negatives being the
overweight positions in managed care, healthcare facilities and
healthcare equipment. Also, stocks with gearing were punished
indiscriminately. The challenge in large-capitalisation stock
selection was the impact on healthcare equipment and healthcare
facilities sub-sectors. The COVID-19 pandemic has led to a collapse
in elective care procedures at hospitals, hence the dramatic fall
in the share prices of many companies in these sub-sectors. On the
drug development side, clinical trials for non-coronavirus drug
development have been delayed or paused, negatively impacting the
outsourcing providers (Clinical Research Organisations or
CROs).
Stocks that outperformed included defensive pharmaceuticals such
as Roche Holdings and Novo Nordisk. Other positive contributors
included Medley, Centene and Hill-Rom. Medley is a leading provider
of telehealth services in Japan and will likely see a significant
increase in revenue driven by a dramatic escalation in doctor
contact through online forums. Centene, which is primarily focussed
on Medicaid and individual exchanges, is the best positioned
managed care company considering the likely medium-term
implications for rising unemployment in the US. Lastly, Hill-Rom is
a medical device company that provides crucial equipment needed at
hospitals to treat patients suffering from the virus. The main
underperforming stocks included HCA, Smith & Nephew, Quotient,
Iqvia and Stryker. HCA is the leading US hospital operator in the
US and thus suffered for reasons described above, as did healthcare
equipment companies Smith & Nephew and Stryker. Iqvia is the
largest CRO and lagged again for reasons described above but also
due to its gearing. Quotient, a small-cap stock was weak like other
small-caps due to the high beta nature of its stock.
Relative Contributors (%) - 30 September 2019 - 31 March
2020
Average Stock Total Attribution
Stock Active Stock Return Effect
Top 10 Weight Weight Return vs BM
Medtronic Inc 0.00 -2.56 -16.82 -16.97 0.48
-------- --------- --------- -------- ------------------
Medley Inc 0.47 0.47 62.02 61.87 0.45
-------- --------- --------- -------- ------------------
UcB Sa 2.54 2.35 18.32 18.17 0.44
-------- --------- --------- -------- ------------------
DexCom Inc 0.47 0.12 78.86 78.71 0.42
-------- --------- --------- -------- ------------------
Zealand Pharma
A/S 1.34 1.34 33.65 33.50 0.38
-------- --------- --------- -------- ------------------
Novo Nordisk A/S 3.30 1.50 17.55 17.40 0.34
-------- --------- --------- -------- ------------------
Pfizer Inc 0.00 -3.60 -8.14 -8.29 0.33
-------- --------- --------- -------- ------------------
Incyte Corp 2.51 2.25 -2.21 -2.36 0.31
-------- --------- --------- -------- ------------------
Cigna Corp 3.58 2.33 15.74 15.59 0.30
-------- --------- --------- -------- ------------------
BELLUS Health Inc 0.51 0.51 52.11 51.96 0.27
-------- --------- --------- -------- ------------------
Average Stock Total Attribution
Stock Active Stock Return Effect
Bottom 10 Weight Weight Return vs BM
-------- --------- --------- -------- --------------------
Quotient Ltd 1.74 1.74 -49.61 -49.75 -1.05
-------- --------- --------- -------- --------------------
HCA Holdings Inc 3.34 2.71 -25.57 -25.72 -0.78
-------- --------- --------- -------- --------------------
IQVIA Holdings
Inc 2.27 1.85 -28.42 -28.57 -0.72
-------- --------- --------- -------- --------------------
Smith & Nephew
PLC 1.79 1.44 -26.31 -26.46 -0.67
-------- --------- --------- -------- --------------------
Intuitive Surgical
Inc 2.83 1.69 -9.08 -9.23 -0.58
-------- --------- --------- -------- --------------------
UnitedHealth Group
Inc 0.00 -4.49 14.64 14.50 -0.57
-------- --------- --------- -------- --------------------
Cash and others -7.88 -7.88 4.33 4.19 -0.54
-------- --------- --------- -------- --------------------
PRA Health Sciences
Inc 2.15 2.15 -17.04 -17.19 -0.46
-------- --------- --------- -------- --------------------
Oxford Immunotec
Global 0.80 0.80 -44.80 -44.95 -0.42
-------- --------- --------- -------- --------------------
Varian Medical
Systems 3.08 2.87 -14.55 -14.70 -0.40
-------- --------- --------- -------- --------------------
COVID-19
http://www.rns-pdf.londonstockexchange.com/rns/1197N_3-2020-5-15.pdf
Source: thepharmaletter.com
This picture shows the basic structure of COVID-19. COVID-19 is
a coronavirus. Coronaviruses are typically carried by animals but
there have been a small number of outbreaks where we have seen a
coronavirus transfer from animal to human. Previous outbreaks were
SARS and MERS which were effectively contained. At the time of
writing, COVID-19 has not yet been contained and has sadly created
this pandemic, which will hopefully prove to be a once in a
lifetime event. Thankfully efforts such as lockdowns and social
distancing are working with a slowdown in net new infections
already occurring across the globe, dependent on when lockdowns
were put in place.
http://www.rns-pdf.londonstockexchange.com/rns/1197N_6-2020-5-15.pdf
Source: H.K. Siddiqi et al, 2020
This diagram illustrates the various stages of the infection, in
terms of immune and inflammation response. Efforts are being made
to develop therapeutics for use in all 3 of the different stages,
with the first stage (early infection) obviously being preferable
and then long-term prevention through vaccination.
http://www.rns-pdf.londonstockexchange.com/rns/1197N_1-2020-5-15.pdf
Source: Wolfe Research
Pharmaceutical and biotechnology companies and academia are
working 24/7 to generate both therapeutics to treat COVID-19 and
vaccines to protect patients from infection. There are currently
over 250 clinical trials planned, many of which are actively
recruiting patients, and results from a significant number of these
studies are expected within the next 12 months. There is tremendous
support from regulatory bodies to boost the speed at which these
products can be used in patients. There are three main strategies
at present, targeting the virus directly, targeting downstream and
the vaccine approach.
Significant efforts have been made to improve diagnostic testing
of COVID-19. The first tests using a technology called PCR were
developed to detect if a patient is infected. The second tests just
being launched now are called serological tests. These identify
whether a person has had an infection, developed antibodies and
therefore hopefully immunity from reinfection. Serological testing
will be critical for determining the scale of the disease,
especially as many people have been infected but experienced none
or only mild symptoms. At present, there is no way of determining
how many of these people there are. From the results of this test,
those that have antibodies should have immunity against COVID-19.
In the case of SARS for example, patients that had suffered from
the infection were able to generate antibody-based immunity for up
to 3 years. This test could therefore change how this pandemic is
managed. Those that test positive may well have immunity and
therefore could be allowed out of lockdown and be able to return to
a "normal life" and head back to work.
http://www.rns-pdf.londonstockexchange.com/rns/1197N_2-2020-5-15.pdf
Source: Morgan Stanley Research, March 2020
This schematic highlights how, theoretically, the landscape for
this pandemic could change over the next several months, through
the use of testing, therapeutics and, hopefully, effective
vaccines. This is shown for the US but is relevant to all other
countries. Some are currently ahead, while others lag behind, but
it is important to acknowledge it is a very fluid situation.
US political environment more supportive
During the reporting period the political environment in the US
has become more supportive for the healthcare sector, or at a bare
minimum the greatest fears have dissipated. With the more
progressive candidates (Elizabeth Warren and Bernie Sanders) no
longer in the running, the more moderate Joe Biden is the clear
favourite for the Democratic nomination removing some of the more
draconian threats to the healthcare industry. Focusing purely on
healthcare, if Biden wins the Presidency one of his primary
priorities will be bolstering the Affordable Care Act (ACA),
essentially reversing the actions taken by the Trump
Administration. Prima facie this would be positive for the
healthcare industry, increasing the number of insured US citizens
in the system which has positive implications for volumes (i.e. up)
and bad debts (i.e. down). A note of caution however, as Biden has
raised the spectre of Medicare-like public insurance plans which
would have negative implications for the managed care industry.
This risk is diminished if the Democrats have a slim majority or if
a number of moderate Democrats are in those Senate seats, but it is
something to be aware of. One additional risk worth highlighting is
one of tax reform with one of Biden's proposals being raising
corporate tax -- the managed care industry was one of the biggest
beneficiaries of the Trump Administration's tax reform.
With regards to drug pricing there are near and medium-term
scenarios worth discussing. In the near-term, Congress is unlikely
to act on drug pricing legislation until after the November
election. Why? The recently announced CARES Act included funding
through 30 November 2020 for certain Medicare programs, extending
the funding that was previously in place and set to expire on 22
May 2020. That May date was the original catalyst to start drug
pricing negotiations but it has now been lost and Congress does not
have a legislative vehicle with which to work. Further, the
COVID-19 crisis has lifted some of the near-term political pressure
on the pharmaceutical and biotechnology industries rendering an
Executive Order less likely ahead of the elections. Looking further
out, one of Biden's policies is to allow Medicare to negotiate
directly on drug pricing but that would need a change in Law and a
majority in the Senate.
Strategy and positioning
As a reminder, the objective of the Company is to achieve
long-term capital appreciation by investing in a globally
diversified portfolio of 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 the near and
medium-term growth drivers.
Within the Growth Portfolio, we continue to be underweight
pharmaceuticals relative to the benchmark, although do acknowledge
that the sector's defensive characteristics have near-term appeal.
With no significant supply-chain issues at the time of writing,
pharmaceutical and large-cap biotechnology companies have been
largely able to display defensive, operational characteristics
through the COVID-19 crisis. Patients that require lifesaving
medications are getting what they need and indeed, in the very
short term, there has been an increase in volumes driven by
physicians writing prescriptions for longer periods and enhanced
uptake in certain therapeutic categories such an anti-depressants
and pneumococcal vaccines. Looking further out however, new drug
launches may be temporarily disrupted with sales reps sitting at
home instead of interacting with prescribing physicians, and
clinical trials could be disrupted if trial sites become
inaccessible and/or patient recruitment is challenged.
The recent additions of Roche Holdings and Bristol-Myers Squibb
are consistent with this view. Swiss-based Roche generates the
majority of its revenue from oncology, which should prove to be
resilient through the COVID-19 crisis, has a deep late-stage
pipeline and has a secure dividend. Further, Roche could benefit in
the near-term from the COVID-19 crisis by way of having a
therapeutic in development (Actemra) and by being one of the
world's largest providers of diagnostic equipment and consumables.
In a similar vein, but with a more value-orientated bias,
Bristol-Myers Squibb has an established oncology franchise and an
evolving pipeline that we believe is not captured with the current
valuation.
Biotechnology is now the biggest over-weight in the Company,
relative to the benchmark. The recent market correction offered a
great opportunity to invest in some high-quality companies. With a
focus on management teams, differentiated medicines and
technologies, we believe the regulatory environment is incredibly
supportive at present. Further, the industry is well capitalised
and will continue to pursue ground-breaking medical innovation,
which should translate into value creation for investors
irrespective of the broader macro-economic environment.
We are also over-weight life sciences tools and services,
reflecting a view that the challenges facing the end markets are
transient. Indeed, not only is the Asia Pacific region starting to
show the green shoots of recovery, the industry has been heavily
involved in the development and manufacture of testing kits to help
manage the COVID-19 crisis.
COVID-19 has had a significant impact on the medical device
sector as the market digests the dramatic slowdown in elective and
non-urgent procedures. As a reminder, hospitals and providers
swiftly moved to free-up capacity for COVID-19 patients at the
expense of procedures considered to be non-urgent. We remain
constructive, however, given there is absolutely no doubt that the
demand for medical devices will resume, and the industry will
continue to innovate. It is the pace and magnitude of that recovery
that is hard to quantify, this uncertainty is reflected in our
modest over-weight stance.
The political backdrop has been very supportive for managed care
and services companies, plus the near-term sales and earnings
trajectories should be reasonably secure given postponed or
cancelled elective procedures could ease medical cost trends for
the industry. Looking further out, the cost of treating severe
COVID-19 patients could be material and rising US unemployment is
also a challenge, especially for those with more exposure to the
commercial market. Lastly, and this is not healthcare specific, a
Biden presidency could bring with it higher corporate taxes, which
would have implications for managed care's medium-term earnings
power.
For the Innovation Portfolio, several assessments have been made
due to the impact of COVID-19 as many of the companies held are not
profitable. All holdings' balance sheets have been checked for cash
runway and the need to refinance. Also, the ability to refinance
was considered in the context of volatile stock/debt markets. For
companies with products in development, many clinical trials are on
hold for obvious reasons. Thus, for all relevant companies, impact
to timelines have been analysed and the ability of companies to
make changes to trials and maintain integrity of clinical studies
in the current environment has been reviewed. This is particularly
relevant to Bellus, Zymeworks, Zealand and Quotient. Companies
launching new products in particular are facing challenges as sales
forces are in lockdown. This is particularly relevant for Biohaven
and Axonics. All companies held in the Innovation Portfolio were
maintained or increased following the analysis described. Also, a
position in ArgenX was added during the weakness in March. ArgenX
is a high quality European based biotechnology company which has a
large and differentiated pipeline with the potential to generate
incredible value over the years to come.
Three companies in particular have products/services that have
proven to be important during this crisis. Medley in Japan is a
leading provider of software for telemedicine whereby patients can
access their doctors through videocalls as opposed to going to the
doctor's practice. Previously utilisation in Japan of telemedicine
has been limited. The restrictions on this have been lifted due to
the acceleration in infected cases in Japan and should see a
significant increase in the use of telemedicine as has been seen in
many other countries. Quotient has developed a serological test for
research use to assess whether patients have generated antibodies
post infection with COVID-19. As described earlier, development of
this type of system will be crucial in terms of assessing how many
patients may have immunity to COVID-19, having already been
infected. Quotient's system can carry out 3000 tests per day per
machine. Intelligent Ultrasound provided its BodyWorks COVID-19
ultrasound simulator at the NHS Nightingale hospital at the Excel
Centre in London so clinicians can rapidly be trained to use
ultrasound to manage the respiratory impact of the COVID-19
infection.
The stocks held in the Innovation portfolio are likely to be
more volatile in the weeks and months to come as countries move out
of lockdown and likely face further outbreaks of COVID-19. Extreme
weakness and panic in markets in March created opportunities to add
to stocks held in the Company, with Ship Healthcare and Biohaven
Pharmaceuticals good examples. As mentioned above, we also added
Belgian biotechnology company, Argenx, to the portfolio. Over the
short to medium term, new opportunities will likely present
themselves to add to these holdings with the potential for upside
as all companies held offer significant potential over the
long-term which will remain the focus of this part of the
Company.
The outlook for healthcare is compelling
The outlook for healthcare is positive given we anticipate the
demand for healthcare products and services to continue, and in
some cases accelerate, post the COVID-19 crisis. In an uncertain
world, the resilient growth profile of the healthcare sector offers
appeal, with financially sound large-capitalisation companies
especially well positioned. At the same time, the political back
drop is supportive, valuations in the US are attractive (Source;
Ned Davis) and we have only just begun to see a change in sector
leadership relative to the S&P 500 (Source: Strategas).
http://www.rns-pdf.londonstockexchange.com/rns/1197N_4-2020-5-15.pdf
Source: Ned Davis Research Inc., 3 January 1992 to 8 May 2020.
Sector earnings estimate calculated by NDR using available mean
1-year forward earnings estimates for sector constituents.
Copyright 2020 Ned Davis Research, Inc. Further distribution
prohibited without prior permission. All Rights Reserved. See NDR
Disclaimer at www.ndr.com/copyright.html . Past performance is not
indicative or a guarantee of future results.
http://www.rns-pdf.londonstockexchange.com/rns/1197N_5-2020-5-15.pdf
Source: Strategas, 5 April 2020. Past performance is not
indicative or a guarantee of future results. All opinions and
estimates constitute the best judgment of Polar Capital as of the
date hereof, but are subject to change without notice, and do not
necessarily represent the views of Polar Capital.
The precise pace and magnitude of a post-COVID-19 economic
recovery is difficult to predict but there is a high degree of
conviction that the demand for healthcare products and services is
not permanently impaired. Indeed, outside of therapeutics, vaccines
and testing kits, other areas of healthcare could see more
sustained periods of growth as the system looks to address
shortfalls that have, unfortunately, been highlighted by the
COVID-19 crisis. The use of telehealth and remote monitoring
services, for example, could see broader adoption having
undoubtedly proved their value. Manufacturers of ICU units,
monitors, ventilators and hospital beds might also see sustained
levels of growth as healthcare systems move to insure against
future need.
Assessing the opportunity for alternative routes of delivery
also needs to be explored given the role that out-patients
facilities, ambulatory care centres and home care could play, not
just in easing the post-COVID-19 backlog, but in offering more
efficient and economically attractive platforms for care delivery.
Given they address high unmet medical needs, it is hard to envisage
a radically different appetite for pharmaceuticals and vaccines in
the medium-term. Further, demand for medical devices associated
with hitherto postponed elective procedures will likely return, as
will investment in the capital equipment and consumables
manufactured by the life sciences industry.
In conclusion, whilst we believe that established healthcare
companies are well positioned in these uncertain health and
economic times, it is also important to note that those that can
innovate and produce highly differentiated therapeutics,
technologies and services can also flourish. We are fortunate in
that healthcare is a very diverse sector, offering opportunities to
invest in earlier stage companies looking to disrupt the status quo
alongside companies with more "blue chip" characteristics.
Financial stability is essential, but we also look for product
leadership, a commitment to innovation and experienced management
teams with strong track records. Importantly, resilient growth,
which we believe healthcare can offer, has high appeal in the
current environment.
James Douglas and Gareth Powell
Co-Managers
15 May 2020
PORTFOLIO AS AT 31 MARCH 2020
(Figures in brackets denote the comparative ranking as at 30
September 2019)
Ranking Stock Market Value % of total
Sector Country GBP'000 net assets
2020 2019 31 30 31 30
March September March September
2020 2019 2020 2019
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
1 (-) Roche Pharmaceuticals Switzerland 17,277 - 6.4% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Bristol Myers
2 (-) Squibb Pharmaceuticals United States 13,696 - 5.1% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
3 (3) Novo Nordisk Pharmaceuticals Denmark 13,009 13,763 4.8% 4.8%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
4 (1) Merck & Co Pharmaceuticals United States 12,662 18,235 4.7% 6.3%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
5 (13) AbbVie Biotechnology United States 11,894 8,602 4.4% 3.0%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
6 (2) Sanofi Pharmaceuticals France 10,920 14,896 4.1% 5.2%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Life Sciences
7 (10) Bio-Rad Tools & Services United States 10,537 8,977 3.9% 3.1%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
8 (18) Becton Dickinson Equipment United States 10,359 7,961 3.9% 2.8%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Fresenius Healthcare
9 (-) Medical Care Services Germany 10,231 - 3.8% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
10 (-) Centene Managed Healthcare United States 9,720 - 3.6% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Top 10 investments 120,305 44.7%
------------------- --------------- --------- ----------- -------- -----------
Baxter Healthcare
11 (22) International Equipment United States 9,471 7,022 3.5% 2.4%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
12 (8) Cigna Services United States 9,183 9,612 3.4% 3.3%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
13 (14) Boston Scientific Equipment United States 9,165 8,598 3.4% 3.0%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
14 (12) HCA Healthcare Facilities United States 8,480 8,758 3.2% 3.0%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
15 (9) Grifols Biotechnology Spain 8,271 9,611 3.1% 3.3%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
16 (-) UCB Pharmaceuticals Belgium 8,262 - 3.1% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
17 (15) Incyte Biotechnology United States 8,142 8,193 3.0% 2.8%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Horizon
18 (20) Therapeutics Pharmaceuticals United States 7,783 7,375 2.9% 2.6%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Varian Medical Healthcare
19 (26) Systems Equipment United States 7,774 6,202 2.9% 2.2%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
20 (-) Alexion Biotechnology United States 7,095 - 2.6% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Top 20 investments 203,931 75.8%
------------------- --------------- --------- ----------- -------- -----------
Agilent Life Sciences
21 (19) Technologies Tools & Services United States 6,807 7,462 2.5% 2.6%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
PRA Health Life Sciences
22 (17) Sciences Tools & Services United States 6,576 8,081 2.4% 2.8%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
23 (-) Catalent Pharmaceuticals United States 6,480 - 2.4% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Life Sciences
24 (25) IQVIA Tools & Services United States 6,429 6,624 2.4% 2.3%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
ACADIA
25 (-) Pharmaceuticals Biotechnology United States 6,105 - 2.3% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Neurocrine
26 (-) Bioscience Biotechnology United States 6,013 - 2.2% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
27 (29) Hill-Rom Equipment United States 5,896 5,888 2.2% 2.0%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
28 (23) Anthem Managed Healthcare United States 5,870 6,802 2.2% 2.4%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
29 (-) Lundbeck Pharmaceuticals Denmark 5,463 - 2.0% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
30 (32) Humana Managed Healthcare United States 5,115 4,936 1.9% 1.7%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Top 30 investments 264,685 98.3%
------------------- --------------- --------- ----------- -------- -----------
31 (38) Zealand Pharma Biotechnology Denmark 4,720 2,678 1.8% 0.9%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
32 (33) Quotient Supplies United Kingdom 3,190 4,767 1.2% 1.7%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
33 (-) Medley Technology Japan 3,166 - 1.1% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Axonics Modulation Healthcare
34 (-) Technologies Equipment United States 2,781 - 1.0% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
35 (-) Zymeworks Biotechnology Canada 2,724 - 1.0% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Biohaven
36 (-) Pharmaceutical Biotechnology United States 2,718 - 1.0% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Healthcare
37 (42) Ship Healthcare Distributors Japan 2,331 1,878 0.9% 0.7%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
38 (46) BELLUS Health Biotechnology Canada 2,073 1,116 0.8% 0.4%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Intelligent Healthcare
39 (41) Ultrasound Technology United Kingdom 1,935 2,043 0.7% 0.7%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
40 (-) Argenx Biotechnology Netherlands 1,822 - 0.7% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Top 40 investments 292,145 108.5%
------------------- --------------- --------- ----------- -------- -----------
Healthcare
41 (37) Oxford Immunotec Equipment United Kingdom 1,484 2,694 0.6% 0.9%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Tactile Systems Healthcare
42 (-) Technology Equipment United States 1,258 - 0.5% -
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Renalytix Healthcare
43 (40) AI Equipment United Kingdom 944 2,405 0.4% 0.8%
----- ------------------- ------------------- --------------- --------- ----------- -------- -----------
Total Equities 295,831 110.0%
------------------- --------------- --------- ----------- -------- -----------
Other Net Liabilities (26,933) (10.0%)
------------------- --------------- --------- ----------- -------- -----------
Net Assets 268,898 100.0%
------------------- --------------- --------- ----------- -------- -----------
Note - Sectors are from the GICS (Global Industry Classification
Standard).
PORTFOLIO REVIEW AS AT 31 MARCH 2020
30 September
Geographical Exposure at: 31 March 2020 2019
------------------------------ ----------------- ----------------
United States 73.5% 75.0%
Denmark 8.6% 8.5%
Switzerland 6.4% 2.5%
France 4.1% 5.8%
Germany 3.8% -
Spain 3.1% 3.3%
Belgium 3.1% -
United Kingdom 2.9% 5.4%
Japan 2.0% 1.5%
Canada 1.8% 0.4%
Netherlands 0.7% 3.6%
Italy - 1.1%
Other net liabilities (10.0%) (7.1%)
Total 100.0% 100.0%
================= ================
30 September
Sector Exposure at: 31 March 2020 2019
----------------------------------- ----------------- ----------------
Pharmaceuticals 35.5% 27.0%
Biotechnology 22.9% 13.9%
Healthcare Equipment 18.4% 36.8%
Life Sciences Tools & Services 11.2% 12.9%
Managed Healthcare 7.7% 4.1%
Healthcare Services 7.2% 5.7%
Healthcare Facilities 3.2% 3.6%
Healthcare Technology 1.8% 0.7%
Healthcare Supplies 1.2% 1.7%
Healthcare Distributors 0.9% 0.7%
Other net liabilities (10.0%) (7.1%)
================= ================
Total 100.0% 100.0%
================= ================
Market Capitalisation breakdown 30 September
at: 31 March 2020 2019
------------------------------------ ----------------- ----------------
Large (>US$5bn) 99.0% 96.9%
Medium (US$1bn - US$5bn) 4.7% 3.3%
Small (<US$1bn) 6.3% 6.9%
Other net liabilities (10.0%) (7.1%)
100.0% 100.0%
================= ================
STATEMENT OF COMPREHENSIVE INCOME
For the half year ended 31 March 2020
Group Group Group
------------------------------ ----------------------------- ----------------------------
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 March 2020 31 March 2019 30 September 2019
------------------------------ ----------------------------- ----------------------------
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 1,883 - 1,883 2,605 - 2,605 4,131 - 4,131
Other operating
income 2 16 - 16 19 - 19 79 - 79
----------------- ------ -------- --------- --------- -------- --------- -------- -------- -------- --------
Losses on
investments
held at fair
value - (15,921) (15,921) - (9,378) (9,378) - (3,337) (3,337)
----------------- ------ -------- --------- --------- -------- --------- -------- -------- -------- --------
Other currency
(losses)/ gains - (704) (704) - 13 13 - 43 43
----------------- ------ -------- --------- --------- -------- --------- -------- -------- -------- --------
Total income 1,899 (16,625) (14,726) 2,624 (9,365) (6,741) 4,210 (3,294) 916
----------------- ------ -------- --------- --------- -------- --------- -------- -------- -------- --------
Expenses
----------------- ------ -------- --------- --------- -------- --------- -------- -------- -------- --------
Investment
management
fee (259) (1,037) (1,296) (250) (998) (1,248) (503) (2,013) (2,516)
----------------- ------ -------- --------- --------- -------- --------- -------- -------- -------- --------
Other
administrative
expenses (337) (37) (374) (279) 9 (270) (610) (69) (679)
----------------- ------ -------- --------- --------- -------- --------- -------- -------- -------- --------
Total expenses (596) (1,074) (1,670) (529) (989) (1,518) (1,113) (2,082) (3,195)
----------------- ------ -------- --------- --------- -------- --------- -------- -------- -------- --------
Loss before
finance
costs and tax 1,303 (17,699) (16,396) 2,095 (10,354) (8,259) 3,097 (5,376) (2,279)
----------------- ------ -------- --------- --------- -------- --------- -------- -------- -------- --------
Finance costs - (513) (513) (7) (522) (529) (9) (1,037) (1,046)
----------------- ------ -------- --------- --------- -------- --------- -------- -------- -------- --------
Loss before tax 1,303 (18,212) (16,909) 2,088 (10,876) (8,788) 3,088 (6,413) (3,325)
----------------- ------ -------- --------- --------- -------- --------- -------- -------- -------- --------
Tax (266) - (266) (306) - (306) (535) - (535)
----------------- ------ -------- --------- --------- -------- --------- -------- -------- -------- --------
Net loss for
the period and
total
comprehensive
income 1,037 (18,212) (17,175) 1,782 (10,876) (9,094) 2,553 (6,413) (3,860)
----------------- ------ -------- --------- --------- -------- --------- -------- -------- -------- --------
Losses per
ordinary
share (basic)
(pence) 3 0.85 (15.01) (14.16) 1.46 (8.88) (7.42) 2.09 (5.25) (3.16)
----------------- ------ -------- --------- --------- -------- --------- -------- -------- -------- --------
The total column of this statement represents the Group and
Company's Statement of Comprehensive Income, prepared in accordance
with IFRS as adopted by the European Union.
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/(loss) for the period/year. The net
profit/(loss) for the period/year disclosed above represents the
Group's total comprehensive Income.
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 2020
Group Company
---- ---------------------------------------
(Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited) (Audited)
31 March 31 March 30 September 31 March 31 March 30 September
2020 2019 2019 2020 2019 2019
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---- ----------- ----------- ------------- ----------- ----------- -------------
Non current assets
Investments held
at fair value 295,831 303,731 308,993 295,831 303,731 308,993
Investment in subsidiary - - - 50 50 50
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
Current assets
Receivables 4,189 4,908 17,237 4,189 4,908 17,237
Overseas tax recoverable 848 674 693 848 674 693
Cash and cash equivalents 7,139 14,670 6,862 7,089 14,620 6,812
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
12,176 20,252 24,792 12,126 20,202 24,742
Total assets 308,007 323,983 333,785 308,007 323,983 333,785
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
Current liabilities
Payables (4,221) (3,149) (10,961) (4,221) (3,149) (10,961)
Bank overdraft (4) (1,746) (4) (4) (1,746) (4)
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
(4,225) (4,895) (10,965) (4,225) (4,895) (10,965)
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
Non-current liabilities
Zero dividend preference
shares (34,884) (33,867) (34,373) - - -
Loan from subsidiary - - - (34,884) (33,867) (34,373)
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
Total liabilities (39,109) (38,762) (45,338) (39,109) (38,762) (45,338)
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
Net assets 268,898 285,221 288,447 268,898 285,221 288,447
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
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 5,502 4,712 3,672 5,502 4,712
Capital reserves 144,434 158,183 162,646 144,434 158,183 162,646
Revenue reserve 2,495 3,239 2,792 2,495 3,239 2,792
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
Total equity 268,898 285,221 288,447 268,898 285,221 288,447
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
Net asset value
per ordinary share
(pence) 4 221.73 233.53 236.88 221.73 233.53 236.88
Net asset value
per ZDP share (pence) 4 108.58 105.41 106.99 - - -
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
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 loss for the half
year was GBP17,175,000 (31 March 2019: loss of GBP9,094,000 and 30
September 2019: loss of GBP3,860,000).
STATEMENT OF CHANGES IN EQUITY
For the half year ended 31 March 2020
Group and Company
Half year ended 31 March 2020 (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
2019 31,037 6,575 80,685 4,712 162,646 2,792 288,447
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total comprehensive (expense)/income:
--------------------------------------------------- -------- -------------- --------- -------- --------
(Loss)/profit for the
half year ended 31 March
2020 - - - - (18,212) 1,037 (17,175)
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Transactions with owners, recorded
directly to equity:
--------------------------------------------------- -------- -------------- --------- -------- --------
Shares bought back
and held in treasury - - - (1,040) - - (1,040)
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Equity dividends
paid - - - - - (1,334) (1,334)
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total equity at 31
March 2020 31,037 6,575 80,685 3,672 144,434 2,495 268,898
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Group and Company
Half year ended 31 March 2019 (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
2018 31,037 6,575 80,685 6,225 169,059 2,682 296,263
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total comprehensive (expense)/income:
--------------------------------------------------- -------- -------------- --------- -------- --------
(Loss)/profit for the
year ended
31 March 2019 - - - - (10,876) 1,782 (9,094)
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Transactions with owners, recorded
directly to equity:
--------------------------------------------------- -------- -------------- --------- -------- --------
Shares bought back
and held in treasury - - - (723) - - (723)
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Equity dividends
paid - - - - - (1,225) (1,225)
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total equity at 31
March 2019 31,037 6,575 80,685 5,502 158,183 3,239 285,221
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Group and Company
Year ended 30 September 2019 (Audited)
-------------------------- -------------------------------------------------------------------------------
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
2018 31,037 6,575 80,685 6,225 169,059 2,682 296,263
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total comprehensive (expense)/income:
--------------------------------------------------- -------- -------------- --------- -------- --------
(Loss)/profit for the
year ended 30 September
2019 - - - - (6,413) 2,553 (3,860)
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Transactions with owners, recorded
directly to equity:
--------------------------------------------------- -------- -------------- --------- -------- --------
Shares bought back
and held in treasury - - - (1,513) - - (1,513)
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Equity dividends
paid - - - - - (2,443) (2,443)
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total equity at 30
September 2019 31,037 6,575 80,685 4,712 162,646 2,792 288,447
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
CASH FLOW STATEMENT
For the half year ended 31 March 2020
Group and Company
(Unaudited) (Unaudited) (Audited)
Half year Half year Year ended
ended ended 30 September
31 March 31 March 2019
2020 2019 GBP'000
GBP'000 GBP'000
------------------------------------------------ ----------- ----------- -------------
Cash flows from operating activities
Loss before finance costs and tax (16,396) (8,259) (2,279)
Adjustment for non-cash items:
Losses on investments held at fair value
through profit or loss 15,921 9,378 3,337
------------------------------------------------ ----------- ----------- -------------
Adjusted (loss)/profit before tax (475) 1,119 1,058
Adjustments for:
Purchases of investments, including transaction
costs (449,722) (145,874) (532,121)
Sales of investments, including transaction
costs 453,244 148,026 530,063
Decrease in receivables 134 58 222
(Decrease)/increase in payables (107) (139) 169
Overseas tax deducted at source (421) (423) (671)
------------------------------------------------ ----------- ----------- -------------
Net cash generated from/(used in) operating
activities 2,653 2,767 (1,280)
------------------------------------------------ ----------- ----------- -------------
Cash flows from financing activities
Cost of shares repurchased (1,040) (723) (1,513)
Interest paid (2) (34) (45)
Equity dividends paid (1,334) (1,225) (2,443)
------------------------------------------------ ----------- ----------- -------------
Net cash used in from financing activities (2,376) (1,982) (4,001)
------------------------------------------------ ----------- ----------- -------------
Net increase /(decrease) in cash and cash
equivalents 277 785 (5,281)
Cash and cash equivalents at the beginning
of the period 6,858 12,139 12,139
------------------------------------------------ ----------- ----------- -------------
Cash and cash equivalents at the end of
the period 7,135 12,924 6,858
------------------------------------------------ ----------- ----------- -------------
NOTES TO THE FINANCIAL STATEMENTS
For the half year ended 31 March 2020
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 2020.
The Group and Company unaudited financial statements to 31 March
2020 have been prepared using the accounting policies used in the
Group and Company's financial statements to 30 September 2019.
These accounting policies are based on International Financial
Reporting Standards ("IFRS"), which comprise standards and
interpretations approved by the International Accounting Standards
Board ("IASB") and the International Accounting Standards Committee
("IASC"), as adopted by the European Union.
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 2020
and 31 March 2019 have not been audited. The figures and financial
information for the year ended 30 September 2019 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 2019, prepared under IFRS, 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 2019.
The Group and Company's financial statements are presented in
Pound 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 and in connection with new risks presented by COVID-19, we
have revised the stress-testing which was completed at the year
end, up to 31 March 2020, the balance sheet date as at the half
year end. These tests included a revised five-year cash flow
forecast which demonstrated the Company's ability to meet its
short-term and long-term obligations. Having carried out the
revised tests, 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. The assets of the Group
and Company comprise mainly of securities that are readily
realisable and accordingly, the Group and Company have adequate
financial resources to meet their liabilities as and when they fall
due and to continue in operational existence for the foreseeable
future.
2. DIVIDENDS 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
2020 2019 2019
GBP'000 GBP'000 GBP'000
---------------------------------- ------------- ------------- -------------
Investment income
Revenue:
Franked: listed investments
Dividend income 64 312 377
---------------------------------- ------------- ------------- -------------
Unfranked: listed investments
Dividend income 1,819 2,293 3,754
---------------------------------- ------------- ------------- -------------
Total investment income allocated
to revenue 1,883 2,605 4,131
---------------------------------- ------------- ------------- -------------
Other operating income
Other income - - 30
Bank interest 16 19 49
-----------------------------
Total other operating income 16 19 79
-----------------------------
Note - There were no dividends allocated to capital as at 31
March 2020.
3. LOSS 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
2020 2019 2019
GBP'000 GBP'000 GBP'000
---------------------------------- ------------- ------------- -------------
Net profit/(loss) for the period:
Revenue 1,037 1,782 2,553
Capital (18,212) (10,876) (6,413)
---------------------------------- ------------- ------------- -------------
Total (17,175) (9,094) (3,860)
---------------------------------- ------------- ------------- -------------
Weighted average number of shares
in issue during the period 121,313,716 122,466,319 122,123,685
Revenue 0.85p 1.46p 2.09p
Capital (15.01)p (8.88p) (5.25p)
---------------------------------- ------------- ------------- -------------
Total (14.16)p (7.42p) (3.16p)
---------------------------------- ------------- ------------- -------------
As at 31 March 2020 there were no potentially dilutive shares in
issue (31 March 2019 and 30 September 2019: 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
2020 2019 2019
------------------------------------ ------------- ------------- -------------
(i) Ordinary shares
Net assets attributable to ordinary
shareholders (GBP'000) 268,898 285,221 288,447
Ordinary shares in issue at
end of period (excluding those
held in treasury) 121,270,000 122,135,000 121,770,000
Net asset value per ordinary
share (pence) 221.73 233.53 236.88
------------------------------------ ------------- ------------- -------------
As at 31 March 2020 there were no potentially dilutive shares in
issue (31 March 2019 and 30 September 2019: nil).
(ii) ZDP shares
Calculated entitlement of ZDP
shareholders (GBP'000) 34,884 33,867 34,373
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) 108.58 105.41 106.99
------------------------------ ---------- ---------- ----------
5. DIVIDENDS
Dividends for the current financial year ending 30 September
2020, if declared, will be paid in August 2020 and February
2021.
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 2020.
7. POST BALANCE SHEET EVENTS
As noted in the Investment Managers' Report, the outbreak of
COVID-19, declared by the World Health Organisation as a global
health emergency on the 30 January 2020, has caused disruption to
businesses and economic activity which has been reflected in recent
fluctuations in global stock markets. The Board and Managers
continue to monitor developments relating to COVID-19 and the
impact on investment performance in line with the investment
objectives.
Subsequent to the half year end, the net asset value per share
of the Company has increased by 18.2% from 221.73p to 262.02p and
the Company's share price has increased by 19.9% from 196p to 235p
as at 14 May 2020.
Polar Capital, the appointed Investment Manager, is coordinating
its operational response based on existing business continuity
plans and on guidance from global health organisations, UK
government and general pandemic response best practice.
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 28 to 30 of the Annual
Report for the year ended 30 September 2019. These risks and
uncertainties are currently compounded by the impact of the
COVID-19 pandemic. 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.polarcapitalhealthcaretrust.com
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 .
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BIGDUUDBDGGU
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May 18, 2020 02:00 ET (06:00 GMT)
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