TIDMPCGH TIDMPGHZ
RNS Number : 1394Y
Polar Capital Global Health Tst PLC
11 May 2021
POLAR CAPITAL GLOBAL HEALTHCARE TRUST PLC
(the "Company")
Unaudited Results Announcement for the Six Months to 31 March
2021
LEI: 549300YV7J2TWLE7PV84 11 May 2021
HIGHLIGHTS IN DETAIL
For the year
For the six to
months to 30 September
Performance 31 March 2021 2020
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Net asset value per ordinary share (total return)
(note 1) +3.57% 14.14%
Benchmark index
MSCI ACWI/Healthcare Index (total return in
GBP sterling with dividends reinvested) +1.02% 15.95%
-------------------------------------------------- -------------- -------------
Since restructuring on 20 June 2017
-------------------------------------------------- -------------- -------------
Net asset value per ordinary share (total return)
(note 2) +32.03% +27.48%
Benchmark index total return +36.68% +35.30%
-------------------------------------------------- -------------- -------------
Expenses
-------------------------------------------------- -------------- -------------
Ongoing charges (note 3) 0.81% 1.01%
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Financials (Audited)
(Unaudited) As at
As at 30 September Change
31 March 2021 2020
------------------------------------- -------------- -------------- --------
Total net assets (Group and Company) GBP335,466,000 GBP325,133,000 +3.2%
Net asset value per ordinary share 276.63p 268.11p +3.2%
Net asset value per ZDP share 111.83p 110.20p +1.5%
Price per ordinary share 242.00p 233.00p +3.9%
Discount per ordinary share 12.5% 13.1%
Price per ZDP share 112.50p 107.50p +4.7%
Net gearing 2.87% 5.28%
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 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 26 February 5 February 4 February 15 December
ended 30 September 2020: 2021 1.00p 2021 2021 2020
----------- ---------- ----------- ----------- -----------
Dividends for the current financial year ending 30 September 2021,
if declared, will be paid in August 2021 and February 2022.
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
CHAIR'S STATEMENT
On behalf of the Board, I am pleased to provide you with the
Company's Half Year Report for the six-months to 31 March 2021.
Performance
I am pleased to report that this has been a positive period for
the Company. Over the period, net assets of the Group, which
includes the subsidiary PCGH ZDP Plc, rose by 3.2% and the
corresponding net asset value (NAV) per share (total return) by
3.57%. In the same period the Company's benchmark index (the MSCI
AC World Daily Total Return Net Health Care Index in sterling with
dividends reinvested) rose by 1.02%, resulting in an outperformance
by the Company of 2.55%. Net gearing decreased to 2.87% from 5.28%
at the start of the period.
We continue to believe healthcare provides very attractive
growth opportunities for investors. 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. There is an
update on the underlying themes that influence stock selection, and
why the COVID-19 crisis has been a catalyst for positive change in
the healthcare sector.
Healthcare is a diverse sector, and there can be a lot of
newsflow, sometimes causing extreme volatility in share price
movements. The Investment Manager's Review reminds us not to
divorce valuation from growth prospects, so individual stock
selection is still key. Towards the end of the period under review,
there was a shift in the market away from the smaller, more
speculative part of the healthcare universe. The Managers see this
continuing and believe the Company is well positioned to benefit
from such a move.
The Board
There have been no changes to the membership of the Board in the
six months to 31 March 2021 following the completion of the Board
refreshment in December 2019. The directors' biographical details
are available on the Company's website and are provided in the
Annual Report.
As reported in our Annual Report for the year ended 30 September
2020, the Board continues to meet regularly utilising
videoconferencing facilities as a result of COVID-19. We are
hopeful that the Board will be able to meet in person once again
later in the year when lockdown restrictions have been lifted.
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 IAS 34, in conformity with the requirements of
the Companies Act 2006 and gives a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company as at 31 March 2021; 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 2021 has not been audited or reviewed by the Auditors. The
half year financial report was approved by the Board on 11 May
2021.
On behalf of the Board
Lisa Arnold
Chair
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 31 of the Annual Report for
the year ended 30 September 2020. 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.
The Board continues to consider and monitor the risks and
uncertainties relating to COVID-19 and the impact on the Company
which has been reflected in the Company's risk register.
Further detail on the Company's performance and portfolio can be
found in the Investment Manager's Review.
Going Concern
As detailed in the notes to the financial statements, the Board
continually monitors the financial position of the Group and
Company and, in connection with COVID-19 we have undertaken
additional stress-testing and analysis and have engaged with our
auditors to review the results. Having carried out the additional
testing, 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 2021.
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
Chair
INVESTMENT MANAGER'S REVIEW
Executive Summary
The first half of 2021 has been a period of positive performance
for the Company, outperforming the benchmark (MSCI AC World Daily
Total Return Net Health Care Index in sterling) by 2.55%.
Importantly, with relative valuations attractive and absolute
valuations supportive, the outlook for the healthcare sector
remains compelling, offering growth opportunities regardless of the
economic, political and regulatory landscape. Areas of particular
excitement are the highly innovative biotechnology sub-sector and
the managed healthcare and facilities sub-sectors, with the latter
two investing in technologies designed to drive efficiencies. Life
sciences tools and services continue to be an integral part of the
healthcare ecosystem, with the COVID-19 crisis really shining a
light on their undoubted value. It is worth noting that the
pharmaceuticals sub-sector is also committed to R&D, and is
successfully innovating, but is perhaps not in a position to offer
the same growth opportunities as other areas of healthcare.
Reflecting on performance, stock selection was a key driver but
we would also note that some of the growth themes highlighted in
the 2020 annual report are becoming more and more evident.
Innovation, the life-blood of the healthcare industry, appears to
be gaining momentum plus there is clear evidence that companies are
investing in products and services that are designed to disrupt the
delivery of healthcare, whilst improving outcomes for patients.
More importantly, perhaps, the COVID-19 crisis has been a
significant catalyst for positive change with healthcare systems
globally investing in critical care and preventative measures such
as diagnostics, investments that provide a platform for sustained
growth. After all, an ounce of prevention is worth a pound of
cure.
Polar Capital Global Healthcare Trust; Structure and
objectives
The objective of 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 through
gearing.
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 of more than
US$5 billion at the time of investment, with the balance invested
in companies with a market capitalisation of less than US$5 billion
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, 34 investments were in the Growth Portfolio
comprising 88.08% of net assets and 12 investments were in the
Innovation Portfolio, comprising 14.64% of net assets.
Performance review
Over the six-month period to the end of March 2021, the
healthcare sector, whilst producing a small positive return, lagged
broader markets as the upturn in cyclical sectors accelerated
following positive news-flow on COVID-19 vaccine development. The
Company outperformed over the period versus its benchmark index,
with further details provided below.
Performance - 30 September 2020 to 31 March 2021
From the 30(th) of September 2020 to the end of March 2021, the
Company returned 3.57% versus 1.02% for the benchmark (MSCI AC
World Daily Total Return Net Health Care Index in sterling). The
outperformance was driven by stock selection, with positive effects
across the market capitalisation spectrum, but particularly in
large and mid-capitalisation stocks. Over the period, market price
moves across the healthcare sector have been quite extreme. In the
4th quarter of 2020, small capitalisation healthcare, including
biotech which would be regarded as the most speculative sub-sector,
enjoyed a significant rally which is typical in the early phase
following a recession when lower quality stocks tend to rally the
most. Since the beginning of 2021, this exuberance has moderated
and since early February, there has been significant weakness in
small capitalisation healthcare, but better performance from higher
quality large capitalisation companies. This benefitted the
performance of the Company over the period under review.
From a geographical perspective, the US was the most positive
region, mainly through stock selection, although the small
overweight exposure was always a bonus. Japanese exposure was also
a positive through both stock selection and asset allocation, with
the latter being an underweight position on a relative basis. The
main other notable impact over the period was the negative
contribution from Europe with the overweight being a negative. The
impact of gearing in terms of performance attribution was
negligible over the six months. The level of gearing was steadily
reduced over the period under review as concern over speculative
activity in markets increased. Net gearing at the end of September
2020 was 5.3% and this was reduced to 2.9% by the end of March
2021.
In terms of sub-sectors, outperformance was split between
allocation and stock selection. Most positive impact came from life
sciences tools and services, healthcare equipment and
pharmaceuticals with stock selection being the most significant
driver for these sub-sectors. Negative contributors were biotech,
healthcare services and managed care, with stock selection again
being the main driver of relative performance.
Positive individual stocks over the period included Syneos
Health, PRA Health Sciences, Align Technology, Chugai
Pharmaceutical and adapthealth. Syneos Health and PRA Health
Sciences are both clinical research organisations (CROs) which have
benefitted from encouraging business trends over the last year and
seen their share prices rise accordingly. PRA Health Sciences was
further bolstered by the announcement of an offer to buy the
company from ICON, another large CRO. Align Technology positively
surprised with stronger growth than expected as the shift to clear
aligners accelerated over the last two quarters. Chugai
Pharmaceutical was purchased after a period of weakness and enjoyed
a very strong rally which peaked following positive data for one of
their drugs used to treat patients suffering with COVID-19. Lastly,
adapthealth moved higher following positive financial results and
the announcement of its intent to acquire another company as part
of its consolidation strategy.
Negative stocks over the period were Exelixis, Quotient, Humana,
Incyte and Vertex Pharmaceuticals. Exelixis and Incyte lagged due
to concerns over the intellectual property protection for the
companies' main products, and whether their respective pipelines
were likely to generate new drugs of sufficient promise in future
years. Quotient suffered due to the effects of another round of
financing and development delays driven by the pandemic. Humana was
weak on concerns that a successful COVID-19 vaccine roll-out would
lead to improved consumer confidence in the healthcare system,
putting upwards pressure on utilisation and medical costs. Lastly,
Vertex Pharmaceuticals suffered due to a pipeline set-back which
caused a significant pull-back in the stock.
Relative Contributors (%) - 30 September 2020 - 31 March
2021
Average Stock Total Attribution
Stock Active Stock Return Effect
Top 10 Weight Weight Return vs BM
Syneos Health 2.86 2.86 33.49 32.47 0.82
-------- --------- --------- -------- ------------------
PRA Health Sciences 0.91 0.91 41.42 40.39 0.69
-------- --------- --------- -------- ------------------
Align Technology 1.47 0.92 54.77 53.74 0.68
-------- --------- --------- -------- ------------------
Chugai Pharmaceutical 1.23 0.78 -14.62 -15.65 0.64
-------- --------- --------- -------- ------------------
adapthealth 1.11 1.11 57.69 56.66 0.60
-------- --------- --------- -------- ------------------
Avantor 2.66 2.46 20.35 19.32 0.56
-------- --------- --------- -------- ------------------
Renalytix AI 0.54 0.54 121.18 120.15 0.54
-------- --------- --------- -------- ------------------
AmerisourceBergen 2.44 2.21 13.97 12.95 0.46
-------- --------- --------- -------- ------------------
Hill-Rom Holdings 2.53 2.53 23.77 22.75 0.42
-------- --------- --------- -------- ------------------
Merck & Co 0.00 -2.90 -13.05 -14.08 0.42
-------- --------- --------- -------- ------------------
Average Stock Total Attribution
Stock Active Stock Return Effect
Bottom 10 Weight Weight Return vs BM
-------- --------- --------- -------- --------------------
Exelixis 0.91 0.91 -13.56 -14.58 -0.53
-------- --------- --------- -------- --------------------
Quotient 1.48 1.48 -33.02 -34.04 -0.52
-------- --------- --------- -------- --------------------
Humana 2.38 1.59 -5.23 -6.26 -0.50
-------- --------- --------- -------- --------------------
Incyte 2.50 2.27 -15.27 -16.30 -0.50
-------- --------- --------- -------- --------------------
Vertex Pharmaceuticals 0.68 -0.18 -26.12 -27.14 -0.47
-------- --------- --------- -------- --------------------
Fresenius Medical
Care AG 1.95 1.71 -18.31 -19.34 -0.47
-------- --------- --------- -------- --------------------
Swedish Orphan
Biovitrum AB 1.08 1.08 -38.07 -39.10 -0.44
-------- --------- --------- -------- --------------------
Medley 1.74 1.74 -21.72 -22.74 -0.41
-------- --------- --------- -------- --------------------
AbbVie 0.00 -2.60 15.59 14.57 -0.40
-------- --------- --------- -------- --------------------
Zealand Pharma
A/S 1.33 1.33 -22.07 -23.10 -0.34
-------- --------- --------- -------- --------------------
Source: Polar Capital as at 31 March 2021. Past performance is
not indicative or a guarantee of future results.
Underlying investment themes are becoming more visible
Clearly we never divorce valuation or opportunity cost from our
investment process, but we are focussed on six underlying
investment themes that we believe will drive growth and returns
over the medium term. Importantly, those investment themes should
yield some exciting investment opportunities, some of which are
really starting to accelerate. In no particular order, those
underlying themes are;
-- Healthcare Delivery Disruption
-- Innovation
-- Consolidation
-- Emerging Markets
-- Outsourcing
-- Prevention
Healthcare Delivery Disruption
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, but the COVID-19 crisis has brought a greater level of focus
and has really accelerated momentum in certain areas. Telemedicine
is a good example of a service that was steadily gaining traction
but really inflected through 2020 as more and more consumers tried
to gain access to healthcare services remotely. As an example of
the growing importance of telemedicine, US-based healthcare
services organisation, Cigna, recently announced its intention to
acquire MDLive, one of the largest telehealth vendors in the US
with expertise in the fields of behavioural care and
dermatology.
Another part of the healthcare ecosystem that could see a
permanent shift in trajectory is the use of Ambulatory Surgery
Centres (ASCs) to perform surgeries that might traditionally have
been performed in a hospital setting (often referred to as the
"in-patient" setting). Cataract surgeries, endoscopies and
colonoscopies have been performed in ASCs for some time, but there
is a rational school of thought that argues that more and more
procedures should be performed in settings that carry the potential
benefits of same-day discharge, reduced costs and a narrowly
focussed healthcare team.
We would also highlight home health as an area that should see
considerable growth over the medium-term as the system looks to
shift patient volumes to lower-cost and more convenient settings
such as the home. It is interesting to note that in February,
Brookdale Senior Living agreed to sell 80% of the equity in its
hospice, home health and outpatient business to US hospital
operator, HCA Holdings. This is an intriguing investment by HCA in
a business that operates 84 outpatient centres, 57 home health
agencies and 22 hospices - all locations that could offer
lower-cost settings to deliver care.
As at 31st March 2021, the portfolio has numerous examples of
investments that are a direct play on the theme of delivery
disruption. For example, Medley is a Japanese-based healthcare
technology company that started out by disrupting healthcare
recruitment to become the dominant on-line participant with
approximately 30% market share. The management team then used the
cash flows to fund a telehealth platform where they have become the
most favoured local provider based on consumer preference. Japan
has been slow to adopt digital health leading us to believe the
opportunity ahead is significant. Philips, more traditionally
associated with domestic appliances and light bulbs, is becoming a
leader in diagnostics, imaging and connected care. And in a
post-COVID-19 world there is expectation that healthcare systems
globally will invest in analytics and digital technologies to drive
cost-efficiencies that should allow for greater provision of
healthcare services and improve operating efficiencies within
hospitals. If correct, then Philips should be very well positioned
to capitalise on this global mega-trend.
Innovation: The lifeblood of the healthcare industry
It is not too controversial to argue that the healthcare
industry is highly innovative, with no better example than the
remarkable development timetable of the novel mRNA-based COVID-19
vaccines. US-based Moderna received the genetic sequence of the
novel coronavirus from the Chinese government on the 11(th) January
2020 and the first clinical batch of vaccine, referred to as
mRNA-1273, was completed just 27 days later on the 7(th) February
2020. The first patient was dosed on the 16(th) March 2020,
followed by the pivotal Phase III study which started on the 27(th)
July 2020. With positive data released at the first interim
analysis in November 2020, mRNA-1273 received emergency use
authorisation on the 18(th) December 2020. With Pfizer/BioNTech
following a not too dissimilar path, this is a hugely impressive
example of innovation, resource mobilisation and coordination with
the regulators to try to tackle a global healthcare crisis.
Whilst there has rightly been a great deal of focus on the
ground-breaking progress made with COVID-19 vaccines in the last
year, there remains very high levels of innovation across the
broader healthcare industry. Alnylam, for example, is a company
that uses a technology called RNA interference (RNAi) which is a
natural process of gene silencing that regulates gene expression.
"Silencing" genes that drive disease allows for highly targeted
therapeutics in areas that hitherto have been untreatable. Progress
has been made with rare genetic disorders but there is hope that
the technology can also be used in more common diseases such as
hypertension. The industry also continues to make progress in areas
such as cell and gene therapy, with US-based Bristol Myers Squibb
recently receiving FDA approvals for cell therapies that target
cancers such as lymphoma and melanoma.
Consolidation: Likely to be an on-going theme
The healthcare industry is highly fragmented, but is generally
characterised by companies with strong balance sheets and cashflows
and will, therefore, likely continue to consolidate. Whilst
predicting the precise timing and nature of the participants is
impossible, it is perfectly reasonable to argue that companies will
continue to look for external sources of growth and will also look
to acquire potentially disruptive technologies. Already in 2021, we
have witnessed a number of deals within the managed care
organisations (MCOs), bio-pharmaceuticals and CRO spheres. Clearly
highly speculative, but perhaps the rising interest rate
environment, coupled with Joe Biden's desire to raise corporate
taxes, could be a near-term catalyst for further consolidation as
management teams look to maximise their returns.
Whilst not an exhaustive list, some of the activity during the
reporting period that involved stocks in the portfolio included
Philips' acquisition of Biotelemetry, United Healthcare's
acquisition of Change Healthcare and ICON's acquisition of PRA
Health Sciences. With an implied enterprise value of $2.8 billion,
Biotelemetry is a leading US-based provider of remote cardiac
diagnostics and monitoring. A strong fit with Philips' strategy to
transform the delivery of healthcare, Biotelemetry is expected to
deliver double-digit growth and improve its adjusted EBITA margin
to over 20% by 2025. Prima facie, the acquisition looks like a
financially and strategically sound use of Philips' capital. Also
designed to generate efficiencies, US-based Change Healthcare
provides data and analytics-driven solutions to improve clinical,
financial, administrative and patient engagement outcomes. The ICON
plus PRA Health Sciences deal is more of a horizontal integration
but does highlight the attractiveness of clinical trial
outsourcing. It is the outsourcing theme that was central to the
decision to own PRA Health Sciences in the portfolio.
Emerging markets: An important source for growth
Emerging markets are an important source of growth for the
healthcare industry, driven not just by generally ageing
populations with greater financial resources, but by governments
and regulators that are investing in infrastructure, opening their
doors to best-in-class medicines and accelerating reimbursement
processes. Crucially, however, sustained commercial success will
only be enjoyed by those with differentiated assets and the
infrastructure to capitalise on the volume uplift that comes with
broadening access. The bio-pharmaceutical industry has an
established footprint in emerging markets, but it is imperative
that their products are differentiated, and that they have the
reach to access volume upside when the inevitable prices
concessions arise. In much the same vein, the medical device
industry has exposure to fast-growing emerging markets but
companies must remain committed to innovating and refreshing their
portfolios, especially when governments go down the price-sensitive
route of national tenders.
Last, and certainly not least, the life sciences tools and
services sub-sector is very well positioned in emerging markets,
especially in China where the government's latest Five-Year Plan
has plenty to offer the industry. Programs prioritised by the
government include disease prevention, diagnosis and treatment, a
comprehensive reform of public hospitals and medical centres and
increased support for science and technology innovation. All of
which can feed in the capital equipment and consumable offerings of
the life sciences tools and services sub-sector.
Outsourcing: A durable trend
Outsourcing is a high-growth area with strong fundamentals as
corporates look to scale back on non-core activities such as
running clinical trials and manufacturing. Rationalising costs is a
key driver but there are also obvious benefits of going to a
"one-stop-shop" that can provide a simple and efficient solution to
your drug development or manufacturing needs. It is not just human
capital and expertise but also technology and data sources that can
yield much-needed efficiencies in the drug development process. The
CROs are enjoying a healthy market backdrop, with well-capitalised
biotechnology companies looking to develop their assets as quickly
and as efficiently as possible. It is our view that ICON's decision
to acquire PRA Health Sciences on the 26(th) February 2021 and
Thermo Fisher Scientific's decision to acquire PPD on the 15(th)
April 2021 are clear signals that the growth runway is not only
highly attractive but also durable. Contract Development and
Manufacturing Organisations (CDMOs) like Catalent and Lonza have
also shown their undoubted value during the COVID-19 crisis,
working closely with the vaccine companies to manufacture hundreds
of millions of doses in a timely manner.
The portfolio's exposure to the outsourcing theme can be found
with CRO Syneos Health and with CDMO AptarGroup. Syneos Health's
vision is to "shorten the distance from lab to life" as they look
not just to accelerate clinical trials but also to collect
real-world data and offer commercial solutions to clients.
AptarGroup generates roughly two-thirds of its profits from its
pharmaceuticals division with expertise in inhalers, elastomers and
dispensing systems. With the balance of profits coming from beauty
& home and from food & beverage, we believe the equity
story should benefit not just from the attractive, high
single-digit growth out of the pharmaceuticals division but also
from a post-COVID-19 recovery in the other two divisions.
Prevention: The cornerstone of public health systems
Effective prevention is the cornerstone of public health
systems, not just vaccinations but early and accurate diagnoses to
set patients on to optimal treatment pathways. The COVID-19 crisis
has offered a timely reminder of the value of safe and effective
vaccines, but also the need for effective diagnostics
infrastructure. Early intervention coupled with effective disease
management should drive better outcomes for patients and,
ultimately, generate much-needed cost savings. Genetic testing to
help greater understanding of underlying disease biology will only
accelerate from here, as will the use of biomarkers to enhance
therapeutic accuracy and reduce waste.
Preventative medicine and preventative measures come in a very
wide range of guises, but we feel it appropriate to focus on
diagnostics and vaccines. In a post-COVID-19 world there is hope
that the much-needed investment in diagnostics infrastructure will
be put to good use as testing menus expand. As such, companies like
Siemens Healthineers and Philips should be well-positioned to
capitalise. Definitive diagnosis, coupled with guided therapies,
are foundational to precision medicine with the goal of driving
better outcomes for patients. Safe and effective vaccines will also
continue to be a critical part of the healthcare eco-system, with
French pharmaceuticals giant Sanofi one of the world's leading
vaccine manufacturers. Sanofi manufactures not just seasonal
vaccines like influenza, but also travel and paediatric
vaccines.
US political environment supportive, with drug-pricing the
biggest wrinkle
Late in March President Joe Biden released an outline for Part I
of his multi-US$ trillion stimulus package, a package that still
needs to navigate through a split Congress. Part I, pegged at
US$2.25 trillion, focusses on transportation, renewable energy,
manufacturing and efforts to combat climate change. To cover the
costs of the 8-year proposal, President Biden wants to raise
corporate taxes to 28% from 21% plus the plan also seeks a minimum
tax on profits that US corporations earn overseas, increasing the
rate to 21% from roughly 13%.
With regards to healthcare, President Biden also proposed a
US$400 billion plan designed to significantly bolster Medicaid
coverage of long-term care outside of institutional settings. The
funds would go towards providing wider access to home and
community-based services, while also bolstering the largely
underpaid frontline caregiving workforce. To be clear, the proposed
increase in funding resides within Medicaid (an assistance program
for low-income US citizens) and will have a limited near term
impact on traditional home health companies given the majority of
their revenues come from Medicare (an insurance program that serves
the over 65s). However, the proposal itself is a clear signal of
intent in terms of expanding access to home-based care, one of our
key investment themes.
Part II of the stimulus package could be more meaningful for the
healthcare industry with many stakeholders expecting drug pricing
reform. There is a school of thought that the package will include
proposed legislation akin to the Democrat-sponsored HR3 Bill. As a
reminder, the HR3 Bill contains quite draconian measures such as
direct drug price negotiations, price controls and international
reference pricing for Government programs and commercial markets.
The US Congressional Budget Office estimates that HR3 could
generate US$456 billion in savings over 10 years, equivalent to
c13% of US prescription drug spending on an annual basis. The
chances of the Bill passing through the Senate, however, are low
given the Democrats thin majority (assuming Vice-President Kamala
Harris' casting vote) and the influence of conservative-leaning
Democrats. Instead, we believe that a more moderate bill is likely
to pass through Congress, a proposal that might include capping
patient out-of-pocket expenses for US seniors and putting
inflationary price caps on drugs.
With drug pricing and the affordability of healthcare likely to
occupy near-term headlines, we feel it prudent to highlight the
potential risks which are heightened further for those
biotechnology and pharmaceutical companies with portfolios that
lack differentiation and do not address high unmet medical needs.
Importantly, however, we are reminded of healthcare's diverse
opportunity set: a characteristic that we believe adds to the
sector's appeal.
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 (82.0% active share as at 31(st) March 2021),
actively managed investment vehicle that gives investors exposure
to the global healthcare universe. Stock-picking remains critical
to the process, but it is worth noting there will be a continued
focus on the previously discussed investment themes, which appear
to be accelerating in the near-term but also have medium-term
durability.
The Company attempts to combine a Growth At a Reasonable price
(GARP) approach with the opportunity to invest in earlier-stage,
more disruptive companies. The Growth portfolio dominates the
portfolio with exposure to companies that sit further up the market
capitalisation scale. This part of the portfolio consists of
non-consensus holdings which, in part but not exclusively, reflect
the investment themes where we have the highest conviction. This
part of the portfolio 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.
http://www.rns-pdf.londonstockexchange.com/rns/1394Y_2-2021-5-10.pdf
Period end positioning; Diverse but with high conviction
The Company's sub-sector exposures have been fairly consistent
throughout the reporting period. The highest conviction stance,
relative to the benchmark, is the material underweight in
pharmaceuticals (-21.3% as at 31 March 2021) given the growth
challenges that face the sub-sector. By contrast, the biggest
overweight is in the biotechnology sub- sector (6.9% as at 31 March
2021), a sub-sector where we believe accelerating innovation should
reap commercial rewards. The managed healthcare and facilities
sub-sectors, the vast majority of which are based in the US, are
attractive given their growth outlook relative to their valuations.
We also continue to be constructive on the distributors and the
life sciences tools and services companies, both areas where we
believe we can find interesting opportunities.
http://www.rns-pdf.londonstockexchange.com/rns/1394Y_3-2021-5-10.pdf
We continue to be underweight in pharmaceuticals relative to the
benchmark. Whilst we acknowledge the sub-sector's valuation offers
downside protection, plus the defensive profiles of component
companies could have appeal in a more cautious market back-drop, we
do have near and medium-term concerns. Drug pricing pressure in the
US is a near-term overhang but our underweight stance is more a
reflection of the industry's anaemic growth profile and mature
operating margins. To be clear, we do see high levels of innovation
and we can find attractive investment opportunities within
pharmaceuticals, we just feel that we can find more upside in other
areas of the healthcare universe.
The biotechnology sub-sector has been under pressure of late,
reflecting a number of factors that may well prove to be either
transient or possibly mis-guided. Concerns that the FDA is getting
more stringent is understandable given some high-profile setbacks,
but it is possibly unfair on those that have differentiated assets
and are submitting high-quality dossiers to the agency. Drug
pricing, as discussed previously, is also a near-term overhang but
we would once again highlight that healthcare systems will pay for
differentiated assets that target high, unmet medical needs.
Perhaps more relevant is the macro pressure as financial markets
digest the implications of rising interest rates on a biotechnology
sub-sector that can carry a relatively high degree of terminal
value. That observation leads us to focus on more mature companies
with under-appreciated commercialised products and/or overly
discounted, late-stage pipeline assets. More importantly, however,
we believe the positive drivers that have been responsible for
shareholder value-creation remain firmly intact. These positive
drivers include ever-improving understanding of human biology and
the ability to take that knowledge into the clinic, and ultimately
onto the market to help patients. Further, with the generous
capital markets environment, the biotechnology sub-sector is well
capitalised and has the opportunity to maximise the returns it can
generate from its internal assets. Years of investment are starting
to pay dividends as more and more novel technologies are reaching
the market, and more importantly, reaching patients.
http://www.rns-pdf.londonstockexchange.com/rns/1394Y_1-2021-5-10.pdf
The managed healthcare sub-sector has been one of the biggest
beneficiaries of the new political landscape in the US as President
Joe Biden looks to invest in, and expand, the infrastructure put in
place by President Barack Obama. As a reminder, President Obama
introduced the Affordable Care Act (ACA) in March 2010 which had
three primary objectives; 1) To make health insurance more
affordable to more people, 2) To expand the Medicaid program, and
3) To support innovative delivery models to lower the cost of
healthcare. President Biden will look to build on the ACA by
offering more choice, lowering premiums and expanding coverage to
more low-income US citizens. Those policies bring a potential
volume tailwind to the insurance industry, especially to those
companies with relatively high levels of exposure to government run
programs like Medicaid. In that context, Centene and Molina
Healthcare would be good examples. The rising interest rate
environment is also a potential positive for the MCOs because as
insurance companies they have large investment portfolios that
benefit from rising rates, creating a potential tailwind to EPS
growth that will phase in over the next few years.
Our positive stance on healthcare facilities in part reflects
the opportunity that we believe lies in the desire to shift patient
volumes to low-cost settings like the home. Encompass Health, for
example, offers a wide range of home health care including skilled
nursing, rehabilitation and assistive care services to help
consumers manage their health needs in the home. It is also worth
noting that hospitals and providers are a direct beneficiary of the
post-COVID-19 "opening up" trade as patients re-enter the system to
access the care that has been denied them during the height of the
coronavirus crisis. Australian-based private hospital operator
Ramsay Healthcare, a new holding, is an excellent example with
operations in 10 countries including Australia, France and the
UK.
Life sciences tools and services continues to be an area of the
market that has attractive fundamentals given the demand for their
capital equipment and consumables remains strong, especially in
areas such as biopharmaceuticals and bioprocessing. Concerns of a
decline in momentum following the COVID-19 testing tailwinds are
understandable but there should also be a post-COVID-19 recovery in
the more cyclical parts of the market such as chemicals and energy.
It is perfectly reasonable to argue that the recovering oil price
and accelerating economic expansion in regions like China are
positives for the sub-sector. Furthermore, the sub-sector has
exposure to academic institutes which are re-opening and returning
to pre-COVID-19 levels of activity. Whilst valuations for the
broader group offer pause for thought, we believe that we can still
find interesting, under-valued opportunities.
Stock-selection is a key driver
The table below displays the Company's top 10 relative
overweight and underweights at the end of the reporting period,
highlighting the highest conviction ideas in the portfolio. Whilst
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
amongst well-covered large capitalisation stocks. With opportunity
cost also a key decision driver as we look to maximise returns, the
Company's top 10 relative overweights are subject to change.
Top 10 Overweights and Top 10 Underweights relative to
Benchmark
Active (%) Active (%)
Bio-Rad Laboratories 4.08% Johnson & Johnson -6.15%
----------- ------------------------- -----------
Baxter International 2.96% Roche -3.40%
----------- ------------------------- -----------
Hill-Rom Holdings 2.93% Abbott Laboratories -3.02%
----------- ------------------------- -----------
Koninklijke Philips 2.87% Pfizer -2.86%
----------- ------------------------- -----------
Syneos Health 2.87% Merck & Co -2.77%
----------- ------------------------- -----------
Medtronic 2.76% AbbVie -2.71%
----------- ------------------------- -----------
AstraZeneca 2.63% Novartis -2.71%
----------- ------------------------- -----------
Align Technology 2.58% Thermo Fisher Scientific -2.57%
----------- ------------------------- -----------
Horizon Pharma 2.54% Eli Lily -2.29%
----------- ------------------------- -----------
Zimmer Biomet Holdings 2.53% Danaher -2.04%
----------- ------------------------- -----------
Overweight 28.74% Underweight -30.52%
----------- ------------------------- -----------
Source: Polar Capital, as at 31 March 2021
The majority of the Top 10 overweights relative to the benchmark
have been in the portfolio for some time, with the exception of
AstraZeneca and Hill-Rom Holdings, both of which were added during
the reporting period. COVID-19 vaccine headlines aside, the last
few months have been an extremely frustrating time for AstraZeneca,
with the proposed US$39 billion acquisition of US biotechnology
company, Alexion Pharmaceuticals, the most noticeable update. On
closing, the acquisition will be highly accretive to earnings, will
allow AstraZeneca to invest in its rich pipeline of mid and
late-stage assets and will also yield greater financial flexibility
when it comes to shareholder returns. Other potential positives
from the proposed deal could come in the form of revenue
diversification and sales synergies given Alexion's modest exposure
to emerging markets. To offer balance, there do remain question
marks regarding the long-term sustainability of the Alexion
franchises plus the impact of the acquisition on AstraZeneca's
medium-term growth profile.
US medical device company Hill-Rom Holdings was also added
during the reporting period. Geographically diverse, with multiple
product offerings, Hill-Rom offers products and services that
support patients in hospitals, in long-term care facilities and in
the home. The demand for a number of Hill-Rom's products has
accelerated due to COVID-19 but it is the sustained opportunities
beyond COVID-19 that are central to the thesis. Hill-Rom has the
ability not only to effectively compete in its existing markets,
but also the ability to innovate and to launch new products that
could accelerate top-line growth. In addition it has an established
emerging markets infrastructure, an area of its operations that is
targeted to grow in double-digits over the medium-term.
There were few changes in the Innovation Portfolio during the
reporting period, as one would expect given the long-dated nature
of the investment's return profiles. We did, however, add two US
biotechnology companies to the portfolio via Arcutis
Biotherapeutics and Cytokinetics. Arcutis Biotherapeutics' leading
asset, roflumilast, is in late-stage development for a number of
skin diseases such as plaque psoriasis, atopic dermatitis and scalp
psoriasis. The company also has two earlier-stage assets, also
being developed for dermatology indications. Cytokinetics' leading
asset, referred to as CK-274, is indicated for the treatment of a
cardiac disorder known as obstructive Hypertrophic Cardiomyopathy
(oHCM). oHCM is a disease in which the heart muscle becomes
abnormally thick, making it harder for the heart to pump blood. A
biologically de-risked asset, positive late-stage data could put
upwards pressure on the company's valuation.
Given their size, stocks held in the Innovation portfolio have
the potential to be more volatile than their larger peers held in
the Growth portfolio. It is also worth noting that companies
further down the market capitalisation scale 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 some interesting ideas that could offer
significant potential over the long-term.
The outlook for healthcare is compelling
Recent corporate actions and operational performances have
underpinned our view that the global healthcare industry should
offer some very interesting, medium-term investment opportunities.
With relative valuations attractive and absolute valuations
supportive, that conviction is heightened further. There is clear
evidence that the industry is investing in products, technologies
and services that are designed to generate efficiencies. without
compromising quality of care. The momentum and investment dollars
behind innovation is accelerating, a necessity given the need to
produce differentiated medicines and devices to target high unmet
medical needs. Consolidation will continue to be an important
theme, as will the growth opportunities that exist in emerging
markets. We also believe the healthcare industry will continue to
outsource non-core activities, maximising cost-base flexibility
whilst also looking to enhance return profiles on internal assets.
Last, but not least, one of the biggest, post-COVID-19 silver
linings could be greater investment in, and respect for, an
effective preventative healthcare strategy.
James Douglas and Gareth Powell
Co-Managers
11 May 2021
PORTFOLIO AS AT 31 MARCH 2021
(Figures in brackets denote the comparative ranking as at 30
September 2020)
Ranking Stock Market Value % of total
Sector Country GBP'000 net assets
2021 2020 31 30 31 30
March September March September
2021 2020 2021 2020
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
1 (31) UnitedHealth Managed Healthcare United States 21,306 5,898 6.4% 1.8%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Healthcare
2 (1) Medtronic Equipment Ireland 16,847 16,519 5.0% 5.1%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
3 (-) AstraZeneca Pharmaceuticals United Kingdom 15,059 - 4.5% -
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Life Sciences
4 (13) Bio-Rad Laboratories Tools & Services United States 14,292 9,867 4.3% 3.0%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
5 (5) Sanofi Pharmaceuticals France 13,697 12,825 4.1% 3.9%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Bristol Myers
6 (4) Squibb Pharmaceuticals United States 13,185 14,393 3.9% 4.4%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Koninklijke Healthcare
7 (12) Philips Equipment Netherlands 12,102 10,071 3.6% 3.1%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Healthcare
8 (15) Baxter International Equipment United States 11,967 9,696 3.6% 3.0%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Healthcare
9 (24) Align Technology Supplies United States 10,597 7,615 3.2% 2.3%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
10 (2) Amgen Biotechnology United States 10,226 15,815 3.0% 4.9%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Top 10 investments 139,278 41.6%
------------------- --------------- -------- ----------- ------- -----------
Healthcare
11 (20) Zimmer Biomet Equipment United States 10,073 8,631 3.0% 2.6%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Healthcare
12 (-) Hill-Rom Equipment United States 9,815 - 2.9% -
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Life Sciences
13 (18) Syneos Health Tools & Services United States 9,611 8,948 2.9% 2.8%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
14 (17) Horizon Pharma Pharmaceuticals United States 9,499 9,335 2.8% 2.9%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
15 (22) Centene Managed Healthcare United States 8,873 8,526 2.6% 2.6%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Ramsay Health Healthcare
16 (-) Care Facilities Australia 8,837 - 2.6% -
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Healthcare
17 (-) Siemens Healthineers Equipment Germany 8,663 - 2.6% -
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
18 (-) Molina Healthcare Managed Healthcare United States 8,556 - 2.6% -
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Alnylam
19 (-) Pharmaceuticals Biotechnology United States 8,340 - 2.5% -
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Encompass Healthcare
20 (-) Health Facilities United States 8,179 - 2.4% -
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Top 20 investments 229,724 68.5%
------------------- --------------- -------- ----------- ------- -----------
21 (-) Genmab Biotechnology Denmark 7,930 - 2.4% -
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Healthcare
22 (21) AmerisourceBergen Distributors United States 7,558 8,545 2.3% 2.6%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Neurocrine
23 (26) Biosciences Biotechnology United States 7,533 7,076 2.2% 2.2%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
24 (16) Incyte Biotechnology United States 7,454 9,431 2.2% 2.9%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Life Sciences
25 (-) PPD Tools & Services United States 7,260 - 2.2% -
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Healthcare
26 (38) AdaptHealth Distributors United States 7,232 2,804 2.2% 0.9%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Life Sciences
27 (9) Avantor Tools & Services United States 7,210 10,948 2.1% 3.4%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Metal & Glass
28 (-) Aptar Containers United States 6,989 - 2.1% -
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
29 (25) ArgenX Biotechnology Netherlands 6,683 7,216 2.0% 2.2%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Biohaven
30 (37) Pharmaceutical Biotechnology United States 5,880 3,821 1.8% 1.2%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Top 30 investments 301,453 90.00%
------------------- --------------- -------- ----------- ------- -----------
Healthcare
31 (-) Cooper Supplies United States 4,946 - 1.5% -
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Swedish Orphan
32 (-) Biovitrum Biotechnology Sweden 4,858 - 1.4% -
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Healthcare
33 (30) Medley Technology Japan 4,629 5,905 1.3% 1.8%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
34 (33) Zealand Pharma Biotechnology Denmark 4,105 4,742 1.2% 1.5%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Intelligent Healthcare
35 (35) Ultrasound Technology United Kingdom 3,800 4,062 1.1% 1.2%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
36 (-) Cytokinetics Biotechnology United States 3,630 - 1.1% -
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Healthcare
37 (32) Quotient Supplies Switzerland 3,255 4,874 1.0% 1.5%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Healthcare
38 (43) Uniphar Distributors Ireland 2,445 193 0.7% 0.1%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Kyowa Hakko
39 (-) Kirin Pharmaceuticals Japan 2,183 - 0.7% -
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Healthcare
40 (39) Ship Healthcare Distributors Japan 2,008 1,850 0.6% 0.6%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Top 40 investments 337,312 100.6%
------------------- --------------- -------- ----------- ------- -----------
Axonics Modulation Healthcare
41 (36) Technologies Equipment United States 1,961 3,896 0.6% 1.2%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Avadel
42 (42) Pharmaceuticals Pharmaceuticals Ireland 1,825 1,105 0.5% 0.3%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Arcutis
43 (-) Biotherapeutics Biotechnology United States 1,375 - 0.4% -
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Renalytix Healthcare
44 (41) AI Technology United States 1,121 1,523 0.3% 0.4%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Acadia
45 (28) Pharmaceuticals Biotechnology United States 787 6,581 0.2% 2.0%
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Healthcare
46 (-) Verici Dx Technology United Kingdom 216 - 0.1% -
----- --------------------- ------------------- --------------- -------- ----------- ------- -----------
Total Equities 344,597 102.7%
------------------- --------------- -------- ----------- ------- -----------
Other Net Liabilities (9,131) (2.7%)
------------------- --------------- -------- ----------- ------- -----------
Net Assets 335,466 100.0%
------------------- --------------- -------- ----------- ------- -----------
Note - Sectors are from the GICS (Global Industry Classification
Standard).
PORTFOLIO REVIEW AS AT 31 MARCH 2021
30 September
Geographical Exposure at: 31 March 2021 2020
------------------------------ ----------------- ----------------
United States 67.3% 68.0%
Ireland 6.2% 5.5%
United Kingdom 5.7% 3.7%
Netherlands 5.6% 5.3%
France 4.1% 3.9%
Denmark 3.6% 6.5%
Japan 2.6% 2.4%
Australia 2.6% -
Germany 2.6% 5.2%
Sweden 1.4% -
Switzerland 1.0% 4.8%
Other net liabilities (2.7%) (5.3%)
Total 100.0% 100.0%
================= ================
30 September
Sector Exposure at: 31 March 2021 2020
----------------------------------- ----------------- ----------------
Healthcare Equipment 21.3% 21.3%
Biotechnology 20.4% 22.6%
Pharmaceuticals 16.5% 25.1%
Managed Healthcare 11.6% 8.2%
Life Sciences Tools & Services 11.5% 12.5%
Healthcare Distributors 5.8% 4.2%
Healthcare Supplies 5.7% 3.8%
Healthcare Facilities 5.0% 1.5%
Healthcare Technology 2.8% 3.4%
Metal & Glass Containers 2.1% -
Healthcare Services - 2.7%
Other net liabilities (2.7%) (5.3%)
----------------- ----------------
Total 100.0% 100.0%
================= ================
Market Capitalisation breakdown 30 September
at: 31 March 2021 2020
------------------------------------ ----------------- ----------------
Large (>US$10bn) 75.5% 83.0%
Medium (US$5bn - US$10bn) 12.6% 11.1%
Small (<US$5bn) 14.6% 11.2%
Other net liabilities (2.7%) (5.3%)
100.0% 100.0%
================= ================
STATEMENT OF COMPREHENSIVE INCOME
For the half year ended 31 March 2021
Group Group Group
---------------------------- ------------------------------ ----------------------------
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 March 2021 31 March 2020 30 September 2020
---------------------------- ------------------------------ ----------------------------
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 1,595 - 1,595 1,883 - 1,883 3,446 - 3,446
Other operating
income 2 - - - 16 - 16 17 - 17
------------------- ------ -------- -------- -------- -------- --------- --------- -------- -------- --------
Gains/(losses)
on investments
held at fair
value - 12,287 12,287 - (15,921) (15,921) - 42,435 42,435
------------------- ------ -------- -------- -------- -------- --------- --------- -------- -------- --------
Other currency
losses - (151) (151) - (704) (704) - (647) (647)
------------------- ------ -------- -------- -------- -------- --------- --------- -------- -------- --------
Total income 1,595 12,136 13,731 1,899 (16,625) (14,726) 3,463 41,788 45,251
------------------- ------ -------- -------- -------- -------- --------- --------- -------- -------- --------
Expenses
------------------- ------ -------- -------- -------- -------- --------- --------- -------- -------- --------
Investment
management
fee (245) (982) (1,227) (259) (1,037) (1,296) (535) (2,140) (2,675)
------------------- ------ -------- -------- -------- -------- --------- --------- -------- -------- --------
Other
administrative
expenses (247) (15) (262) (337) (37) (374) (685) (107) (792)
------------------- ------ -------- -------- -------- -------- --------- --------- -------- -------- --------
Total expenses (492) (997) (1,489) (596) (1,074) (1,670) (1,220) (2,247) (3,467)
------------------- ------ -------- -------- -------- -------- --------- --------- -------- -------- --------
Profit/(loss)
before finance
costs and tax 1,103 11,139 12,242 1,303 (17,699) (16,396) 2,243 39,541 41,784
------------------- ------ -------- -------- -------- -------- --------- --------- -------- -------- --------
Finance costs - (526) (526) - (513) (513) (1) (1,038) (1,039)
------------------- ------ -------- -------- -------- -------- --------- --------- -------- -------- --------
Profit/(loss)
before tax 1,103 10,613 11,716 1,303 (18,212) (16,909) 2,242 38,503 40,745
------------------- ------ -------- -------- -------- -------- --------- --------- -------- -------- --------
Tax (170) - (170) (266) - (266) (472) - (472)
------------------- ------ -------- -------- -------- -------- --------- --------- -------- -------- --------
Net profit/(loss)
for the period
and total
comprehensive
income 933 10,613 11,546 1,037 (18,212) (17,175) 1,770 38,503 40,273
------------------- ------ -------- -------- -------- -------- --------- --------- -------- -------- --------
Earnings/(losses)
per ordinary
share (pence) 3 0.77 8.75 9.52 0.85 (15.01) (14.16) 1.46 31.74 33.20
------------------- ------ -------- -------- -------- -------- --------- --------- -------- -------- --------
The total column of this statement represents the Group's
Statement of Comprehensive Income, prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006.
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 2021
Group Company
---- ---------------------------------------
(Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited) (Audited)
31 March 31 March 30 September 31 March 31 March 30 September
2021 2020 2020 2021 2020 2020
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---- ----------- ----------- ------------- ----------- ----------- -------------
Non-current assets
Investments held
at fair value 344,597 295,831 342,404 344,597 295,831 342,404
Investment in subsidiary - - - 50 50 50
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
Current assets
Receivables 285 4,189 3,082 285 4,189 3,082
Overseas tax recoverable 547 848 589 547 848 589
Cash and cash equivalents 26,306 7,139 17,845 26,256 7,089 17,795
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
27,138 12,176 21,516 27,088 12,126 21,466
Total assets 371,735 308,007 363,920 371,735 308,007 363,920
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
Current liabilities
Payables (339) (4,221) (3,382) (339) (4,221) (3,382)
Bank overdraft - (4) - - (4) -
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
(339) (4,225) (3,382) (339) (4,225) (3,382)
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
Non-current liabilities
Zero dividend preference
shares (35,930) (34,884) (35,405) - - -
Loan from subsidiary - - - (35,930) (34,884) (35,405)
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
Total liabilities (36,269) (39,109) (38,787) (36,269) (39,109) (38,787)
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
Net assets 335,466 268,898 325,133 335,466 268,898 325,133
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
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 211,762 144,434 201,149 211,762 144,434 201,149
Revenue reserve 1,735 2,495 2,015 1,735 2,495 2,015
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
Total equity 335,466 268,898 325,133 335,466 268,898 325,133
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
Net asset value
per ordinary share
(pence) 4 276.63 221.73 268.11 276.63 221.73 268.11
Net asset value
per ZDP share (pence) 4 111.83 108.58 110.20 - - -
-------------------------- ---- ----------- ----------- ------------- ----------- ----------- -------------
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 GBP11,546,000 (31 March 2020: loss of GBP17,175,000 and 30
September 2020: profit of GBP40,273,000).
STATEMENT OF CHANGES IN EQUITY
For the half year ended 31 March 2021
Group and Company
Half year ended 31 March 2021 (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
2020 31,037 6,575 80,685 3,672 201,149 2,015 325,133
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total comprehensive income:
--------------------------------------------------- -------- -------------- --------- -------- --------
Profit for the half
year ended 31 March
2021 - - - - 10,613 933 11,546
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Transactions with owners, recorded
directly to equity:
--------------------------------------------------- -------- -------------- --------- -------- --------
Equity dividends
paid - - - - - (1,213) (1,213)
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total equity at 31
March 2021 31,037 6,575 80,685 3,672 211,762 1,735 335,466
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
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
Year ended 30 September 2020 (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
2019 31,037 6,575 80,685 4,712 162,646 2,792 288,447
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total comprehensive income:
--------------------------------------------------- -------- -------------- --------- -------- --------
Profit for the year
ended 30 September 2020 - - - - 38,503 1,770 40,273
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Transactions with owners, recorded
directly to equity:
--------------------------------------------------- -------- -------------- --------- -------- --------
Shares bought back
and held in treasury - - - (1,040) - - (1,040)
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Equity dividends
paid - - - - - (2,547) (2,547)
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total equity at 30
September 2020 31,037 6,575 80,685 3,672 201,149 2,015 325,133
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
CASH FLOW STATEMENT
For the half year ended 31 March 2021
Group and Company
(Unaudited) (Unaudited) (Audited)
Half year Half year Year ended
ended ended 30 September
31 March 31 March 2020
2021 2020 GBP'000
GBP'000 GBP'000
------------------------------------------------ ----------- ----------- -------------
Cash flows from operating activities
Profit/(loss) before finance costs and
tax 12,242 (16,396) 41,784
Adjustment for non-cash items:
(Gains)/losses on investments held at fair
value through profit or loss (12,287) 15,921 (42,435)
Scrip dividend received - - (204)
------------------------------------------------ ----------- ----------- -------------
Adjusted loss before tax (45) (475) (855)
Adjustments for:
Purchases of investments, including transaction
costs (329,996) (449,722) (952,341)
Sales of investments, including transaction
costs 340,486 453,244 967,884
(Increase)/decrease in receivables (133) 134 85
(Decrease)/increase in payables (509) (107) 176
Overseas tax deducted at source (128) (421) (368)
------------------------------------------------ ----------- ----------- -------------
Net cash generated from operating activities 9,675 2,653 14,581
------------------------------------------------ ----------- ----------- -------------
Cash flows from financing activities
Cost of shares repurchased - (1,040) (1,040)
Interest paid (1) (2) (7)
Equity dividends paid (1,213) (1,334) (2,547)
------------------------------------------------ ----------- ----------- -------------
Net cash used in from financing activities (1,214) (2,376) (3,594)
------------------------------------------------ ----------- ----------- -------------
Net increase in cash and cash equivalents 8,461 277 10,987
Cash and cash equivalents at the beginning
of the period 17,845 6,858 6,858
------------------------------------------------ ----------- ----------- -------------
Cash and cash equivalents at the end of
the period 26,306 7,135 17,845
------------------------------------------------ ----------- ----------- -------------
NOTES TO THE FINANCIAL STATEMENTS
For the half year ended 31 March 2021
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 2021.
The Group and Company unaudited financial statements to 31 March
2021 have been prepared using the accounting policies used in the
Group and Company's financial statements to 30 September 2020.
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"), in conformity with the requirements of the Companies Act
2006.
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 2021
and 31 March 2020 have not been audited. The figures and financial
information for the year ended 30 September 2020 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 2020, 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 2020.
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. 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.
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
2021 2020 2020
GBP'000 GBP'000 GBP'000
---------------------------------- ------------- ------------- -------------
Investment income
Revenue:
Franked: listed investments
Dividend income 286 64 63
---------------------------------- ------------- ------------- -------------
Unfranked: listed investments
Dividend income 1,309 1,819 3,179
Scrip dividends - - 204
---------------------------------- ------------- ------------- -------------
Total investment income allocated
to revenue 1,595 1,883 3,446
---------------------------------- ------------- ------------- -------------
Other operating income
Bank interest -16 17
-----------------------------
Total other operating income -16 17
-----------------------------
There were no dividends allocated to capital as at 31 March
2021
3. EARNING/(LOSS) per ORDINARY (Unaudited) (Unaudited) (Audited)
share For the half For the half For the
year ended year ended year ended
31 March 31 March 30 September
2021 2020 2020
GBP'000 GBP'000 GBP'000
---------------------------------- ------------- ------------- -------------
Net profit/(loss) for the period:
Revenue 933 1,037 1,770
Capital 10,613 (18,212) 38,503
---------------------------------- ------------- ------------- -------------
Total 11,546 (17,175) 40,273
---------------------------------- ------------- ------------- -------------
Weighted average number of shares
in issue during the period 121,270,000 121,313,716 121,291,858
Revenue 0.77p 0.85p 1.46p
Capital 8.75p (15.01p) 31.74p
---------------------------------- ------------- ------------- -------------
Total 9.52p (14.16p) 33.20p
---------------------------------- ------------- ------------- -------------
As at 31 March 2021 there were no potentially dilutive shares in
issue (31 March 2020 and 30 September 2020: 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
2021 2020 2020
------------------------------------ ------------- ------------- -------------
(i) Ordinary shares
Net assets attributable to ordinary
shareholders (GBP'000) 335,466 268,898 325,133
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) 276.63 221.73 268.11
------------------------------------ ------------- ------------- -------------
As at 31 March 2021 there were no potentially dilutive shares in
issue (31 March 2020 and 30 September 2020: nil).
(ii) ZDP shares
Calculated entitlement of ZDP
shareholders (GBP'000) 35,930 34,884 35,405
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) 111.83 108.58 110.20
------------------------------ ---------- ---------- ----------
5. DIVIDENDS
Dividends for the current financial year ending 30 September
2021, if declared, will be paid in August 2021 and February
2022.
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 2021.
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.
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 31 of the Annual
Report for the year ended 30 September 2020. 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.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 .
This information is provided by RNS, the news service of the
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END
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