Woodford’s PCT capital raising delayed

Capital-raising plans in Neil Woodford’s £800m Patient Capital Trust are still on the horizon, but right now is “not an appropriate time”, according to the trust’s chairman.

PCT said that it has not ruled out a further shares roll-out, but initial plans for raising capital in the early part of 2016  have been set aside due to “continuing uncertainty prevailing in markets”.

Susan Searle, chairman of the Woodford Patient Capital Trust, said last week that the firm’s board had been “delighted” with the investment community’s enthusiastic response to the launch of Woodford Patient Capital Trust last spring, with the initial £200m public offering re-sized to a share issue of £800m, but that any possible further additions would have to wait.

‘Not an appropriate time’

In the company’s annual report, which was unveiled last week, Searle said a further roll-out was still being monitored, but would not as early as previously predicted.

She said: “In January, we announced we were looking at ways to raise additional capital. With the continuing uncertainty prevailing in markets, now is not an appropriate time to raise capital. The board will, however, monitor the situation and advise shareholders of any developments.”

The results covering the period from the company’s inception on 26 January 2015 to its 31 December 2015 year-end saw the net asset value of Woodford Patient Capital Trust ending the period at 97.38p per share (cum income), slightly below the issue price of 100p per share.

In her comments accompanying the report, Searle added that performance since launch has been broadly in line with the board’s expectations, given the “long-term nature of this investment vehicle, and the deterioration in market sentiment over the period”.

The company’s shares first traded on the London Stock Exchange on 21 April 2015.

A resolution to declare a final dividend of 0.16 pence per share will be proposed at the company’s annual general meeting, which is due to take place on 9 May.

The company said that it will not receive a fee for managing the investment trust, unless it is able to deliver a cumulative annual return in excess of 10%.

‘Still early days’ 

In a statement accompanying his trust’s results last week, Woodford, pictured,  told investors that it was “still very early days” for his long-term strategy, and this the trust’s performance therefore needed to be viewed “in the context of the overall market environment since launch”.

“We would be concerned if the share price performance of our investee businesses had been prompted by disappointing operational progress”, he added.

“In most instances, in fact, the opposite is true – we have been very pleased by the fundamental performance of the vast majority of our holdings, many of which have actually exceeded our initial expectations.”

Woodford predicted that 2016 would shape up to be another challenging year for financial markets, but that this could end up boosting the long-term potential in the PCT  portfolio.

“The realisation of future long-term value will be determined by the fundamental progress made by the companies in which we have invested, not by market sentiment,” he said.

“We have invested in some incredible businesses with massively disruptive technologies and high-growth potential. Some of these businesses may take a long time to fulfill their potential, but the stock market is not well endowed with patience, particularly in volatile conditions. Periodically, this manifests itself in share price weakness, especially in businesses with no earnings or dividends and relatively limited market liquidity.

“Share price weakness in listed early-stage businesses tends, therefore, to reflect this lack of patience from investors, rather than a lack of fundamental progress by the companies.

“Therein lies the opportunity for patient capital to exploit.”

Speaking to investors online last week,  Woodford added that his investment team remained “very pleased” with the underlying progress of the businesses in which it has invested, and added that expectations for the underlying performance of “many businesses in the portfolio have been exceeded”.

Woodford set up his own fund house after leaving Invesco Perptual in 2013. As well as the Patient Capital Trust, his new firm, Woodford Funds, also manages the flagship £8bn Woodford Equity Income fund as an open-ended product.

ABOUT THE AUTHOR
Gary Robinson
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