Schroder UK Public Private (SUPP ) has seen the value of its portfolio cut by 20%, with a number of top holdings written down in the latest blow to the former Woodford Patient Capital Trust, scotching what had seemed a period of progress.
Shares in the £315m investment trust crashed nearly 11% on Wednesday, after the release of the latest net asset value (NAV) yesterday afternoon. They have slumped another 1.7p or 4.9% to 33p today, undoing most of this year’s earlier gains and leaving them at a third of their value at launch in a blaze of publicity six years ago.
The end-of-December NAV was reported as 35.01p per share, falling 20.1% in the final quarter from 43.84p at the end of September.
The news comes as a blow to Schroders and portfolio managers Tim Creed and Ben Wicks, who took over management of the trust and rechristened it in December 2019, following the implosion of Neil Woodford’s fund business.
The major hit came from Rutherford Health (RUTH), where the stake in the quoted company was revalued to £34m from £81m. That was attributed to slower-than-expected commercial progress and increased risk to the business outlook for shareholders.
The company, which treats cancer using proton beam therapy, had been the trust’s top holding with the position accounting for 16.1% of the portfolio at the end of September, according to the latest factsheet.
Atom Bank, an 11.3% position at the same point, is another large holding which has been written down, reflecting a funding round at a lower valuation. The size of the loss in the private, unquoted company was not disclosed by the trust, but secondary reports indicate it could also be significant. Atom conducted a £40m funding round at 60p per share, just under half the price at which it raised equity in 2019, according to Sky News and others.
The value of Industrial Heat was also reduced by Link Fund Solutions, administrator to the trust, due to ‘a lack of technical and operational progress’. The cold fusion developer, which has been met with scientific scepticism, was formerly one of the larger and more controversial holdings from the Woodford era.
Spin Memory was another write-down, while Kind Consumer, a maker of Voke nicotine-inhaling devices, has collapsed into administration with no value expected to be recovered.
The latest NAV also reflected some other previously reported transactions. Ombu’s valuation was cut following its sale by the LF Equity Income fund at a lower price.
Carrick Therapeutics and Mission Therapeutics were also included in the list of write-downs, two of a group of seven companies recently sold to Rosetta Capital at a 22% aggregate discount.
There was one significant positive contributor, with the £70m sale of Kymab to French pharma giant Sanofi, announced in January. That generated a £52m fair value gain, in comparison to the £18m holding value previously.
This latest portfolio valuation does not include adjustment for Oxford Nanopore, following the DNA sequencing group’s announcement that it expects to list in London in the second half of this year, at what is expected to be a higher valuation. The holding is valued at £68.7m, equivalent to 21.6% of net assets, according to broker Numis Securities.
Previously, the Kymab sale had kicked off a string of positive updates – prompting something of a rerating in the shares from around 25p in early December – which saw the trust get on top of the debt mountain inherited from Woodford era.
In Wednesday’s announcement to the market, Schroders and the board expressed disappointment about the scale of the reduction to NAV. But they emphasised that significant progress had been achieved since December, including reducing the debt, which is expected to be fully paid down with the completion of the Kymab sale, as well as refinancing the credit facility.
Numis analyst Andrew Rees called the NAV update ‘disappointing news for shareholders’.
‘Schroder UK Public Private has a concentrated portfolio and therefore the outlook for performance was always going to be dependent on the fortunes of a few of the largest holdings, including Rutherford Health and Atom Bank, both of which have seen their valuations fall,’ he said.
Trading at 32p this afternoon, the shares are at less than a third of their value at launch six years ago in April 2015. That price represents a roughly 7.6% discount to the latest 35.01p per share NAV.
The market announcement added that the list of valuation changes was not exhaustive. More detail will be included in annual results later this month.
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