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Woodford investors suffer further blow as Industrial Heat slashed

4 November 2019

Huge writedown to valuation of controversial cold fusion developer is second in less than three months.

Woodford Patient Capital (WPCT) has suffered another major writedown to its controversial holding in cold fusion developer Industrial Heat, knocking 8% off the investment trust's net asset value (NAV).

Link Fund Solutions, administrator to the trust, is slashing the valuation for the second time in less than three months, blaming a 'delay in operational progress'. Shares in the trust fell 6.3% to 35.5p on the news.

The writedown, which the Patient Capital board said would knock 5p off the trust's 62.84p NAV, implies an 80% cut to the valuation of Industrial Heat, which was one of the trust's largest holdings. 

The stake, which was valued at around £69 million in the trust's half-year results, including some of the impact of a major writedown in August, is now being valued at around £14 million. At the end of last year, the position was valued at around £91 million, according to the trust's last annual report.

The writedown will also hit investors in the Woodford Equity Income fund, which is set to wind up. The fund's stake, which was also hit by August's cut, will now be worth around £18 million. At the end of June the stake was worth £115 million, according to the fund's interim report. 

Industrial Heat was the most controversial of Neil Woodford's investments, given the widespread scepticism over the cold fusion technology it was pursuing among the scientific community.

Woodford's stake in the business was revalued 357% higher last year, prompting the manager to list his shares in the business on the Guernsey stock exchange as a means of remaining below the 10% limit on unquoted companies that applied to his equity income fund. Today's huge writedown has more than wiped out the impact of that 357% uplift. 

Management of the Patient Capital trust is set to pass to Schroders after Woodford handed in his notice ahead of the closure of his Woodford Investment Management business.

Woodford is being forced to close his fund group after being sacked as the manager of his flagship Woodford Equity Income fund, which is to be wound up.

The writedown to Industrial Heat has been marginally offset by a revaluation higher for another unquoted business held by Patient Capital. The trust's board said another stock, which it did not name, had been revalued after securing funding, having been written down last month 'due to a challenging funding environment'. 

That revaluation will add 0.7p to the trust's NAV, meaning the trust will suffer a net 4.3p fall from the two revaluations.

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