Schroders trust stung by ex-Woodford unquoteds as Covid crisis delivers £37m in writedowns

NAV slumps 8% after the value of the trust’s unlisted assets falls to £390m

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The Schroder UK Public Private trust has been stung by its unquoted holdings previously owned by Neil Woodford following a £37m hit to valuations amid the Covid crisis.

In its interim figures published Wednesday, the trust, formerly known as Woodford Patient Capital, revealed its net asset value had slumped by 8.1%in line with its previous warnings, from 49.46p to 45.44p per share. 

Its share price posted an even sharper decline, plunging by a third from 38.35p to 25.50p over the six months to 30 June 2020 though since then chair Susan Searle said it has “shown signs of recovery”. Shares were trading at 27.68p as at 28 September. 

Unquoted holdings take a 10% haircut

Managers Tim Creed (pictured) and Ben Wicks said the trust’s slump was driven by writedowns to its unquoted holdings which took a 10% haircut during the period, falling in value from £426.8m to £389.6m.

Around three quarters of the portfolio is held in unlisted companies. The bulk of these were purchased by the trust’s former manager Woodford, whose fund empire collapsed a year ago, including top 10 holdings Oxford Nanopore, Atom Bank and Benevolent AI. 

This compares with 2.3% of the portfolio listed on the Aim exchange and 6.7% listed on overseas indices. The trust’s largest holding, Rutherford Health, is listed on the smaller UK-based Acquis Stock Exchange. It currently makes up 15.6% of the portfolio. 

Though Creed and Wicks said the trust’s unquoted segment had held up better in the first quarterit experienced a sharper decline in the second quarter as the full impact of Covid became reflected in valuations. 

The opposite was true for the trust’s quoted holdings which suffered a “modest decline” of 3% during the period after losing 16% of their value in the first quarter during the height of the Covid sell-off. The FTSE Aim All-Share Index was down 7.8% by comparison. 

Trio of ex-Woodford holdings written down

Three unquoted stocks were written down over the period, all of which were former Woodford holdings.

Atom Bank was identified as the biggest negative contributor to the trust’s performance after seeing its valuation slashed by £24.1mCreed and Wicks’s 11% stake in the online bank was worth £56.7m at the end of June, down substantially from its £80.9m valuation at 31 December 2019.

Ratesetter and Mission Therapeutics also saw their valuations slashed by over £5m each in the first six months of the year, taking the value of the trust’s stakes to £1.3m and £10.1m respectively.  

Bucking this trend was liquid biopsy firm Inivata, another Woodford holding, which saw its valuation revised upward by £7m after announcing a strategic partnership with US-based cancer diagnostics company NeoGenomicsFollowing this “major milestone” the trust’s stake is currently worth £25m. 

Prior Woodford funding commitments nearly in the rear view mirror

In the interim update Creed said rebalancing the portfolio and reducing the trust’s £103.5m debt remains a “clear priority” but added it was also important to continue to support the companies in the portfolio as they grow and develop.

The managers have previously highlighted 28% of their companies would require additional funding in the next 12 to 24 months because of the Covid crisis.

But they have also flagged a number of holdings set to benefit from the global pandemic, such as healthcare companies Benevolent AI and Oxford Nanopore which have been involved in creating Covid vaccines and tests.

See also: Schroders trust warns former Woodford holdings it will not be an ‘endless source of capital’

Creed said he and Wicks expect to announce “several significant operational milestones” from companies in the portfolio in the second half of the year and 2021.

The pair also mentioned they were soon to be free from prior funding commitments agreed under Woodford’s management.

In Q2 the investment company completed the first tranche of a follow-on investment into an unidentified private healthcare holding alongside existing shareholders. The penultimate tranche is expected to be completed before the year-end, with the final transaction due to be reported in the third quarter, according to the pair.

“While the specific company remains unnamed due to commercial sensitivity, it is important to highlight that we intend to move towards increasing the level of disclosure as we progress with our repositioning,” they said in the results.

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