Prelude Trust's portfolio sheds 11%; Board orders investigation of options going forward
Prelude Trust plc, the Cambridge-based investment fund specialising in tech-based growth businesses, said its Net Asset Value (NAV) at the end of 2007 slipped to £41.4m from £46.6m at the end of the previous quarter.
As Prelude's ability to make further investments is governed by its ability to realise gains from its portfolio, and given the uncertain state of capital markets right now - the planned IPO on the Euronext market of portfolio company Kiadis has been postponed, for instance - the Board said it had undertaken a review of strategic options.
“After consultation with the major shareholders, the Board now announces that it has asked the Trust's manager and corporate advisers to investigate, in more detail and as a matter of priority, certain options in relation to the Trust's investment strategy,” it said in a statement.
The decline in NAV was the result of provisions from portfolio companies "having so far failed to make sufficient progress" in developing their businesses, or in finding new investors, merger partners or acquirers.The principal culprits were DeNovo Pharmaceuticals, m-spatial and Si-Connect.
Also during the quarter, Prelude, which is managed by DFJ Esprit, made follow on investments of £0.71m. So that at the end of the year, the top ten investments held in the portfolio by value, which includes all investments with a value greater than 5% of its NAV, were:
ZBD Displays Ltd 15.7%
Polatis Inc 12.3%
XMOS Ltd 7.6%
Phyworks Ltd 7.3%
Kiadis Pharma BV 7.1%
Oxford Immunotec Ltd 6.9%
DisplayLink Corp 6.8%
Sciona Inc 6.0%
GreenPeak Technologies BV (Xanadu) 4.5%
Lime Microsystems Ltd 2.4%
Despite the reduction in NAV, the Board said it still believes its portfolio has the potential to meet its investment objective of providing substantial growth in NAV over the long term, especially with recent investments performing well.
Cash reserves continue to decline as portfolio companies require further funding and Trust Manager DFJ Esprit is focused on ensuring those companies with the greatest potential for growth can continue to be supported.
The Board said the options DFJEsprit had been instructed to investigate:
- adopting a "run-off" strategy. This would involve investing in no new portfolio companies, whilst retaining enough cash now and from future realisations to support the portfolio; realising the portfolio over time; and returning capital to shareholders in due course;
- a corporate transaction; and
- the sale of the existing portfolio and the prompt return of the net proceeds to shareholders.
The Board said that in evaluating the options, it is seeking to provide shareholders with a return in excess of the current market price of the Trust's shares.
It expects to put whatever proposals emerge to an extraordinary general meeting.
Chairman Mike Brooke, who in October announced his intention to step down, has agreed to stay on as Chairman for the next few months.
16th January 2008
