Further blow for Woodford Patient Capital as net asset value cut

According to one analyst, Woodford Patient Capital faces some serious challenges in the coming months.

Woodford Patient Capital shares slid by nearly 8% yesterday (4 November), following the latest writedown of one of its holdings.

Link Fund Solutions, which oversees the valuations of the holdings in Woodford Patient Capital, reduced the value of the trust’s investment in Industrial Heat, a nuclear energy firm, by £45 million. As a result of this, the net asset value (NAV) of Woodford Patient Capital was cut by 5p per share.

The NAV reduction, though, was partly offset by Link Fund Solutions positively revaluing an unnamed company, one of the three firms that saw its valuation cut in late September.

Overall, the two changes led to a decline in NAV of 4.3%, which sent Woodford Patient Capital’s share price deep into the red. At the time of writing (8.30am on 5 November), the trust’s share price stood at 34.5p per share.

In the weeks and months ahead, more valuation reductions are on the cards, particularly as the open-ended LF Woodford Equity Income fund, which is in the process of being wound down, holds a stake in Woodford Patient Capital. This point is made by Killik, the wealth manager, which notes: “There is clearly potential for further setbacks as the new management team takes on the challenging task of managing the portfolio against the backdrop of the open-ended funds winding down.”

Schroders will take the reins of Woodford Patient Capital by the end of 2019, and will manage the trust in line with its current investment objective of investing in both quoted and unquoted UK companies. The trust will be renamed Schroder UK Public Private Trust.

On the day the appointment of Schroders was announced (24 October), Woodford Patient Capital’s share price soared by over 20%, towards 40p per share. This rise, though, has now been wiped out.

Analysts are cautious on the prospects for the trust. According to Numis Securities, the appointment of Schroders as the new manager of the trust removes a significant amount of uncertainty for investors. But, Numis warns, it still “leaves a number of questions unanswered”.

Alan Brierley, an analyst at Investec Securities, cautions that “the company faces some serious challenges in the coming months”.

In a broker note yesterday, Brierley added: “Ominously, we see parallels here with the investor experience of the Listed Private Equity sector after the crisis in 2009. Many reputations were destroyed as companies were forced to pick up the pieces from being highly geared into illiquid investments, while there was little visibility as to the actual NAV. This all sounds painfully familiar. Indeed, one of the few key differences is that at least the Listed Private Equity sector could point to a global financial crisis as a catalyst for chaos; the original board and manager do not have this luxury.”

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