Woodford's job on the line as Patient Capital value plunges

Neil Woodford could be replaced as manager after Patient Capital Trust's net asset value dives and results show steep losses. 

The half-yearly results for Woodford Patient Capital Trust (LSE:WPCT) showed a 26% reduction in net asset value (NAV) and big increase in losses in the first six months of the year, in what the chairman of the trust's board called "the most challenging period for the company since it floated in 2015."

According to the trust's latest results, to end June 2019, WPCT saw pre-tax losses of £232 million in the first half of 2019, compared with losses of £5 million for the same period a year before. The trust saw a fall in NAV to £654 million, or 72p per share, over the same period, from £760 million; NAV stood at 97.6p per share at the end of 2018.

Based on the current share price of 44.5p, WPCT trades at a 32% discount to the NAV of 65.02p reported at close of play on 26 September.

Source: TradingView Past performance is not a guide to future performance

WPCT has been under pressure for the past few years. However, the trust started to see major losses following the suspension of LF Woodford Equity Income (WEIF) in early June.  

According to Susan Searle, the investment trust's chairman: "Since the suspension of WEIF, the value of some of the company's assets have come under significant pressure as a result of the portfolio manager and WEIF no longer being able to support follow-on funding, thereby also in some cases impacting the net asset value of the company."

Added to this, says Searle, the trust cannot provide increased funding to its unlisted companies due to its self-imposed limit of no more than 80% of gross assets being in unlisted companies. Searle says the board is considering lifting this cap. 

Some of the trust's holdings have also suffered from the "forced sales" of holdings held in WEIF. Both the trust and fund have had significant portfolio overlaps. Added to this, the negative sentiment surrounding Woodford following WEIF's suspension has likely led investors to sell out of the trust. 

The trust's fortunes are not likely to have picked up in the second half of the year to date, however. Last week (26 Sept) the trust was forced by Link's Fair Value Pricing Committee to write down the value of three of the investment trust's unquoted assets. 

As a result, the net asset value of the trust has been reduced by 3.1p per share. This latest write-down is the third in the past two months. 

In its latest results, the trust reconfirmed that the board is exploring the possibility of replacing Neil Woodford as manager of the trust. The chairman noted: "This process can take time and ultimately the board's decision will be that which is in the best interests of protecting long-term value for shareholders."

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