TIDMOOA
Octopus AIM VCT plc
Half-Yearly Results
Octopus AIM VCT plc announces its unaudited half-yearly results
for the six months ended 31 August 2023.
Octopus AIM VCT plc (the 'Company') is a venture capital trust
(VCT) which aims to provide shareholders with attractive tax-free
dividends and long-term capital growth by investing in a diverse
portfolio of predominantly AIM-traded companies. The Company is
managed by Octopus Investments Limited ('Octopus' or the
'Investment Manager').
Financial Summary
Six months to 31 Six months to 31 Year to 28
August 2023 August 2022 February 2023
------------------ ------------------ ------------------ ------------------
Net assets
(GBP'000) 120,131 138,489 141,222
Loss after tax
(GBP'000) (15,972) (24,508) (33,414)
Net asset value
(NAV) per share
(p) 67.2 86.5 78.5
Total return
(%)(1) (11.2) (14.6) (19.8)
Dividends per
share paid in the
period (p) 2.5 3.0 5.5
Dividend declared
(p)(2) 2.5 2.5 2.5
------------------ ------------------ ------------------ ------------------
(1) Total return is an alternative performance measure
calculated as movement in NAV per share in the period plus
dividends paid in the period, divided by the NAV per share at the
beginning of the period.
(2) The interim dividend of 2.5p will be paid on 12 January 2024
to those shareholders on the register on 22 December 2023.
Chair's statement
The six months to 31 August 2023 have seen a continuation of the
challenging conditions for smaller company investments that were
outlined in the last annual report, and which have persisted for
several reporting periods. Inflation has been slow to fall with the
result that expectations for peak interest rates have risen and
interest rates are now expected to remain high into 2024. The
market turbulence resulting from this has been particularly harsh
on smaller companies in some of the key sectors in which we invest.
Against this background it is disappointing to report the VCT's Net
Asset Value (NAV) per share fell by 11.2% during the six month
period after adding back the 2.5p dividend paid in August. This
reduction is marginally less than the reduction in the FTSE AIM
All-Share index, which fell by 12.8% over the same period.
The flow of VCT qualifying investment opportunities was still
weak at the start of the year and any recovery in the new issues
market was delayed in response to less certain market conditions
after the collapse of Silicon Valley Bank in March. Consequently,
the level of investment in the period has been low at GBP0.5
million. More encouragingly, there has been a pick-up in activity
towards the end of the period, led by existing AIM companies many
of which have been able to access funding on lower valuations. We
have made several new investments since the period end.
Transactions with the Investment Manager
Details of amounts paid to the Investment Manager are disclosed
in Note 8 to the financial statements.
Share buybacks
In the six months to 31 August 2023, the Company bought back
2,221,434 Ordinary shares for a total consideration of
GBP1,564,000. It is evident from the conversations which your
Investment Manager has that this facility remains an important
consideration for investors. The Company remains committed to
maintaining its policy of buying back shares at a discount of
approximately 4.5% to NAV (equating to up to a 5% discount to the
selling shareholder after costs).
Share issues
In this period 1,301,464 new shares were issued, 1,260,682 of
these being issued through the Dividend Reinvestment Scheme
(DRIS).
New share offer
Since the period end the Company has launched a new combined
offer for subscription alongside Octopus AIM VCT 2 plc to raise up
to GBP20 million with an over allotment of up to a further GBP10
million.
Dividends
On 10 August 2023, the Company paid a dividend of 2.5p per
share, being the final dividend for the year ended 28 February
2023. For the period to 31 August 2023, the Company has declared an
interim dividend of 2.5p which will be paid on 12 January 2024 to
shareholders on the register on 22 December 2023. It remains the
Company's target to pay an annual dividend of 5.0p or 5% of the
year-end share price, whichever is greater at the time.
Principal risks and uncertainties
The principal risks and uncertainties faced by the VCT are set
out in Note 7 to the financial statements.
Outlook
The twin challenges of high interest rates and strong inflation,
combined with unsettled geopolitical circumstances including the
recent tragic events in the Middle East have led to significant
numbers of shares now being priced well below their recent peaks
and on valuations not seen since the last financial crisis. Your
VCT has the resilience of being invested in a widely diversified
portfolio of companies, and the recently announced fundraising
means that our Investment Manager is in a strong position to invest
in new opportunities as they arise.
Neal Ransome
Chair
7 November 2023
Investment Manager's review
Overview
The six months to 31 August 2023 has been a frustrating period
for smaller company investors. Good growth companies trading
robustly have seen their share prices and ratings fall as investors
have shied away from taking risks. This has partly been the result
of persistently high inflation, which has led to interest rates
being raised four times in the half-year to 5.25%, further than had
been anticipated a year ago, with any meaningful fall now not
expected until next year. This nervousness has resulted in many
valuations falling to levels not seen since the Financial Crisis
nearly 15 years ago and has left the wider equity market trading at
a discount of over 25% to its longer-term average. The Company has
been particularly adversely affected by these market conditions
over the past two years as it invests in early-stage companies,
which rely on supportive market conditions for capital until they
reach profitability. However, on a more positive note the economy
has remained more robust than expected and many companies in the
portfolio are still managing significant progress and growth.
Valuations are at an attractive level for buyers and we see scope
to deploy cash profitably once the market becomes comfortable that
interest rates have peaked.
Performance
Adding back the 2.5p paid out in dividends in the period, the
NAV fell by 11.2% in the six months to 31 August 2023. This
compares with a 12.8% fall in the FTSE AIM All-Share Index, a 3.3%
fall in the Small Cap Index (ex-Investment Trusts) and a 3.2% fall
in the FTSE All Share Index, all on a total return basis. The
Company's relatively high exposures to the healthcare and
technology sectors (which had been a reason for good returns in the
past) were once again detrimental to performance in a world where
risk averse investors have little appetite for early-stage growth
stocks. Companies yet to reach profitability were particularly
affected with those needing to raise money now rather than wait for
more favourable market conditions suffering some steep falls in
their valuations. The VCT rules require investment to be made at an
early stage and the benefits of doing so have been clear in past
periods. The FTSE All Share Index performed noticeably better than
the AIM Index, reflecting a higher weighting in larger companies,
although it also continues to be valued at a discount to indices in
other major geographies. The FTSE Small Cap Index (excluding
Investment Trusts) did better than the AIM Index but has a much
narrower membership and its constituents were less affected by the
conditions described above.
There were two main themes behind the largest detractors from
performance in the period, the most dominant of which was the
on-going de-rating of growth stocks as investors sought safe havens
such as the oil and resource sectors. Of the top ten detractors,
seven companies (Learning Technologies Group, SDI Group, Next 15
Group, GB Group, Nexteq, Ergomed and Netcall) are established and
profitable companies held for long-term growth potential. The worst
impact on the NAV was from Learning Technologies Group, which saw
its shares almost halve despite producing robust trading statements
and demonstrating the ability of the business to generate cash from
its recurring revenue base. Next 15 Group and Ergomed's shares
suffered a similar de-rating although the latter has since been
subject to a takeover bid from a private equity house at a 28%
premium to the then prevailing share price, demonstrating the value
to be found in the portfolio. Others such as SDI and GB Group did
have their 2023 forecasts cut although the longer-term investment
cases remain robust. The other main theme was early-stage companies
(such as Libertine and Feedback) either making slower progress than
expected or perceived as not having a long enough cash runway to
achieve profitability.
There were several positive contributors to performance
including some early-stage companies which did demonstrate progress
or where share prices recovered from previous lows when they
achieved funding. Among these were Equipmake which has made several
encouraging announcements since its latest funding round, Spectral
MD which announced a reverse takeover by a US special acquisitions
company (SPAC) which will enable it to tap US investors, and
Intelligent Ultrasound which is making good progress with the
commercialisation of its AI-based ultrasound software. In the
retail sector Vertu Motors is trading well and its shares have been
buoyed by takeover bids for quoted competitors.
Portfolio activity
In the period under review, the Company made one qualifying
investment totalling GBP0.5 million into a new AIM flotation, a
marked decrease on the GBP2.4 million we invested in the
corresponding period last year, reflecting caution on the part of
companies and brokers about raising new capital against a
background of volatile markets.
The new investment was in Tan Delta Systems plc, a UK-based
manufacturer of equipment which can accurately monitor the
condition of oil to reduce maintenance costs and unnecessary oil
usage. The systems are sold to operators of heavy equipment,
supplying customers globally.
A number of disposals in the period resulted in a loss of GBP0.5
million over book cost. Adept Telecom was the subject of a cash
takeover bid by a private equity bidder at a profit. We also
disposed of ITSarm (formerly In The Style), realising a loss. Its
business had been very badly affected by a squeeze between the
consumer's dwindling appetite for online purchases and cost and
logistics challenges exacerbated by inflation, and the management
sold the business for cash. We made partial disposals at an overall
profit of Genedrive, Intelligent Ultrasound, Judges Scientific,
Nexteq (formerly Quixant), EKF Diagnostics Holdings, Glantus
Holdings and Equipmake Holdings.
In the period we invested GBP1.2 million into the FP Octopus
Micro Cap Growth Fund and GBP0.1 million into the FP Octopus Future
Generations Fund and sold GBP0.7 million of the FP Octopus Multi
Cap Income Fund. The strategy is to reduce other individually held
non-qualifying holdings and replace them with liquid collective
funds. Although the funds have had a negative impact on returns in
this period, we believe valuations are currently at an attractive
level and expect them to provide a return on our cash awaiting
investment once stock markets return to a more settled state.
Unquoted investments
The Company is able to make investments in unquoted companies
intending to float. Currently 7.1% (31 August 2022: 7.3% and 28
February 2023: 6.1%) of the Company's net assets are invested in
unquoted companies. In the period there was a reduction in the
valuation of the holding in Popsa on the basis of peer group
comparisons and a slight increase in the valuation of Hasgrove,
which continues to grow strongly.
Outlook
The very real issue of inflation and the need to tighten
monetary policy by raising interest rates further than had been
anticipated six months ago has prolonged the pain for the share
prices of companies exposed to growth sectors. This has impacted
the NAV and left some of the more mature companies in the portfolio
held for their long-term growth potential valued well below their
long-term averages despite profit forecasts showing resilience. It
has also had a dampening effect on the new issue pipeline although
there are recent signs that this is becoming more active again.
Short-term attention remains fixed on the monthly inflation figures
with the most recent monthly figures showing a larger than expected
fall, giving hope that interest rates may be at or close to their
peak. If confirmed it will have a huge impact on investor
confidence which should also be bolstered by recent economic growth
revisions, which no longer show the UK trailing other major
economies over the past three years.
The portfolio's strength is that it is well diversified both in
terms of sector exposure and of individual company concentration.
At the period end it contained 87 holdings (31 August 2022: 91
holdings and 28 February 2023: 88 holdings) across a range of
businesses with exposure to some exciting new technologies in the
environmental and healthcare sectors. The Company currently has
funds available for new investments as well as supporting those
which are still on their journey to profitability. These are
uncertain macroeconomic and geopolitical times, but the balance of
the portfolio towards profitable companies remains, and the
Investment Manager is confident that there will continue to be
sufficient opportunities to invest our funds in good companies
seeking more growth capital at attractive valuations, which we
expect will result in improved future returns.
The Octopus Quoted Companies team
Octopus Investments
7 November 2023
Directors' responsibilities statement
We confirm that to the best of our knowledge:
-- the half-yearly financial statements have been prepared in accordance
with Financial Reporting Standard 104 'Interim Financial Reporting'
issued by the Financial Reporting Council;
-- the half-yearly financial statements give a true and fair view of the
assets, liabilities, financial position, and profit or loss of the
Company;
-- the half-yearly report includes a fair review of the information required
by the Financial Conduct Authority's Disclosure Guidance and Transparency
Rules, being:
-- we have disclosed an indication of the important events that have
occurred during the first six months of the financial year and
their impact on the condensed set of financial statements;
-- we have disclosed a description of the principal risks and
uncertainties for the remaining six months of the year; and
-- we have disclosed a description of related party transactions that
have taken place in the first six months of the current financial
year, that may have materially affected the financial position or
performance of the Company during that period and any changes in
the related party transactions described in the last annual report
that could do so.
On behalf of the Board
Neal Ransome
Chair
7 November 2023
Income statement
Unaudited Unaudited Audited
Six months to 31 August 2023 Six months to 31 August 2022 Year to 28 February 2023
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- --------------------------------- ----------------------------------------------------------------
Gain on
disposal of
fixed asset
investments -- 139 139 -- 15 15 -- 207 207
Loss on
disposal of
current asset
investments -- (52) (52) -- -- -- -- -- --
Loss on
valuation of
fixed asset
investments -- (13,719) (13,719) -- (21,159) (21,159) -- (29,192) (29,192)
Loss on
valuation of
current asset
investments -- (1,794) (1,794) -- (2,137) (2,137) -- (2,233) (2,233)
Investment
income 920 -- 920 448 23 471 1,068 24 1,092
Investment
management
fees (304) (912) (1,216) (359) (1,078) (1,437) (650) (1,949) (2,599)
Other expenses (250) -- (250) (261) -- (261) (689) -- (689)
-------------- ------ --------- -------------- ------- --------- --------- ------- --------- -------------
(Loss)/profit
before tax 366 (16,338) (15,972) (172) (24,336) (24,508) (271) (33,143) (33,414)
Tax _ _ _ _ _ _ _ _ _
-------------- ------ --------- -------------- ------- --------- --------- ------- --------- -------------
(Loss)/profit
after tax 366 (16,338) (15,972) (172) (24,336) (24,508) (271) (33,143) (33,414)
-------------- ------ --------- -------------- ------- --------- --------- ------- --------- -------------
Earnings per
share --
basic and
diluted 0.2p (9.1p) (8.9p) (0.1p) (15.2p) (15.3p) (0.2p) (20.0p) (20.2p)
-------------- ------ --------- -------------- ------- --------- --------- ------- --------- -------------
-- The 'Total' column of this statement represents the statutory Income
Statement of the Company; the supplementary revenue return and capital
return columns have been prepared in accordance with the AIC Statement of
Recommended Practice.
-- All revenue and capital items in the above statement derive from
continuing operations.
-- The Company has no recognised gains or losses other than those disclosed
in the Income Statement.
-- The Company has only one class of business and derives its income from
investments made in shares and securities and from bank and money market
funds, as well as OEIC funds.
The accompanying notes form an integral part of the financial
statements.
Balance sheet
Unaudited Unaudited Audited
As at 31 August 2023 As at 31 August 2023 As at 28 February 2023
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ------------- -------- ------------- --------- --------------
Fixed asset
investments 87,322 108,474 102,667
Current assets:
Investments 14,873 14,505 16,188
Money market
funds 16,485 1,331 21,433
Debtors 282 345 354
Cash at bank 1,921 14,710 1,437
Applications
cash(1) 4 3 3
--------------- -------- ------------- -------- ------------- --------- --------------
33,565 30,894 39,415
--------------- -------- ------------- -------- ------------- --------- --------------
Creditors:
amounts
falling due
within one
year (756) (879) (860)
--------------- -------- ------------- -------- ------------- --------- --------------
Net current
assets 32,809 30,015 38,555
--------------- -------- ------------- -------- ------------- --------- --------------
Total assets
less current
liabilities 120,131 138,489 141,222
--------------- -------- ------------- -------- ------------- --------- --------------
Called up
equity share
capital 1,789 1,601 1,798
Share premium 19,807 1,080 18,924
Capital
redemption
reserve 301 252 279
Special
distributable
reserve 112,000 124,444 118,015
Capital reserve
realised (24,586) (21,993) (23,143)
Capital reserve
unrealised 12,650 35,202 27,545
Revenue reserve (1,830) (2,097) (2,196)
Total equity
shareholders'
funds 120,131 138,489 141,222
--------------- -------- ------------- -------- ------------- --------- --------------
NAV per share - 67.2p 86.5p 78.5p
basic and
diluted
--------------- -------- ------------- -------- ------------- --------- --------------
(1) Cash held but not yet allotted
The statements were approved by the Directors and authorised for
issue on 7 November 2023 and are signed on their behalf by:
Neal Ransome
Chair
Company No: 03477519
Statement of changes in equity
Capital Special Capital Capital
Share Share redemption distributable reserve reserve
capital premium reserve reserves(1) realised(1) unrealised Revenue reserve(1) Total
--------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------- ------- ---------- ------------- ----------- ---------- ------------------- --------
As at 28
February
2023 1,798 18,924 279 118,015 (23,143) 27,545 (2,196) 141,222
-------------- ------- ------- ---------- ------------- ----------- ---------- ------------------- --------
Total
comprehensive
loss for the
period -- -- -- -- (825) (15,513) 366 (15,972)
Contributions by and distributions to owners:
Repurchase and
cancellation
of own
shares (22) -- 22 (1,564) -- -- -- (1,564)
Issue of
shares 13 883 -- -- -- -- -- 896
Share issue
costs -- -- -- -- -- -- -- --
Dividends -- -- -- (4,451) -- -- -- (4,451)
-------------- ------- ------- ---------- ------------- ----------- ---------- ------------------- --------
Total
contributions
by and
distributions
to owners (9) 883 22 (6,015) -- -- -- (5,119)
Other
movements:
Cancellation
of share
premium -- -- -- -- -- -- -- --
Prior years'
holding
losses now
realised -- -- -- -- (618) 618 -- --
-------------- ------- ------- ---------- ------------- ----------- ---------- ------------------- --------
Total other
movements -- -- -- -- (618) 618 -- --
-------------- ------- ------- ---------- ------------- ----------- ---------- ------------------- --------
As at 31
August 2023 1,789 19,807 301 112,000 (24,586) 12,650 (1,830) 120,131
-------------- ------- ------- ---------- ------------- ----------- ---------- ------------------- --------
(1) The sum of these reserves is an amount of GBP85,584,000 (31
August 2022: GBP100,354,000 and 28 February 2023: GBP92,676,000)
which is considered distributable to shareholders.
Special Capital Capital
Share Capital redemption distributable reserve reserve Revenue
capital Share premium reserve reserves(1) realised(1) unrealised reserve(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 March
2022 1,605 25,450 236 105,258 (20,762) 58,307 (1,925) 168,169
Total
comprehensive
income for
the period -- -- -- -- (1,040) (23,296) (172) (24,508)
Contributions by and distributions to owners:
Repurchase and
cancellation
of own
shares (16) -- 16 (1,489) -- -- -- (1,489)
Issue of
shares 12 1,090 -- -- -- -- -- 1,102
Share issue
costs -- (9) -- -- -- -- -- (9)
Dividends paid -- -- -- (4,776) -- -- -- (4,776)
-------------- ---------- ---------------- --------------------- ------------------ ----------- ------------ ---------- --------
Total
contributions
by and
distributions
to owners (4) 1,081 16 (6,265) -- -- -- (5,172)
Other
movements:
Cancellation
of share
premium -- (25,451) -- 25,451 -- -- -- --
Prior years'
holding gains
now realised -- -- -- -- (191) 191 -- --
-------------- ---------- ---------------- --------------------- ------------------ ----------- ------------ ---------- --------
Total other
movements -- (25,451) -- 25,451 (191) (191) -- --
-------------- ---------- ---------------- --------------------- ------------------ ----------- ------------ ---------- --------
As at 31
August 2022 1,601 1,080 252 124,444 (21,993) 35,202 (2,097) 138,489
-------------- ---------- ---------------- --------------------- ------------------ ----------- ------------ ---------- --------
(1) The sum of these reserves is an amount of GBP85,584,000 (31
August 2022: GBP100,354,000 and 28 February 2023: GBP92,676,000)
which is considered distributable to shareholders.
Share capital Share premium Capital redemption reserve Special distributable reserves(1) Capital reserve realised(1) Capital reserve unrealised Revenue reserve(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------------- -------------- --------------------------- ---------------------------------- ---------------------------- --------------------------- ------------------- --------
As at 1 March 2022 1,605 25,450 236 105,258 (20,762) 58,307 (1,925) 168,169
---------------------------- -------------- -------------- --------------------------- ---------------------------------- ---------------------------- --------------------------- ------------------- --------
Comprehensive income for the
year:
Management fee allocated as
capital expenditure -- -- -- -- (1,949) -- -- (1,949)
Current year gains on
disposal -- -- -- -- 207 -- -- 207
Current period gains on fair
value of investments -- -- -- -- -- (31,425) -- (31,425)
Capital investment income -- -- -- -- 24 -- -- 24
Loss after tax -- -- -- -- -- -- (271) (271)
---------------------------- -------------- -------------- --------------------------- ---------------------------------- ---------------------------- --------------------------- ------------------- --------
Total comprehensive loss for
the year -- -- -- -- (1,718) (31,425) (271) (33,414)
Contributions by and
distributions to owners:
Repurchase and cancellation
of own shares (43) -- 43 (3,567) -- -- -- (3,567)
Issue of shares 236 19,742 -- -- -- -- -- 19,978
Share issue costs -- (668) -- -- -- -- -- (668)
Dividends paid -- -- -- (9,276) -- -- -- (9,276)
---------------------------- -------------- -------------- --------------------------- ---------------------------------- ---------------------------- --------------------------- ------------------- --------
Total contributions by and
distributions to owners 193 19,074 43 (12,843) -- -- -- 6,467
Other movements:
Cancellation of share
premium -- (25,600) -- 25,600 -- -- -- --
Prior years' holding gains
now realised -- -- -- -- (663) 663 -- --
---------------------------- -------------- -------------- --------------------------- ---------------------------------- ---------------------------- --------------------------- ------------------- --------
Total other movements -- (25,600) -- 25,600 (663) 663 -- --
---------------------------- -------------- -------------- --------------------------- ---------------------------------- ---------------------------- --------------------------- ------------------- --------
Balance as at 28 February
2023 1,798 18,924 279 118,015 (23,143) 27,545 (2,196) 141,222
---------------------------- -------------- -------------- --------------------------- ---------------------------------- ---------------------------- --------------------------- ------------------- --------
(1) The sum of these reserves is an amount of GBP85,584,000 (31
August 2022: GBP100,354,000 and 28 February 2023: GBP92,676,000)
which is considered distributable to shareholders.
Cash flow statement
Audited year to
28 February
Unaudited six months to 31 August 2023 Unaudited six months to 31 August 2022 2023
GBP'000 GBP'000 GBP'000
------------------------------------ -------------------------------------------- -------------------------------------------- ---------------------
Cash flows from operating activities
Loss before tax (15,972) (24,508) (33,414)
Adjustments for:
(Increase)/decrease in debtors 72 (16) (25)
Decrease in creditors (105) (289) (794)
Gain on disposal of fixed assets (139) (15) (207)
Loss on disposal of current assets 52 -- --
Loss on valuation of fixed asset
investments 13,719 21,159 29,192
Loss on valuation of current asset
investments 1,794 2,137 2,233
Non-cash distributions -- (23) (24)
------------------------------------ -------------------------------------------- -------------------------------------------- ---------------------
Net cash used in operating
activities (579) (1,555) (3,039)
Cash flows from investing activities
Purchase of fixed asset investments (453) (2,425) (4,880)
Purchase of current asset
investments (1,259) (99) (1,878)
Proceeds from sale of fixed asset
investments 2,218 2,056 2,478
Proceeds from sale of current asset
investments 728 -- --
------------------------------------ -------------------------------------------- -------------------------------------------- ---------------------
Net cash used in investing
activities 1,234 (468) (4,280)
Cash flows from financing activities
Movement in applications account 1 (243) 243
Purchase of own shares (1,564) (1,489) (3,567)
Share issues 28 209 18,217
Share issues costs -- (9) (668)
Dividends paid (3,583) (3,883) (7,515)
------------------------------------ -------------------------------------------- -------------------------------------------- ---------------------
Net cash used in financing
activities (5,118) (5,415) 6,710
Decrease in cash and cash
equivalents (4,463) (7,438) (609)
Opening cash and cash equivalents 22,873 23,482 23,482
------------------------------------ -------------------------------------------- -------------------------------------------- ---------------------
Closing cash and cash equivalents 18,410 16,044 22,873
------------------------------------ -------------------------------------------- -------------------------------------------- ---------------------
Cash and cash equivalents comprise
Cash at bank 1,921 14,710 1,437
Applications cash 4 3 3
Money market funds 16,485 1,331 21,433
------------------------------------ -------------------------------------------- -------------------------------------------- ---------------------
Total cash and cash equivalents 18,410 16,044 22,873
------------------------------------ -------------------------------------------- -------------------------------------------- ---------------------
Notes to the financial statements
1. Basis of preparation
The unaudited financial statements which covers the six months
to 31 August 2023 has been prepared in accordance with the
Financial Reporting Council's (FRC) Financial Reporting Standard
104 'Interim Financial Reporting' (March 2018) and the Statement of
Recommended Practice (SORP) for Investment Companies re-issued by
the Association of Investment Companies in July 2022.
The principal accounting policies have remained unchanged from
those set out in the Company's 2023 Annual Report and Accounts.
2. Publication of non-statutory accounts
The unaudited financial statements for the six months ended 31
August 2023 does not constitute statutory accounts within the
meaning of Section 415 of the Companies Act 2006 and has not been
delivered to the Registrar of Companies. The comparative figures
for the year ended 28 February 2023 have been extracted from the
audited financial statements for that year, which have been
delivered to the Registrar of Companies. The independent auditor's
report on those financial statements, in accordance with chapter 3,
part 16 of the Companies Act 2006, was unqualified. This financial
statements have not been reviewed by the Company's auditor.
3. Earnings per share
The earnings per share is calculated on the basis of 178,768,443
Ordinary shares (31 August 2022: 159,856,324 and 28 February 2023:
165,688,082), being the weighted average number of shares in issue
during the period.
There are no potentially dilutive capital instruments in issue
and, therefore, no diluted return per share figures are relevant.
The basic and diluted earnings per share are therefore
identical.
4. Net asset value per share
The net asset value per share is based on net assets as at 31
August 2023 divided by 178,882,114 shares in issue at that date (31
August 2022: 160,064,444 and 28 February 2023: 179,802,084).
31 August 2023 31 August 2022 28 February 2023
-------------------------- -------------- -------------- ----------------
Net assets (GBP'000) 120,131 138,489 141,222
Shares in Issue 178,882,114 160,064,444 179,802,084
-------------------------- -------------- -------------- ----------------
Net asset value per share 67.2p 86.5p 78.5p
-------------------------- -------------- -------------- ----------------
5. Dividends
The interim dividend declared of 2.5p per Ordinary share will be
paid on 12 January 2024 to those shareholders on the register on 22
December 2023.
6. Buybacks and share issues
During the six months ended 31 August 2023 the Company
repurchased the following shares.
Date No. of shares Price (p) Cost (GBP)
----------------- ------------- --------- ----------
16 March 2023 459,683 72.5 333,000
20 April 2023 558,866 72.5 405,000
18 May 2023 290,881 71.9 209,000
15 June 2023 221,943 70.4 156,000
13 July 2023 247,764 68.2 169,000
17 August 2023 442,297 66.2 292,000
----------------- ------------- --------- ----------
Total 2,221,434 1,564,000
----------------- ------------- --------- ----------
The weighted average price of all buybacks during the period was
70.4p per share.
During the six months ended 31 August 2023 the Company issued
the following shares.
Date No. of shares Price (p) Gross proceeds (GBP)
------------------------ ------------- --------- --------------------
10 August 2023 (DRIS) 1,260,682 68.8 868,000
10 August 2023(1) 40,782 68.8 28,000
------------------------ ------------- --------- --------------------
Total 1,301,464 896,000
------------------------ ------------- --------- --------------------
(1) Shares issued as a result of reduced adviser charges, and
reduced annual management fee for Octopus people.
The weighted average allotment price of all shares issued during
the period was 68.8p per share.
7. Principal risks and uncertainties
The Company's principal risks are investment performance, VCT
qualifying status risk, operational risk, information security,
economic and price risk, regulatory and reputational/legislative
risk, liquidity/cash flow risk and valuation risk. These risks, and
the way in which they are managed, are described in more detail in
the Company's Annual Report and Accounts for the year ended 28
February 2023. The Company's principal risks and uncertainties have
not changed materially since the date of that report.
8. Related Party Transactions
The Company has employed Octopus Investments Limited throughout
the period as Investment Manager. Octopus has also been appointed
as Custodian of the Company's investments under a Custodian
Agreement. The Company has been charged GBP1,216,000 by Octopus as
a management fee in the period to 31 August 2023 (31 August 2022:
GBP1,437,000 and 28 February 2023 GBP2,599,000). The management fee
is payable quarterly and is based on 2% of net assets at six-month
intervals.
The Company has invested a further GBP1.3 million into Octopus
managed funds (31 August 2022: GBP0.1 million and 28 February 2023
GBP1.9 million), being the Multi Cap Income Fund, Micro Cap Growth
Fund and Future Generations Fund. The Company has partially
disposed its holding in Multi Cap Income Fund for total
consideration of GBP0.7 million (31 August 2022: nil and 28
February 2023: nil) and has made a loss of GBP0.02 million over
book cost (31 August 2022: nil and 28 February 2023: nil). To make
sure the Company is not double charged management fees on these
products, the Company receives a reduction in the management fee as
a percentage of the value of these investments. This amounted to
GBP43,000 in the period to 31 August 2023 (31 August 2022:
GBP43,000 and 28 February 2023: GBP83,000). For further details
please refer to the Company's Annual Report and Accounts for the
year ended 28 February 2023.
In the period, Octopus Investments Nominees Limited (OINL)
purchased shares in the Company from shareholders to correct
administrative issues, on the understanding that shares will be
sold back to the Company in subsequent share buybacks at the
prevailing market price. As at 31 August 2023, OINL held nil shares
(31 August 2022: 4,540 shares and 28 February 2023: 7,598 shares)
in the Company as beneficial owner, with a nil book cost (31 August
2022: GBP4,000 and 28 February 2023: GBP7,000). Throughout the
period to 31 August 2023 OINL purchased 2,657 shares (31 August
2022: 6,253 shares and 28 February 2023: 9,875 shares) at a cost of
GBP2,372 (31 August 2022: GBP5,930 and 28 February 2023: GBP9,000)
and sold 10,255 shares (31 August 2022: 2,602 shares and 28
February 2023: 3,166 shares) for proceeds of GBP7,383 (31 August
2022: GBP2,328 and 28 February 2023: GBP3,000). This is classed as
a related party transaction as Octopus, the Investment Manager and
OINL are part of the same group of companies. Any such future
transactions, where OINL takes over the legal and beneficial
ownership of Company shares, will be announced to the market and
disclosed in annual and financial statements.
9. Fixed asset investments
Accounting Policy
The Company's principal financial assets are its investments and
the policies in relation to those assets are set out below.
Purchases and sales of investments are recognised in the
financial statements at the date of the transaction (trade
date).
These investments will be managed and their performance
evaluated on a fair value basis in accordance with a documented
investment strategy and information about them has to be provided
internally on that basis to the Board. Accordingly, as permitted by
FRS 102, the investments are measured as being fair value through
profit or loss on the basis that they qualify as a group of assets
managed, and whose performance is evaluated, on a fair value basis
in accordance with a documented investment strategy. The Company's
investments are measured at subsequent reporting dates at fair
value.
In the case of investments quoted on a recognised stock
exchange, fair value is established by reference to the closing bid
price on the relevant date or the last traded price, depending upon
convention of the exchange on which the investment is quoted. This
is consistent with the International Private Equity and Venture
Capital Valuation (IPEV) guidelines.
Gains and losses arising from changes in fair value of
investments are recognised as part of the capital return within the
Income Statement and allocated to the capital reserve --
unrealised. The Managers review changes in fair value of
investments for any permanent reductions in value and will give
consideration to whether these losses should be transferred to the
Capital reserve -- realised.
In the preparation of the valuations of assets the Directors are
required to make judgements and estimates that are reasonable and
incorporate their knowledge of the performance of the investee
companies.
Fair value hierarchy
Paragraph 34.22 of FRS 102 suggests following a hierarchy of
fair value measurements for financial instruments measured at fair
value in the Balance Sheet, which gives the highest priority to
unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1) and the lowest priority to unobservable
inputs (Level 3). This methodology is adopted by the Company and
requires disclosure of financial instruments to be dependent on the
lowest significant applicable input, as laid out below:
Level 1: The unadjusted, fully accessible and current quoted
price in an active market for identical assets or liabilities that
an entity can access at the measurement date.
Level 2: Inputs for similar assets or liabilities other than the
quoted prices included in Level 1 that are directly or indirectly
observable, which exist for the duration of the period of
investment.
Level 3: This is where inputs are unobservable, where no active
market is available and recent transactions for identical
instruments do not provide a good estimate of fair value for the
asset or liability.
There have been no reclassifications between levels in the year.
The change in fair value for the current and previous year is
recognised through the profit and loss account.
Level 3: Unquoted
Level 1: Quoted equity investments investments Total
Disclosure GBP'000 GBP'000 GBP'000
------------------------ ---------------------------------- ----------------- --------
Cost as at 1 March 2023 72,846 4,488 77,334
Opening unrealised gain
at 1 March 2023 21,207 4,126 25,333
------------------------ ---------------------------------- ----------------- --------
Valuation at 1 March
2023 94,053 8,614 102,667
------------------------ ---------------------------------- ----------------- --------
Purchases at cost 453 -- 453
Disposal proceeds (2,218) -- (2,218)
Gain on realisation of
investments 139 -- 139
Change in fair value in
year (13,663) (56) (13,719)
------------------------ ---------------------------------- ----------------- --------
Closing valuation at 31
August 2023 78,764 8,558 87,322
------------------------ ---------------------------------- ----------------- --------
Cost at 31 August 2023 70,570 4,488 75,058
Closing unrealised gain
at 31 August 2023 8,194 4,070 12,264
------------------------ ---------------------------------- ----------------- --------
Valuation at 31 August
2023 78,764 8,558 87,332
------------------------ ---------------------------------- ----------------- --------
Level 1 valuations are valued in accordance with the bid-price
on the relevant date. Further details of the fixed asset
investments held by the Company are shown within the Investment
Manager's review.
Level 3 investments are reported at fair value in accordance
with FRS 102 Sections 11 and 12, which is determined in accordance
with the latest IPEV guidelines. In estimating fair value, there is
an element of judgement, notably in deriving reasonable
assumptions, and it is possible that, if different assumptions were
to be used, different valuations could have been attributed to some
of the Company's investments.
Level 3 investments include GBP600,000 (31 August 2022:
GBP600,000 and 28 February 2023: GBP600,000) of convertible loan
notes held at cost, which is deemed to be current fair value. In
addition to this the Company holds eight unquoted investments which
are classified as level 3 in terms of fair value hierarchy. These
are valued based on a range of valuation methodologies, determined
on an investment specific basis. The price of recent investment is
used where a transaction has occurred sufficiently close to the
reporting date to make this the most reliable indicator of fair
value. Where recent investment is not deemed to indicate the most
reliable indicator of fair value i.e. the most recent investment is
too distant from the reporting date for this to be deemed a
reasonable indicator, other market-based approaches including
earnings multiples, annualised recurring revenues, discounted cash
flows or net assets are used to determine a fair value for the
investments.
All capital gains or losses on investments are classified at
FVTPL (fair value through profit or loss). Given the nature of the
Company's venture capital investments, the changes in fair value of
such investments recognised in these financial statements are not
considered to be readily convertible to cash in full at the balance
sheet date and accordingly these gains are treated as holding gains
or losses.
At 31 August 2023 there were no commitments in respect of
investments approved by the Investment Manager but not yet
completed. The transaction costs incurred when purchasing or
selling assets are written off to the Income Statement in the
period that they occur.
10. Post balance sheet events
The following events occurred between the balance sheet date and
the signing of these financial statements.
-- A follow-on investment totalling GBP210,000 completed in FP Octopus UK
Future Generations Fund.
-- A follow-on investment totalling GBP180,000 (convertible loan note)
completed in Rosslyn Data Technologies Plc.
-- A follow-on investment totalling GBP540,000 completed in Rosslyn Data
Technologies Plc.
-- A new investment totalling GBP1,620,000 completed in Eden Research Plc.
-- A follow-on investment totalling GBP1,259,000 completed in Haydale
Graphene Industries Plc.
-- A partial disposal with proceeds totalling GBP39,000 completed in
Equipmake Holdings Limited.
-- A partial disposal with proceeds totalling GBP967,000 completed in
Ergomed Plc.
-- A partial disposal with proceeds totalling GBP38,000 completed in Clean
Power Hydrogen plc.
-- A full disposal with proceeds totalling GBP364,000 completed in Glantus
Holdings plc.
-- A full redemption of the Osirium Technologies plc Loan Notes with
proceeds totalling GBP766,000.
-- A partial disposal with proceeds totalling GBP1,260,000 completed in FP
Octopus UK Multi Cap Income Fund.
-- 284,846 shares were bought back on 21 September 2023 at a price of 64.6p
per share.
-- 978,221 shares were bought back on 19 October 2023 at a price of 60.4p
per share.
-- On 14 September 2023, a prospectus offer was launched alongside Octopus
AIM VCT 2 plc to raise a combined total of up to GBP20 million with a
GBP10 million over allotment facility. The Offer will close on 13
September 2024 or earlier if fully subscribed.
-- A final order to cancel share premium amounting to GBP19.8 million was
granted on 20 October 2023.
11. Half Yearly Report
The unaudited half-yearly report for the six months ended 31
August 2023 will shortly be available to view on the Company's
website http://www.octopusinvestments.com
A copy of the half-yearly report will be submitted to the
National Storage Mechanism and will shortly be available for
inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
For further enquiries, please contact:
Rachel Peat
Octopus Company Secretarial Services Limited
Tel: +44 (0)80 0316 2067
LEI: 213800C5JHJUQLAFP619
(END) Dow Jones Newswires
November 07, 2023 13:20 ET (18:20 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
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