Half-Yearly Results
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 August 2023 |
Six months to 31 August 2022 |
Year to 28 February 2023 |
Net
assets (£’000) |
120,131 |
138,489 |
141,222 |
Loss after tax (£’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 |
1Total 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.
2The 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 £0.5 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
£1,564,000. 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 £20 million with an over allotment of up to a
further £10 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
RansomeChair 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 £0.5 million into a new AIM
flotation, a marked decrease on the £2.4 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 £0.5 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 £1.2 million into the
FP Octopus Micro Cap Growth Fund and £0.1 million into the FP
Octopus Future Generations Fund and sold £0.7 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 teamOctopus 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 Chair7 November 2023
Income statement
|
UnauditedSix
months to 31
August
2023Revenue Capital Total£’000 £’000 £’000 |
Unaudited AuditedSix
months to 31 August
2022 Year to 28
February
2023Revenue Capital Total Revenue Capital Total£’000 £’000 £’000 £’000 £’000 £’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
|
UnauditedAs at 31 August
2023 |
UnauditedAs at 31 August 2023 |
AuditedAs at 28 February 2023 |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’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 cash1 |
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 - basic and diluted |
|
67.2p |
|
86.5p |
|
78.5p |
1Cash 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 ChairCompany No: 03477519
Statement of changes in equity
|
Share capital |
Share premium |
Capital redemption reserve |
Special distributable
reserves1 |
Capital reserve realised1 |
Capital reserve unrealised |
Revenue reserve1 |
Total |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’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 |
1The sum of these reserves is an amount of £85,584,000 (31
August 2022: £100,354,000 and 28 February 2023: £92,676,000) which
is considered distributable to shareholders.
|
Share capital |
Share premium |
Capital redemption reserve |
Special distributable
reserves1 |
Capital reserve realised1 |
Capital reserve unrealised |
Revenue reserve1 |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’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 |
1The sum of these reserves is an amount of £85,584,000 (31
August 2022: £100,354,000 and 28 February 2023: £92,676,000) which
is considered distributable to shareholders.
|
Share capital |
Share premium |
Capital redemption reserve |
Special distributable
reserves1 |
Capital reserve realised1 |
Capital reserve unrealised |
Revenue reserve1 |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’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 ascapital 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 £85,584,000 (31
August 2022: £100,354,000 and 28 February 2023: £92,676,000) which
is considered distributable to shareholders.
Cash flow statement
|
Unaudited six
months to 31
August
2023£’000 |
Unaudited six months to 31 August 2022£’000 |
Audited year to28 February 2023£’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 (£’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 (£) |
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
(£) |
10 August 2023 (DRIS) |
1,260,682 |
68.8 |
868,000 |
10 August 20231 |
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 £1,216,000 by
Octopus as a management fee in the period to 31 August 2023 (31
August 2022: £1,437,000 and 28 February 2023 £2,599,000). The
management fee is payable quarterly and is based on 2% of net
assets at six-month intervals.
The Company has invested a further £1.3 million
into Octopus managed funds (31 August 2022: £0.1 million and 28
February 2023 £1.9 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 £0.7 million (31 August 2022: nil and 28 February
2023: nil) and has made a loss of £0.02 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
£43,000 in the period to 31 August 2023 (31 August 2022: £43,000
and 28 February 2023: £83,000). 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: £4,000 and 28 February 2023: £7,000). 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
£2,372 (31 August 2022: £5,930 and 28 February 2023: £9,000) and
sold 10,255 shares (31 August 2022: 2,602 shares and 28 February
2023: 3,166 shares) for proceeds of £7,383 (31 August 2022: £2,328
and 28 February 2023: £3,000). 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.
Disclosure |
|
|
Level 1: Quoted equity
investments£’000 |
Level 3: Unquoted
investments£’000 |
Total£’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 £600,000 (31 August
2022: £600,000 and 28 February 2023: £600,000) 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 £210,000 completed in FP Octopus UK Future
Generations Fund.
- A follow-on
investment totalling £180,000 (convertible loan note) completed in
Rosslyn Data Technologies Plc.
- A follow-on
investment totalling £540,000 completed in Rosslyn Data
Technologies Plc.
- A new investment
totalling £1,620,000 completed in Eden Research Plc.
- A follow-on
investment totalling £1,259,000 completed in Haydale Graphene
Industries Plc.
- A partial disposal
with proceeds totalling £39,000 completed in Equipmake Holdings
Limited.
- A partial disposal
with proceeds totalling £967,000 completed in Ergomed Plc.
- A partial disposal
with proceeds totalling £38,000 completed in Clean Power Hydrogen
plc.
- A full disposal
with proceeds totalling £364,000 completed in Glantus Holdings
plc.
- A full redemption
of the Osirium Technologies plc Loan Notes with proceeds totalling
£766,000.
- A partial disposal
with proceeds totalling £1,260,000 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 £20 million with a £10
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 £19.8 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 PeatOctopus Company Secretarial Services LimitedTel: +44
(0)80 0316 2067
LEI: 213800C5JHJUQLAFP619
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