Octopus AIM VCT Plc
Half-Yearly Results
26 October 2017
Octopus AIM VCT plc, managed by Octopus Investments Limited, today announces the unaudited half-yearly results for the six months ended 31 August 2017.
These results were approved by the Board of Directors on 26 October 2017.
You may, in due course, view the Half-Yearly report in full at www.octopusinvestments.com. All other statutory information can also be found there.
Financial Summary
| Six months to 31 August 2017 | Six months to 31 August 2016 | Year to 28 February 2017 | |
| Net assets (£'000s) | 115,856 | 91,832 | 99,915 |
| Net profit after tax (£'000s) | 6,355 | 6,915 | 15,123 |
| Net asset value per share ("NAV") (p) | 118.4 | 107.4 | 114.4 |
| Ordinary Dividends paid in the period (p) | 3.0 | 2.5 | 5.0 |
| Total return* (%) | 6.1 | 8.2 | 17.5 |
| Interim Dividend proposed (p)** | 2.5 |
*The total return is calculated as the (movement in NAV + Dividends paid in the period) divided by the NAV at the beginning of the period.
**An interim dividend of 2.5p will be paid on 19 January 2018 to those shareholders on the register on 22 December 2017.
Chairman's Statement
I am pleased to present the half-yearly results for Octopus AIM VCT plc. In the past my interim statement has incorporated information about, for example, performance and portfolio activity, but this has now been set out separately below in the Interim Management Report. However, it seems sensible to make a few overall remarks.
The six months to 31 August 2017 has seen smaller companies outperform larger companies, continuing the trend seen at the end of 2016 and the beginning of 2017. This was despite a considerable degree of political uncertainty around the mechanics of Brexit and the upset caused by the General Election result in June which has resulted in more volatile market movements over the summer months. Since then the Government has published a consultative document on the Patient Capital Review, the purpose of which is to review funding support for small businesses of which VCTs are an integral part. Your Manager has participated in this process and the final outcome is awaited.
Your Board has declared a dividend of 2.5p, which will be paid on 19 January 2018 to those shareholders on the register on 22 December 2017.
Your Managers have made a number of new investments in the six month period and these are more fully explained within the Interim Management Report. There also appears to be a healthy pipeline of potential new investments, so at this stage it is probable that there will be more new holdings made in the second half of the year.
Shareholders will be aware that your Board decided to launch a new public offer of shares in June and the first allotment took place on 4 August 2017. On the basis of current evidence it seems that there may be good investment opportunities for the new funds, despite the fact that the market will be more prone to bouts of uncertainty as the Brexit negotiations unfold. Nevertheless the broad economic background currently remains favourable and your Board therefore hopes that the NAV can continue to rise.
Roger Smith
Chairman
26 October 2017
Interim Management Report
Overview
The six months to 31 August 2017 saw the progress in the Net Asset Value per share that we reported on in the annual report continue. Smaller companies enjoyed a particularly strong start to 2017 after a period when they had underperformed the FTSE 100, which had benefitted from its high exposure to foreign earnings in the final quarter of 2016. The outperformance of smaller companies was supported by some very good results in the March reporting season and has continued despite a considerable degree of political uncertainty around the mechanics of Brexit, which was further complicated by the General Election result in June. Against this background the NAV enjoyed strong gains in April and May before giving some of these back in the month of June and finishing the period still below its peak.
Fundraisings on AIM got off to a slow start in the first quarter of 2017 although they picked up throughout the period and remain strong as this report goes to press with the result that the VCT invested more in qualifying holdings in the six months than in the whole of the previous year. Once again, further fundraisings for existing businesses exceeded those for new issues, demonstrating that AIM continues to support its existing members. We announced a top-up offer to raise £4.3 million which closed to new applications, fully subscribed, at the beginning of March, well before the end of the tax year. A subsequent combined offer with Octopus AIM VCT 2 plc to raise up to £30million, with an over allotment facility of £10 million for the 2017/18 and 2018/19 tax years was launched in June. Further details can be found on Page 8. The supply of new issues and fundraisings has carried on improving and we believe that the increased flow of opportunities that we have seen as market participants became more familiar with current VCT rules will continue.
Performance
Adding back the 3.0p paid out in dividends in the period, the Net Asset Value has increased by 6.1% in the six months to 31 August 2017. This compares with a 9.1% rise in the Smaller Companies Index (ex Investment Trusts), a 5.3% increase in the FTSE All Share Index and a 12.2% rise in AIM, all on a total return basis. Smaller companies outperformed as they narrowed the valuation discount to the FTSE 100 that had widened in the aftermath of the Brexit vote and weaker sterling. Performance remained stock specific and heavily influenced by the announcement of news with the market remaining wary of early stage companies not yet making a profit, of which we hold a number in the portfolio, particularly in the pharmaceutical, medical device and technology sectors. This was a contributor to the fund lagging both AIM and the Smaller Companies Index in the period. It remained the case that most of the gains in the portfolio relied on progress being made by companies originally invested in at an early stage, and some of those have struggled to make that transformation with many taking longer than originally expected.
Many companies in the portfolio announced good results in March and were subsequently rewarded with share price gains, including several of the larger holdings which contributed the most to the rise in the NAV in the period. Breedon shares continued their outperformance following the acquisition of Hope Cement in 2016 which had doubled the size of the business and increased the geographical reach to cover most of the UK. Quixant's shares also had another good six months, helped by further reports of strong trading which led to further upgrades in forecasts. It has since reported a very strong set of interim results although the shares have now paused for breath to await the outcome for the year. We have taken some profit in the latter holding since the period end. Gear4music's shares were exceptionally strong performers as they reported profits and revenue growth ahead of expectations with rapid expansion of the European leg of the business demonstrating the potential for a much larger international business. GB Group's shares recovered from an earlier setback as investors focused on the size of the opportunity for international identity verification in an increasingly global world. Learning Technologies also made a significant acquisition which extends the company's geographical reach and increases the proportion of recurring revenues, in addition to announcing strong growth in its core business.
Notable detractors from performance in the period were Tasty, where rising food and staff costs resulted in significant downgrades to short term profit expectations and caused it to re-evaluate its new opening pipeline, and DP Poland which operates the Dominos Pizza franchise in Poland. The latter is better placed and starting to show the effective roll-out of its model with 50 owned and franchised stores. It had a successful placing to accelerate its opening programme towards profitability. We believe that the shares will recover once it shows that it has achieved critical mass. Vertu Motors continued to see its share price suffer bouts of pressure from fears around Brexit. Elsewhere, most of the drag on performance came from the earlier stage companies in the portfolio, particularly those that had setbacks or showed themselves in need of further cash to reach profitability. Oxford Pharmascience, Futura Medical, Midatech Pharma, Sphere, Tyratech and Microsaic all fall into this category with several of them publicly highlighting a need for further cash investment in order to achieve the necessary momentum in their businesses. Sphere Medical found that it was unable to raise sufficient funds on AIM and so announced the decision to de-list, causing us to sell our shares at a loss as the proposed structure would have led to the fund holding a private company which would cease to form part of the qualifying portfolio. Some others in this list have announced strategic reviews and will be presenting shareholders with action plans over the coming months.
However, there were also some earlier stage companies which performed well in the period, with good initial contributions from Faron and Maxcyte as well as an upturn in fortunes at MyCelx on the back of a more stable oil price and initial signs that the marketing agreement with Schlumberger could lead to significant future growth. The shares are now well above their low point although they have yet to regain their float price. WANdisco shares also performed well as the market started to appreciate the benefits of the IBM re-seller agreement and the progress towards breakeven.
Portfolio Activity
In the period under review, the Company made seven new qualifying investments totalling £5.32million in companies exposed to a wide range of industries. This represented a significant increase on the previous year when £3.4million was invested in the twelve months to February. The majority were loss-making at the time of investment although we expect several of them to reach profitability in the near to medium term. The new investments were Escape Hunt, Faron Pharmaceuticals, Maxcyte Group, Velocity Composites, DP Poland, Appscatter Group and FairFX Group. Three of these investments (Escape Hunt, Velocity and Appscatter) were new issues, three (Faron, FairFX and Maxcyte) were new investments for the VCT into existing AIM companies and DP Poland was a follow-on investment for the fund. Escape Hunt is a leisure company operating live escape games in premises around the world both through its own outlets and franchisees. Faron Pharmaceuticals is a drug development company with a drug in phase III trials to treat the often lethal Acute Respiratory Distress Syndrome suffered by trauma victims in A&E. Maxcyte is a pharmaceutical services company with particular technological expertise in the discovery, development, manufacture and commercialisation of cell-based medicines. Velocity Composites manages the supply of raw composite materials in prepared form to the production lines of Tier 1 aircraft component manufacturers. FairFX Group is a foreign exchange provider to both private individuals and corporations. Appscatter manages apps for corporate customers and app developers so that they are registered and distributed to over 50 global app stores which are all monitored for brand and piracy infringements and updated as necessary.
Your Managers continued to use non-qualifying investments to manage liquidity while awaiting new qualifying investment opportunities. Existing holdings for this purpose include some AIM non-qualifying stocks but we have added three holdings in UP Global Sourcing, Medica and Alfa Financial Software which are fully listed stocks and therefore allowed under the new regulations. In the period we also invested a further £7.2 million of the cash balances into Octopus managed portfolios of mixed equity and bond funds and £1.05 million into the FP Octopus UK Micro-Cap Fund, with the objective of obtaining a better return on our cash awaiting investment.
A number of disposals were made, which were a mixture of profit-taking from existing holdings such as Netcall and Restore, and outright sales as in the case of Work Group which had been suspended and changed its business so that it no longer qualified and Sphere which decided to raise funds as a private company as well as Ideagen. The result has been a net loss of £263,000. Since the period end we have taken profits in Quixant and Restore.
Transactions with Manager
Details of amounts paid to the Manager are disclosed in note 8 to the Financial Statements.
Share Buybacks
In the six months to 31 August 2017, the Company bought back 929,542 Ordinary shares for total consideration of £1,048,000. It is evident from the conversations which your Managers have that this facility remains an important consideration to investors. The Company remains committed to maintaining its policy of buying back shares at a 5% discount to NAV.
Share Issues and Fundraising
Your Board announced the intention to launch a new prospectus offer on 16 May 2017 to raise up to £30 million with a possible £10million over allotment facility in combination with Octopus AIM VCT 2 plc. This represents a fundraising of up to £24 million for this VCT. The offer launched on 16 June 2017 and two allotments have taken place with the issue of 10,986,600 shares and funds raised of £13.0 million, net of costs. The Board confirmed the use of the £10 million over allotment facility on 6 October 2017.
In addition 289,872 new ordinary shares were issued in August to shareholders who participated in the dividend reinvestment scheme (DRIS).
Dividend
On 4 August 2017, the Company paid a dividend of 3p per share, being the final dividend for the year ended 28 February 2017.
For the period to 31 August 2017, the Board has declared an interim dividend of 2.5p. This will be paid on 19 January 2018 to shareholders on the register on 22 December 2017.
It remains the Board's intention to maintain a minimum annual dividend payment of 5.0p per share or a 5% yield based on the period end share price, whichever is the greater. This will usually be paid in two instalments during each year.
Risks and Uncertainties
The principal risks and uncertainties are set out in Note 7.
Outlook
Politics continues to dominate the news and a minority Government post the general election is not obviously helpful to negotiating our way successfully out of the European Union. All of this has made the market more volatile since June and the NAV has given back some of its strong rise in the first three months of the period. Although it is only to be expected that the market will be more prone to bouts of uncertainty as the Brexit negotiations unfold, it remains the case that the economic Armageddon predicted by many in the immediate aftermath of the vote a year ago has not materialised and any effects of Brexit itself will be felt much further into the future than 2018.
In the first six months of the year we have seen some good results and a number of encouraging trading statements from companies in the portfolio which is mostly being reinforced in the Autumn interim results season. The portfolio now contains 74 holdings across a range of sectors with the balance weighted towards profitable companies which are continuing to pursue growth. The current fundraising will make cash available for new investments giving the VCT the chance to take advantage of any lowering of valuations in the new issue market that may arise as a result of market uncertainty. With the VCT 90% invested in qualifying companies for HMRC purposes your Manager can afford to be selective about new investments.
The AIM Team
Octopus Investments
26 October 2017
Investment Portfolio
| Investee Company | Sector | Cost as at 31 August 2017 (£'000) | Cumulative change in fair value (£'000) | Fair Value at 31 August 2017 (£'000) | Movement in period ('£000) | % equity held by Octopus AIM VCT plc | % equity held by all funds managed by Octopus | ||
| Breedon Group plc | Construction & Building | 859 | 5,545 | 6,404 | 1,163 | 0.49% | 2.47% | ||
| Quixant plc | Technology Hardware | 697 | 5,661 | 6,358 | 1,090 | 2.30% | 5.98% | ||
| GB Group plc | Support Services | 715 | 3,765 | 4,480 | 1,041 | 1.32% | 14.15% | ||
| Staffline Recruitment Group plc | Support Services | 334 | 4,105 | 4,439 | 422 | 0.76% | 9.73% | ||
| Mattioli Woods plc | Finance | 529 | 2,778 | 3,307 | 277 | 1.13% | 11.70% | ||
| Brooks Macdonald Group plc | Finance | 746 | 2,470 | 3,216 | 112 | 1.15% | 2.92% | ||
| Gear4music Holdings plc | Media | 557 | 2,611 | 3,168 | 542 | 1.92% | 5.48% | ||
| IDOX plc | Software | 353 | 2,497 | 2,850 | (551) | 1.53% | 2.17% | ||
| Learning Technologies Group plc | Support Services | 1,319 | 1,424 | 2,743 | 292 | 1.03% | 1.83% | ||
| RWS Holdings plc | Support Services | 367 | 2,222 | 2,589 | 523 | 0.27% | 7.18% | ||
| Animalcare Group plc | Pharmaceuticals & Biotech | 306 | 1,774 | 2,080 | 72 | 0.92% | 2.57% | ||
| DP Poland plc | Leisure & Hotels | 1,016 | 913 | 1,929 | (580) | 2.07% | 3.59% | ||
| Craneware plc | Software | 183 | 1,562 | 1,745 | 104 | 2.20% | 7.37% | ||
| Yu Group plc | Utilities | 705 | 1,029 | 1,734 | 591 | 0.51% | 1.79% | ||
| Clinigen Group plc | Pharmaceuticals & Biotech | 935 | 794 | 1,729 | 445 | 3.17% | 6.65% | ||
| Ergomed plc | Pharmaceuticals & Biotech | 1,440 | 164 | 1,604 | (276) | 2.71% | 9.53% | ||
| Restore plc | Support Services | 427 | 1,154 | 1,581 | 411 | 0.13% | 4.37% | ||
| Gooch & Housego plc | Electronic & Electrical | 490 | 1,089 | 1,579 | 152 | 0.29% | 10.25% | ||
| Netcall plc | Telecommunication Services | 308 | 1,246 | 1,554 | (340) | 0.49% | 15.25% | ||
| Cello Group plc | Media | 895 | 606 | 1,501 | 109 | 1.17% | 3.94% | ||
| Advanced Medical Solutions Group plc | Pharmaceuticals & Biotech | 757 | 730 | 1,487 | 488 | 0.22% | 9.26% | ||
| Next Fifteen Communications Group plc | Media | 687 | 679 | 1,366 | 89 | 0.45% | 10.99% | ||
| EKF Diagnostics Holdings plc | Health | 931 | 370 | 1,301 | 305 | 1.19% | 2.15% | ||
| Adept Telecom plc | Telecommunication Services | 601 | 686 | 1,287 | (43) | 1.81% | 3.89% | ||
| appScatter Group plc | Software | 1,257 | - | 1,257 | - | 3.06% | 5.36% | ||
| FairFX Group plc | Software | 948 | 245 | 1,193 | 245 | 1.05% | 1.95% | ||
| Escher Group Holdings plc | Software | 1,003 | 176 | 1,179 | 295 | 3.13% | 5.48% | ||
| Cambridge Cognition Holdings plc | Health | 601 | 566 | 1,167 | 506 | 4.19% | 13.70% | ||
| Vertu Motors plc | General Retailers | 1,265 | (105) | 1,160 | (100) | 0.68% | 4.81% | ||
| Escape Hunt plc | Leisure & Hotels | 988 | 66 | 1,054 | 65 | 3.61% | 6.02% | ||
| Brady plc | Software | 947 | 65 | 1,012 | (149) | 1.79% | 3.01% | ||
| Abcam plc | Pharmaceuticals & Biotech | 537 | 421 | 958 | 182 | 0.04% | 2.58% | ||
| Judges Scientific plc | Electronic & Electrical | 314 | 619 | 933 | 108 | 0.82% | 1.37% | ||
| Nasstar plc | Software | 481 | 408 | 889 | 72 | 1.67% | 4.61% | ||
| CityFibre plc | Telecommunication Services | 1,025 | (152) | 873 | 148 | 0.26% | 0.67% | ||
| LoopUp Group plc | Software | 480 | 374 | 854 | 144 | 1.17% | 3.90% | ||
| Omega Diagnostics Group plc | Health | 465 | 377 | 842 | 134 | 3.01% | 5.27% | ||
| Gamma Communications plc | Telecommunication Services | 488 | 320 | 808 | 177 | 0.14% | 9.33% | ||
| Velocity Composites plc | Industrial | 799 | - | 799 | - | 2.63% | 4.93% | ||
| SQS Software Quality Systems AG | Software | 291 | 474 | 765 | (65) | 0.42% | 15.25% | ||
| MyCelx Technologies Corporation | Oil Equipment | 1,470 | (737) | 733 | 446 | 4.34% | 9.19% | ||
| Faron Pharmaceuticals Oy | Pharmaceuticals & Biotech | 344 | 335 | 679 | 335 | 0.35% | 0.72% | ||
| Osirium Technologies plc | Electronic & Electrical | 750 | (77) | 673 | 144 | 4.63% | 15.36% | ||
| TLA Worldwide plc | Media | 807 | (141) | 666 | (545) | 2.81% | 4.69% | ||
| Vectura Group plc | Pharmaceuticals & Biotech | 498 | 159 | 657 | (212) | 0.09% | 0.15% | ||
| Haydale Graphene Industries plc | Chemicals | 598 | 45 | 643 | - | 1.91% | 6.99% | ||
| WANdisco plc | Software | 145 | 441 | 586 | 276 | 0.22% | 0.36% | ||
| Tasty plc | Leisure & Hotels | 622 | (56) | 566 | (997) | 2.49% | 4.36% | ||
| Scientific Digital Imaging plc | Electronic & Electrical | 179 | 357 | 536 | 89 | 2.49% | 9.55% | ||
| Futura Medical plc | Pharmaceuticals & Biotech | 968 | (433) | 535 | (331) | 1.41% | 7.88% | ||
| Mears Group plc | Support Services | 139 | 387 | 526 | (80) | 0.12% | 0.14% | ||
| Iomart Group plc | Software | 268 | 205 | 473 | 41 | 0.14% | 11.07% | ||
| Sinclair IS Pharma plc | Pharmaceuticals & Biotech | 765 | (305) | 460 | (40) | 0.32% | 0.54% | ||
| Maxcyte Inc | Pharmaceuticals & Biotech | 511 | (65) | 446 | (65) | 2.55% | 7.16% | ||
| UP Global Sourcing Holdings plc | Household Goods & Textiles | 273 | 171 | 444 | 171 | 0.26% | 0.60% | ||
| Plastics Capital plc | Engineering & Machinery | 400 | 36 | 436 | (80) | 1.03% | 7.68% | ||
| TP Group plc | Engineering & Machinery | 648 | (315) | 333 | (80) | 0.70% | 2.92% | ||
| Access Intelligence plc | Software | 375 | (75) | 300 | (19) | 2.35% | 4.65% | ||
| FreeAgent Holdings plc | Media | 277 | 13 | 290 | (112) | 0.81% | 3.38% | ||
| Oxford Pharmascience Group plc | Pharmaceuticals & Biotech | 1,350 | (1,148) | 202 | (162) | 1.12% | 3.31% | ||
| Midatech Pharma plc | Pharmaceuticals & Biotech | 600 | (402) | 198 | (76) | 0.46% | 2.40% | ||
| Enteq Upstream plc | Oil Services | 1,032 | (836) | 196 | - | 1.67% | 2.78% | ||
| Tyratech Inc | Chemicals | 600 | (420) | 180 | (120) | 5.46% | 19.87% | ||
| Microsaic Systems plc | Engineering & Machinery | 1,084 | (921) | 163 | (136) | 5.99% | 11.79% | ||
| Nektan Limited | Software | 845 | (699) | 146 | 51 | 1.75% | 10.58% | ||
| Fusionex International plc | Software | 282 | (164) | 118 | (157) | 0.34% | 0.57% | ||
| ReNeuron Group plc | Pharmaceuticals & Biotech | 324 | (211) | 113 | (36) | 0.20% | 1.17% | ||
| Dods Group plc | Media | 203 | (98) | 105 | (4) | 0.24% | 0.24% | ||
| Genedrive Plc | Pharmaceuticals & Biotech | 210 | (127) | 83 | (16) | 1.40% | 2.34% | ||
| 1Spatial plc | Software | 300 | (270) | 30 | 15 | 0.12% | 0.21% | ||
| Proxama plc | Software | 763 | (755) | 8 | (98) | 0.22% | 0.70% | ||
| Bond International Software plc | Software | 8 | - | 8 | - | n/a | n/a | ||
| Total Quoted Investments | 45,684 | 43,622 | 89,306 | 6,402 | |||||
| Unquoted Investments | |||||||||
| Hasgrove plc | Media | 88 | 132 | 220 | 70 | 0.74% | 4.38% | ||
| Rated People Limited | Software | 354 | (268) | 86 | - | 0.51% | 1.49% | ||
| Total Unquoted Investments | 442 | (136) | 306 | 70 | |||||
| Loan Note Investments | |||||||||
| Nektan Limited | Software | 500 | - | 500 | - | ||||
| Access Intelligence plc | Software | 120 | - | 120 | - | ||||
| Total Loan Notes | 620 | - | 620 | - | |||||
| Total Fixed Asset Investments | 46,746 | 43,486 | 90,232 | 6,472 | |||||
| Current Asset Investments | |||||||||
| Octopus Portfolio Manager - Conservative Capital Growth | 7,450 | 427 | 7,877 | 124 | |||||
| Octopus Portfolio Manager - Defensive Capital Growth | 7,450 | 304 | 7,754 | 105 | |||||
| Octopus UK Micro Cap Growth Fund | 2,250 | 518 | 2,768 | 352 | |||||
| Total Current Asset Investments | 17,150 | 1,249 | 18,399 | 581 | |||||
| Total fixed and current asset investments | 108,631 | ||||||||
| Money Market Funds | 4,295 | ||||||||
| Cash at bank | 10,179 | ||||||||
| Debtors less creditors | (7,249) | ||||||||
| Total net assets | 115,856 | ||||||||
Directors' Responsibility 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 report includes a fair review of the information required by the Financial Conduct Authority's Disclosure and Transparency Rules, being:
· 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;
· a description of the principal risks and uncertainties for the remaining six months of the year; and
· 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
Roger Smith
Chairman
26 October 2017
Income Statement
| Unaudited | Unaudited | Audited | |||||||
| Six months to 31 August 2017 | Six months to 31 August 2016 | Year to 28 February 2017 | |||||||
| Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | |
| (Loss)/gain on disposal of fixed asset investments | - | (25) | (25) | - | 78 | 78 | - | 1,178 | 1,178 |
| Gain on valuation of fixed asset investment | - | 6,472 | 6,472 | - | 7,252 | 7,252 | - | 14,258 | 14,258 |
| Gain on valuation of current asset investment | - | 581 | 581 | - | - | - | - | 668 | 668 |
| Investment income | 442 | - | 442 | 432 | - | 432 | 858 | - | 858 |
| Investment management fees | (192) | (575) | (767) | (148) | (445) | (593) | (353) | (1,059) | (1,412) |
| Other expenses | (348) | - | (348) | (254) | - | (254) | (427) | - | (427) |
| Profit/(loss) on ordinary activities before tax | (98) | 6,453 | 6,355 | 30 | 6,885 | 6,915 | 78 | 15,045 | 15,123 |
| Taxation on profit/(loss) on ordinary activities | - | - | - | - | - | - | - | - | - |
| Profit/(loss) on ordinary activities after tax | (98) | 6,453 | 6,355 | 30 | 6,885 | 6,915 | 78 | 15,045 | 15,123 |
| Earnings per share - basic and diluted | (0.1)p | 7.0p | 6.9p | 0.1p | 8.3p | 8.4p | 0.1p | 17.7p | 17.8p |
· The 'Total' column of this statement is the profit and loss account of the Company; the supplementary revenue return and capital return columns have been prepared under guidance published by the Association of Investment Companies.
· 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 are an integral part of the half-yearly report.
Balance Sheet
| Unaudited | Unaudited | Audited | ||||
| As at 31 August 2017 | As at 31 August 2016 | As at 28 February 2017 | ||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Fixed asset investments | 90,232 | 73,210 | 79,919 | |||
| Current assets: | ||||||
| Current asset investments | 18,399 | 6,622 | 9,568 | |||
| Money market securities | 4,295 | 5,281 | 5,290 | |||
| Debtors | 87 | 34 | 332 | |||
| Cash at bank | 10,179 | 8,610 | 13,679 | |||
| 32,960 | 20,547 | 28,869 | ||||
| Creditors: amounts falling due within one year | (7,336) | (1,925) | (8,873) | |||
| Net current assets | 25,624 | 18,622 | 19,996 | |||
| Net assets | 115,856 | 91,832 | 99,915 | |||
| Called up equity share capital | 978 | 855 | 873 | |||
| Share premium | 48,650 | 32,620 | 35,422 | |||
| Capital redemption reserve | 54 | 37 | 45 | |||
| Special distributable reserve | 49,961 | 56,670 | 53,717 | |||
| Capital reserve realised | (28,858) | (27,406) | (28,020) | |||
| Capital reserve unrealised | 44,736 | 28,671 | 37,445 | |||
| Revenue reserve | 335 | 385 | 433 | |||
| Total equity shareholders' funds | 115,856 | 91,832 | 99,915 | |||
| Net asset value per share | 118.4p | 107.4p | 114.4p | |||
The accompanying notes form an integral part of the financial statements.
The statements were approved by the Directors and authorised for issue on 26 October 2017 and are signed on their behalf by:
Roger Smith
Chairman
Company No: 03477519
Statement of Changes in Equity
| Share Capital £'000 | Share Premium £'000 | Capital redemption reserve £'000 | Special distributable reserves £'000 | Capital reserve realised £'000 | Capital reserve unrealised £'000 | Revenue reserve £'000 | Total £'000 | |
| As at 1 March 2017 | 873 | 35,422 | 45 | 53,717 | (28,020) | 37,445 | 433 | 99,915 |
| Management fee allocated as capital expenditure | - | - | - | - | (575) | - | - | (575) |
| Current period loss on disposal | - | - | - | - | (25) | - | - | (25) |
| Current period gains on fair value of investments | - | - | - | - | - | 7,053 | - | 7,053 |
| Prior periods' holding losses now realised | - | - | - | - | (238) | 238 | - | - |
| Loss on ordinary activities after tax | - | - | - | - | - | - | (98) | (98) |
| Total comprehensive income for the period | - | - | - | - | (838) | 7,291 | (98) | 6,355 |
| Contributions by and distributions to owners: | ||||||||
| Repurchase and cancellation of own shares | (9) | - | 9 | (1,047) | - | - | - | (1,047) |
| Issue of shares | 114 | 14,037 | - | - | - | - | - | 14,151 |
| Share issue costs | - | (809) | - | - | - | - | - | (809) |
| Dividends paid | - | - | - | (2,709) | - | - | - | (2,709) |
| Balance as at 31 August 2017 | 978 | 48,650 | 54 | 49,961 | (28,858) | 44,736 | 335 | 115,856 |
| As at 1 March 2016 | 760 | 21,643 | 24 | 60,062 | (26,158) | 20,898 | 355 | 77,224 |
| Management fee allocated as capital expenditure | - | - | - | - | (445) | - | - | (445) |
| Current period gain on disposal | - | - | - | - | 78 | - | - | 78 |
| Current period gain on fair value of investments | - | - | - | - | - | 7,252 | - | 7,252 |
| Prior periods' holding losses now realised | - | - | - | - | (521) | 521 | - | - |
| Profit on ordinary activities after tax | - | - | - | - | - | - | 30 | 30 |
| Total comprehensive income for the period | - | - | - | - | (888) | 7,773 | 30 | 6,915 |
| Contributions by and distributions to owners: | ||||||||
| Repurchase and cancellation of own shares | (13) | - | 13 | (1,281) | - | - | - | (1,281) |
| Issue of shares | 108 | 11,440 | - | - | - | - | - | 11,548 |
| Share issue costs | - | (463) | - | - | - | - | - | (463) |
| Dividends paid | - | - | - | (2,111) | - | - | - | (2,111) |
| Balance as at 31 August 2016 | 855 | 32,620 | 37 | 56,670 | (27,406) | 28,671 | 385 | 91,832 |
| As at 1 March 2016 | 760 | 21,643 | 24 | 60,062 | (26,518) | 20,898 | 355 | 77,224 |
| Management fee allocated as capital expenditure | - | - | - | - | (1,059) | - | - | (1,059) |
| Current period gains on disposal | - | - | - | - | 1,178 | - | - | 1,178 |
| Current period gain on fair value of investments | - | - | - | - | - | 14,926 | - | 14,926 |
| Prior periods' holding losses now realised | - | - | - | - | (1,621) | 1,621 | - | - |
| Profit on ordinary activities after tax | - | - | - | - | - | - | 78 | 78 |
| Total comprehensive income for the period | - | - | - | - | (1,502) | 16,547 | 78 | 15,123 |
| Contributions by and distributions to owners: | ||||||||
| Repurchase and cancellation of own shares | (21) | - | 21 | (2,054) | - | - | - | (2,054) |
| Issue of shares | 134 | 14,413 | - | - | - | - | - | 14,547 |
| Share issue costs | - | (634) | - | - | - | - | - | (634) |
| Dividends paid | - | - | - | (4,291) | - | - | - | (4,291) |
| Balance as at 28 February 2017 | 873 | 35,422 | 45 | 53,717 | (28,020) | 37,445 | 433 | 99,915 |
Cash Flow Statement
| Unaudited Six months to 31 August 2017 £'000 | Unaudited Six months to 31 August 2016 £'000 | Audited Year to 28 February 2017 £'000 | |
| Cash flows from operating activities | |||
| Return on ordinary activities before tax | 6,355 | 6,915 | 15,123 |
| Adjustments for: | |||
| Decrease/(increase) in debtors | 245 | 14 | (284) |
| (Decrease)/increase in creditors | (1,537) | (497) | 6,451 |
| (Loss)/gain on disposal of fixed assets | 25 | (78) | (1,178) |
| Gain on valuation of fixed asset investments | (6,472) | (6,930) | (14,258) |
| Gain on valuation of current asset investments | (581) | (322) | (668) |
| Net cash generated from operating activities | (1,965) | (898) | 5,186 |
| Cash flows from investing activities | |||
| Purchase of fixed asset investments | (5,807) | (2,145) | (3,391) |
| Purchase of current asset investments | (8,250) | (6,300) | (8,900) |
| Sale of fixed asset investments | 1,941 | 521 | 3,486 |
| Net cash flows from investing activities | (12,116) | (7,924) | (8,805) |
| Cash flows from financing activities | |||
| Purchase of own shares | (1,047) | (1,281) | (2,054) |
| Share issues | 13,342 | 11,085 | 13,913 |
| Dividends paid | (2,709) | (2,111) | (4,291) |
| Net cash flows from financing activities | 9,586 | 7,693 | 7,568 |
| (Decrease)/increase in cash and cash equivalents | (4,495) | (1,129) | 3,949 |
| Opening cash and cash equivalents | 18,969 | 15,020 | 15,020 |
| Closing cash and cash equivalents | 14,474 | 13,891 | 18,969 |
| Cash and cash equivalents comprise | |||
| Cash at Bank | 10,179 | 8,610 | 13,679 |
| Money Market Funds | 4,295 | 5,281 | 5,290 |
| 14,474 | 13,891 | 18,969 |
Notes to the Half-Yearly Report
1. Basis of preparation
The unaudited half-yearly results which cover the six months to 31 August 2017 have been prepared in accordance with the Financial Reporting Council's (FRC) Financial Reporting Standard 104 Interim Financial Reporting (March 2015) and the Statement of Recommended Practice (SORP) for Investment Companies re-issued by the Association of Investment Companies in January 2017.
2. Publication of non-statutory accounts
The unaudited interim results for the six months ended 31 August 2017 do not constitute statutory accounts within the meaning of s.415 of the Companies Act 2006 and have not been delivered to the Registrar of Companies. The comparative figures for the year ended 28 February 2017 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 of part 16 of the Companies Act 2006, was unqualified. This half-yearly report has not been reviewed by the Company's auditor.
3. Earnings per share
The earnings per share at 31 August 2017 is calculated on the basis of 91,508,456 (28 February 2017: 84,880,191 and 31 August 2016: 82,606,763) shares, 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
| 31 August 2017 £'000 | 31 August 2016 £'000 | 28 February 2017 £'000 | |
| Net assets | 115,856 | 91,832 | 99,915 |
| Shares in Issue | 97,829,766 | 85,498,913 | 87,366,893 |
| Net Asset Value per share | 118.4p | 107.4p | 114.4p |
There are no potentially dilutive capital instruments in issue and, as such, the basic and diluted earnings per share are identical.
5. Dividends
The interim dividend declared of 2.5 pence per Ordinary share will be paid on 19 January 2018 to those shareholders on the register on 22 December 2017.
6. Buybacks share issues
During the six months ended 31 August 2017 the Company repurchased the following shares.
| Date | No of shares | Price (p) |
| 3 March 2017 | 174,092 | 109.3 |
| 13 April 2017 | 259,620 | 111.0 |
| 22 May 2017 | 232,278 | 116.0 |
| 29 June 2017 | 63,545 | 114.0 |
| 11 August 2017 | 200,007 | 113.5 |
| Total | 929,542 |
The weighted average price of all buybacks during the period was 112.7 pence per share.
During the six months ended 31 August 2017 the Company issued the following shares.
| Date | No of shares | Price (p) |
| 3 March 2017 | 3,454,226 | 121.1 |
| 13 April 2017 | 195,145 | 123.0 |
| 4 August 2017 | 7,432,367 | 125.9 |
| 4 August 2017(DRIS) | 289,872 | 118.9 |
| 15 August 2017 | 20,805 | 118.9 |
| Total | 11,392,415 |
The weighted average allotment price of all shares issued during the period was 124.2 pence per share.
7. Principal risks and uncertainties
The Company's assets consist of equity and fixed-rate interest investments, cash and liquid resources. Its principal risks are therefore market risk, credit risk and liquidity risk. Other risks faced by the Company include economic, loss of approval as a VCT, investment and strategic, regulatory, reputational, operational and financial risks. 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 2017. Since the publication of those Accounts the Government has published a consultative document on the Patient Capital Review, the purpose of which is to review funding support for small businesses of which VCTs are an integral part. The final outcome of this Review is awaited. Subject to this matter, the Company's principal risks and uncertainties have not changed materially since the date of the Company's Annual Report and Accounts for the year ended 28 February 2017
8. Related Party Transactions
Octopus acts as the investment manager of the Company. Under the management agreement, Octopus receives a fee of 2.0 per cent per annum of the net assets of the Company for the investment management services. During the period, the Company incurred management fees of £767,000 payable to Octopus (28 February 2017: £1,412,000 and 31 August 2016: £593,000). At the period end there was £404,000 outstanding to Octopus (28 February 2017: £399,000 and 31 August 2016: £326,000).
The Company has invested £8.3 million into Octopus managed funds, being the Octopus Portfolio Manager funds. To ensure that there is no duplication of management fees on investments, the Company receives a reduction in the management fee as a percentage of the value of these investments.
9. Post Balance Sheet Events
The following events occurred between the Balance sheet date and the signing of this half-yearly report.
· Disposal of 65,400 shares in Restore plc for total consideration of £367,000.
· Disposal of 120,000 shares in Quixant plc for total consideration of £527,000.
· Disposal of 213,281 shares in UP GLobal Sourcing for total consideration of £175,000.
· Addition of 54,000 shares in Faron Pharmaceuticals for total consideration of £432,000.
· The Company issued 3,554,233 shares at a price of 125.0p per share on 8 September 2017.
· The Company repurchased 335,557 shares at a weighted average price of 113.3p per share.
10. Other Information
This statement will be made available to all shareholders. Copies are also available from the registered office of the Company at 33 Holborn, London, EC1N 2HT, and will also be available to view on the Octopus website at www.octopusinvestments.com.