TIDMOSEC
Octopus AIM VCT 2 plc
Half-Yearly Results
Octopus AIM VCT 2 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').
Today the Company announces the half-yearly results for the six
months ended 31 May 2023.
Financial Summary
Six months to Six months to Year to
31 May 2023 31 May 2022 30 November 2022
----------------------------- ------------- ------------- -----------------
Net assets (GBP'000) 88,237 103,831 101,794
Loss after tax (GBP'000) (9,038) (26,909) (36,695)
Net asset value (NAV) per
share (p) 53.9 70.5 61.6
Total return (%)(1) (8.8) (20.0) (27.5)
Dividends paid in the period
(p) 2.3 2.1 4.2
Interim dividend (p)(2) 1.8 2.1 2.3
----------------------------- ------------- ------------- -----------------
(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 will be paid on 9 November 2023 to
shareholders on the register on 13 October 2023.
Chair's statement
The six months to 31 May 2023 have seen a continuation of the
challenging conditions for smaller company investments that we
outlined in our last annual report. Inflation has remained
stubbornly high with the result that expectations for peak interest
rates have risen and are now anticipated to remain higher into
2024. As explained further below, 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 net asset value (NAV) of the Company
fell by 8.8% in the period after adding back the 2.3p dividend paid
in May 2023 and underperformed the AIM index.
At the time of the full-year results we reported that the flow
of fundraisings, particularly new listings, had been weak in the
second half of the year. Volatile market conditions have meant that
new listings planned for the first half of 2023 have also been
delayed although many existing AIM companies have still been able
to access funding on lower valuations. Furthermore, market
conditions have led to significant numbers of shares now being
priced well below their recent peaks despite many individual
companies in the portfolio continuing to report encouraging trading
momentum.
Against this backdrop of challenge and some opportunity, in
accordance with our stated objectives of maintaining predictable
levels of returns for investors the Board has declared an interim
dividend of 1.8p which will be paid on 9 November 2023 to
shareholders on the register on 13 October 2023.
Keith Mullins
Chair
Investment Manager's review
Overview
The six months to 31 May 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 to 5%, further than had been anticipated, with any change of
direction 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 badly 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 and we see scope
to deploy cash profitably once the market becomes comfortable that
interest rates have peaked.
Performance
Adding back the 2.3p paid out in dividends in the period, the
NAV fell by 8.8% in the six months to 31 May 2023. This compares
with a 7.1% fall in the AIM Index, a 1.6% rise in the FTSE Small
Cap Index (ex Investment Trusts) and a 0.2% rise in the FTSE All
Share Index, all on a total return basis. The Company's relatively
high exposure to the healthcare and technology sectors (which had
been a reason for good returns in the past) was once again
detrimental to performance in a world where risk averse investors
have little appetite for earlier 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 this early stage and
the benefits of doing so have been clear in past periods.
AIM itself was once again the worst performing index, affected
in part by the same factors and the FTSE All Share Index performed
noticeably better reflecting a higher weighting in larger
companies. The FTSE Small Cap Index (ex Investment Trusts) did
better but has a much narrower membership than AIM and its members
were not as affected by the conditions described above.
Among the larger and more profitable companies the de-rating of
shares was also reflected. The largest single detractor from
performance was Ergomed, which gave up some of its former gains as
investor sentiment cooled towards the pharmaceutical sector. It
produced final results ahead of expectations and has since reported
robust trading at its AGM. Learning Technologies also produced good
results and robust trading statements but its shares have been
de-rated. Craneware was another negative performer after analysts
adjusted their forecasts for higher interest rates and more
measured growth expectations in a slow US hospital market. SDI and
EKF diagnostics were both punished for profit expectations
post-Covid-19 still being set too high. Of the top ten detractors,
half were companies still on the pathway to profitability. Lunglife
and Maxcyte both suffered (as did other smaller holdings) from
being in the healthcare sector and lossmaking despite each
reporting encouraging progress and Maxcyte being particularly well
funded. Engage XR, which has a virtual reality platform and some
very high profile clients successfully raised money in the period
and is growing strongly although profitability remains some
distance in the future. Popsa, a private company, scaled back its
marketing spend to preserve cash and has set its growth
expectations at a more modest rate. This, and a review of peer
group valuations, caused us to cut the valuation from the previous
year-end level.
There were several positive contributors to performance
including Equipmake, which has made some encouraging announcements
since its successful fundraise, Netcall, which has had upgrades to
forecasts as a result of good demand for its Lo-Code software and
Hasgrove, another private company, which is still seeing strong
demand for its intranet software. In the retail sector both
Sosandar and Vertu motors are still trading well and Breedon
announced a move to the full list. It will remain a qualifying
holding for two years following this. Other smaller contributors
include Judges Scientific, Feedback and Spectral MD.
Portfolio activity
In the period under review, the Company made two qualifying
investments totalling GBP1.2 million, a decrease on the GBP4.6
million we invested in the corresponding period last year,
reflecting some caution on the part of companies and brokers about
raising new capital against a background of volatile markets. One
of these was a small follow-on investment into an existing holding
in Equipmake of GBP0.1 million. Equipmake is an electric drivetrain
specialist focusing on retrofitting carbon-intensive vehicles and
aeroplanes, most notably diesel buses. The company made its stock
market debut in July 2022 and successfully raised a further GBP6.2
million in January 2023, expanding its shareholder base. We opted
to make a small further investment given the exciting progress the
team are making.
We invested GBP1.1 million in Itaconix, an existing AIM company.
It is a leading producer of plant-based additives for a range of
consumer products, from detergents to shampoos. Itaconix's natural
polymers help to decarbonise products, whilst providing improved
performance, safety and sustainability. The company raised a total
of GBP10.5 million in a heavily over-subscribed share placing,
which will be used to support a range of growth initiatives,
including the development of new products and applications for its
technology.
A number of disposals in the period resulted in a small net
overall loss of GBP0.3 million over book cost. We sold the entire
holdings of Adept Telecom and TP Group which were both the subject
of cash takeover bids. We also disposed of Itsarm (formerly In The
Style). Its business had been very badly affected by a squeeze
between the consumer's dwindling appetite for on-line purchases and
cost and logistics challenges exacerbated by inflation and the
management sold the business for cash. We made partial disposals of
Genedrive, Intelligent Ultrasound, Judges Scientific and Nexteq
(formerly Quixant).
In the period we also invested GBP1.5 million of the cash
balances into the FP Octopus UK Micro Cap Growth Fund, FP Octopus
UK Multi Cap Income Fund and FP Octopus Future Generations Fund at
reduced prices. The strategy is to reduce other individually held
non-qualifying holdings and replace them with liquid collective
funds. Although the funds have had a small negative impact on
returns in this period, we expect them to provide a positive return
on our cash awaiting investment once stock markets return to a more
settled state and equity valuations recover.
Unquoted investments
As stated in the investment policy, the Company is able to make
investments in unquoted companies intending to float. At 31 May
2023 8.0% (31 May 2022: 7.7% and 30 November 2022: 7.9%) of the
Company's net assets were invested in unquoted companies. This is
after reducing the valuation of the holding in Popsa on the basis
of peer group comparisons and slightly increasing the valuation of
Hasgrove, which continues to grow strongly.
Transactions with the Investment Manager
Details of amounts paid to the Investment Manager are disclosed
in Note 8.
Share buybacks
In the six months to 31 May 2023, the Company bought back
2,675,889 Ordinary shares for a total consideration of
GBP1,507,000. It is evident from the conversations that the
Investment Manager has that this facility remains an important
consideration for investors. The Board remains committed to
maintaining its policy of buying back shares at a discount of
approximately 4.5% to NAV (equating to up to a 5.0% discount to the
selling shareholder after costs).
Share issues
In this period 1,340,242 new shares were issued, through the
dividend reinvestment scheme (DRIS).
Dividend
On 25 May 2023, the Company paid a dividend of 2.3p per share,
being the final dividend for the year ended 30 November 2022. For
the period to 31 May 2023, the Board has declared an interim
dividend of 1.8p. This will be paid on 9 November 2023 to
shareholders on the register on 13 October 2023. It remains the
Board's intention to maintain a minimum annual dividend payment of
3.6p per share or a 5% yield based on the prior year-end share
price, whichever is the greater. This will usually be paid in two
instalments during each year.
Principal risks and uncertainties
The principal risks and uncertainties are set out in Note 7.
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 is fixed on the monthly inflation figures with
the most recent figure showing a larger than expected fall giving
hope that interest rates may be nearing their peak. If confirmed it
will have a huge impact on investor confidence.
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 85 holdings (31 May 2022: 92
holdings and 30 November 2022: 87 holdings) across a range of
sectors 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 who
are still on their journey to profitability. These are difficult
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
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 Disclosure 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
Keith Mullins
Chair
Income
statement
Unaudited Unaudited Audited
Six months to 31 May 2023 Six months to 31 May 2022 Year to 30 November 2022
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/(loss) on
disposal of
fixed asset
investments -- 402 402 -- 78 78 -- (32) (32)
Loss on
valuation of
fixed asset
investments -- (8,417) (8,417) -- (24,037) (24,037) -- (31,821) (31,821)
Loss on
valuation of
current asset
investments -- (397) (397) -- (1,733) (1,733) -- (2,946) (2,946)
Investment
income 496 - 496 182 -- 182 589 19 608
Investment
management
fees (211) (633) (844) (271) (814) (1,085) (481) (1,443) (1,924)
Other expenses (278) - (278) (314) -- (314) (580) -- (580)
-------------- ---------- ---------- --------- -------- --------- --------- -------- --------- --------
Profit/(loss)
before tax 7 (9,045) (9,038) (403) (26,506) (26,909) (472) (36,223) (36,695)
Tax -- -- -- -- -- -- -- -- --
-------------- ---------- ---------- --------- -------- --------- --------- -------- --------- --------
Profit/(loss)
after tax 7 (9,045) (9,038) (403) (26,506) (26,909) (472) (36,223) (36,695)
-------------- ---------- ---------- --------- -------- --------- --------- -------- --------- --------
Earnings per
share --
basic and
diluted (0.0p) (5.5p) (5.5p) (0.3p) (17.9p) (18.2p) (0.3p) (24.5p) (24.8p)
-------------- ---------- ---------- --------- -------- --------- --------- -------- --------- --------
There is no other comprehensive income for the period.
-- 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 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 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 Open Ended Investment Company (OEIC) funds.
Balance sheet
Unaudited Unaudited Audited
As at 31 May 2023 As at 31 May 2022 As at 30 November 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------------ ------------ --------------- ------- ---------------- ---------
Fixed asset
investments 63,851 78,551 72,249
Current
assets:
Investments 10,462 10,484 9,399
Money market
funds 13,455 3,490 3,515
Debtors 184 199 205
Cash at bank 903 11,674 17,217
-------------- ------------ ------------ --------------- ------- ---------------- ---------
25,004 25,847 30,336
Creditors:
amounts
falling due
within one
year (618) (567) (791)
-------------- ------------ ------------ --------------- ------- ---------------- ---------
Net current
assets 24,386 25,280 29,545
-------------- ------------ ------------ --------------- ------- ---------------- ---------
Total assets
less current
liabilities 88,237 103,831 101,794
-------------- ------------ ------------ --------------- ------- ---------------- ---------
Called up
equity share
capital 17 15 17
Share premium 13,637 55,284 12,904
Special
distributable
reserve 70,902 26,028 76,154
Capital
reserve
realised (6,777) (4,786) (5,843)
Capital
reserve
unrealised 13,079 29,850 21,190
Capital
redemption
reserve 3 2 3
Revenue
reserve (2,624) (2,562) (2,631)
-------------- ------------ ------------ --------------- ------- ---------------- ---------
Total equity
shareholders'
funds 88,237 103,831 101,794
-------------- ------------ ------------ --------------- ------- ---------------- ---------
NAV per share 53.9p 70.5p 61.6p
-- basic and
diluted
-------------- ------------ ------------ --------------- ------- ---------------- ---------
The statements were approved by the Directors and authorised for
issue on 10 August 2023 and are signed on their behalf by:
Keith Mullins
Chair
Company Number: 05528235
Statement of changes in equity
Capital
Special reserve Capital Capital
Share distributable realised reserve redemption
capital Share premium reserves (1) (1) unrealised reserve Revenue reserve (1) Total
--------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- -------- -------------- ------------- -------- ---------- ---------- -------------------- -------
As at 1
December
2022 17 12,904 76,154 (5,843) 21,190 3 (2,631) 101,794
-------------- -------- -------------- ------------- -------- ---------- ---------- -------------------- -------
Total
comprehensive
income for
the period -- -- -- (231) (8,814) -- 7 (9,038)
Contributions
by and
distributions
to owners:
Repurchase and
cancellation
of own
shares -- -- (1,507) -- -- -- -- (1,507)
Issue of
shares -- 733 -- -- -- -- -- 733
Share issue
costs -- -- -- -- -- -- -- --
Dividends paid -- -- (3,745) -- -- -- -- (3,745)
-------------- -------- -------------- ------------- -------- ---------- ---------- -------------------- -------
Total
contributions
by and
distributions
to owners -- 733 (5,252) -- -- -- -- (4,519)
Other
movements:
Prior years'
holding
losses now
realised -- -- -- (703) 703 -- -- --
-------------- -------- -------------- ------------- -------- ---------- ---------- -------------------- -------
Total other
movements -- -- -- (703) 703 -- -- --
-------------- -------- -------------- ------------- -------- ---------- ---------- -------------------- -------
Balance as at
31 May 2023 17 13,637 70,902 (6,777) 13,079 3 (2,624) 88,237
-------------- -------- -------------- ------------- -------- ---------- ---------- -------------------- -------
(1) The sum of these reserves is an amount of GBP61,501,000 (31
May 2022: GBP18,680,000 and 30 November 2022: GBP67,680,000) which
is considered distributable to shareholders.
Capital
Special reserve Capital Capital
Share Share distributable realised reserve redemption
capital premium reserves (1) (1) unrealised reserve Revenue reserve (1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ------- ------- ------------- -------- ---------- ---------- -------------------- --------
As at 1 December 2021 15 54,600 30,826 (4,533) 56,103 2 (2,159) 134,854
----------------------- ------- ------- ------------- -------- ---------- ---------- -------------------- --------
Total comprehensive
income for the period -- -- -- (736) (25,770) -- (403) (26,909)
Contributions by and
distributions to
owners
Repurchase and
cancellation of own
shares -- -- (1,719) -- -- -- -- (1,719)
Issue of shares -- 689 -- -- -- -- -- 689
Share issue costs -- (5) -- -- -- -- -- (5)
Dividends paid -- -- (3,079) -- -- -- -- (3,079)
----------------------- ------- ------- ------------- -------- ---------- ---------- -------------------- --------
Total contributions by
and distributions to
owners -- 684 (4,798) -- -- -- -- (4,114)
Other movements:
Prior years' holding
gains now realised -- -- -- 483 (483) -- -- --
----------------------- ------- ------- ------------- -------- ---------- ---------- -------------------- --------
Total other movements -- -- -- 483 (483) -- -- --
----------------------- ------- ------- ------------- -------- ---------- ---------- -------------------- --------
Balance as at 31 May
2022 15 55,284 26,028 (4,786) 29,850 2 (2,562) 103,831
----------------------- ------- ------- ------------- -------- ---------- ---------- -------------------- --------
(1) The sum of these reserves is an amount of GBP61,501,000 (31
May 2022: GBP18,680,000 and 30 November 2022: GBP67,680,000) which
is considered distributable to shareholders.
Capital
Special reserve Capital Capital
Share Share distributable realised reserve redemption
capital premium reserves (1) (1) unrealised reserve Revenue reserve (1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------- -------- ------------- -------- ---------- ---------- -------------------- --------
As at 1
December
2021 15 54,600 30,826 (4,533) 56,103 2 (2,159) 134,854
-------------- ------- -------- ------------- -------- ---------- ---------- -------------------- --------
Total
comprehensive
income for
the period -- -- -- (1,456) (34,767) -- (472) (36,695)
Contributions
by and
distribution
to owners
Repurchase and
cancellation
of own
shares (1) -- (3,117) -- -- 1 -- (3,117)
Issue of
shares 3 13,698 -- -- -- -- -- 13,701
Share issue
costs -- (794) -- -- -- -- -- (794)
Dividends paid -- -- (6,155) -- -- -- -- (6,155)
-------------- ------- -------- ------------- -------- ---------- ---------- -------------------- --------
Total
contributions
by and
distributions
to owners 2 12,904 (9,272) -- -- 1 -- 3,635
Other
movements:
Cancellation
of share
premium -- (54,600) 54,600 -- -- -- -- --
Prior years'
holding gains
now realised -- -- -- 146 (146) -- -- --
-------------- ------- -------- ------------- -------- ---------- ---------- -------------------- --------
Total other
movements -- (54,600) 54,600 146 (146) -- -- --
-------------- ------- -------- ------------- -------- ---------- ---------- -------------------- --------
Balance as at
30 November
2022 17 12,904 76,154 (5,843) 21,190 3 (2,631) 101,794
-------------- ------- -------- ------------- -------- ---------- ---------- -------------------- --------
(1) The sum of these reserves is an amount of GBP61,501,000 (31
May 2022: GBP18,680,000 and 30 November 2022: GBP67,680,000) which
is considered distributable to shareholders.
Cash flow statement
Unaudited Audited
Six months to Unaudited Six months Year to
31 May to 31 May 30 November
2023 2022 2022
GBP'000 GBP'000 GBP'000
------------------------------------------------------ -------------- -------------------------- ------------------
Cash flows from operating activities
Loss before tax (9,038) (26,909) (36,695)
Adjustments for:
(Increase)/decrease in debtors 21 (14) (20)
Decrease in creditors (173) (195) (196)
(Gain)/loss on disposal of fixed assets investments (402) (78) 32
Loss on valuation of fixed asset investments 8,417 24,037 31,821
Loss on valuation of current asset investments 397 1,733 2,946
Non-cash distributions - - (19)
------------------------------------------------------ -------------- -------------------------- ------------------
Cash from operations (778) (1,426) (2,131)
Net cash used in operating activities (778) (1,426) (2,131)
Cash flows from investing activities
Purchase of fixed asset investments (1,159) (4,618) (6,071)
Proceeds from sale of fixed asset investments 1,542 2,144 2,249
Purchase of current asset investments (1,460) (223) (352)
Net cash flows used in investing activities (1,077) (2,697) (4,174)
Cash flows from financing activities
Purchase of own shares (1,507) (1,719) (3,117)
Share issues -- 89 12,502
Share issue costs -- (5) (794)
Dividends paid (net of DRIS) (3,012) (2,480) (4,956)
------------------------------------------------------ -------------- -------------------------- ------------------
Net cash flows from financing activities (4,519) (4,115) 3,635
------------------------------------------------------ -------------- -------------------------- ------------------
Decrease in cash and cash equivalents (6,374) (8,238) (2,670)
Opening cash and cash equivalents 20,732 23,402 23,402
------------------------------------------------------ -------------- -------------------------- ------------------
Closing cash and cash equivalents 14,358 15,164 20,732
------------------------------------------------------ -------------- -------------------------- ------------------
Closing cash and cash equivalents is represented by:
Cash at bank 903 11,674 17,217
Money market funds 13,455 3,490 3,515
------------------------------------------------------ -------------- -------------------------- ------------------
Total cash and cash equivalents 14,358 15,164 20,732
------------------------------------------------------ -------------- -------------------------- ------------------
Notes to the half-yearly report
1. Basis of preparation
The unaudited half-yearly report which covers the six months to
31 May 2023 has been prepared in accordance with the Financial
Reporting Council's (FRC) Financial Reporting Standard (FRS) 104
Interim Financial Reporting (March 2018) and the Statement of
Recommended Practice (SORP) for Investment Companies issued by the
Association of Investment Companies in 2014 (updated in July
2022).
The Directors consider it appropriate to adopt the going concern
basis of accounting. The Directors have not identified any material
uncertainties to the Company's ability to continue to adopt the
going concern basis over a period of at least 12 months from the
date of approval of the financial statements. In reaching this
conclusion the Directors have had regard to the potential impact on
the economy and the Company of the current economic conditions
including inflation, the possibility of recession and the war in
Ukraine.
The principal accounting policies have remained unchanged from
those set out in the Company's 2022 Annual Report and Accounts.
2. Publication of non-statutory accounts
The unaudited half-yearly report for the six months ended 31 May
2023 does not constitute statutory accounts within the meaning of
Section 415 of the Companies Act 2006. The comparative figures for
the year ended 30 November 2022 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
half-yearly report has not been reviewed by the Company's
auditor.
3. Earnings per share
The earnings per share at 31 May 2023 are calculated on the
basis of 163,971,209 shares (31 May 2022: 147,560,275 and 30
November 2022: 147,948,350), being the weighted average number of
shares in issue during the period.
There are no potentially dilutive capital instruments in issue
and, so no diluted returns per share figures are relevant.
4. Net asset value per share
The net asset value per share is based on net assets as at 31
May 2023 divided by 163,837,197 shares in issue at that date (31
May 2022: 147,345,533 and 30 November 2022: 165,172,844).
5. Dividends
The Directors have declared an interim dividend of 1.8 pence per
share (2022: 2.1 pence per share) payable from the special
distributable reserve. This dividend will be paid on 9 November
2023 to those shareholders on the register at 13 October 2023. On
25 May 2023 the prior year final dividend of 2.3 pence per share
was paid.
6. Buybacks and share issues
During the six months ended 31 May 2023 the Company repurchased
the following shares.
Date No. of shares Price (p) Cost (GBP)
------------------- ------------- --------- ----------
15 December 2022 274,131 57.9 159,000
19 January 2023 436,267 57.7 252,000
16 February 2023 432,226 58.5 253,000
16 March 2023 731,856 55.6 407,000
20 April 2023 442,177 55.6 246,000
18 May 2023 359,232 53.1 190,000
------------------- ------------- --------- ----------
Total 2,675,889 1,507,000
------------------- ------------- --------- ----------
The weighted average price of all buybacks during the period was
56.3 pence per share.
During the six months ended 31 May 2023 the Company issued the
following shares:
Date No. of shares Price (p) Net proceeds (GBP)
25 May 2023 (DRIS) 1,340,242 54.7 733,000
--------------------- ------------- --------- ------------------
Total 1,340,242 733,000
--------------------- ------------- --------- ------------------
The weighted average allotment price of all shares issued during
the period net of costs was 54.7 pence per share.
7. Principal risks and uncertainties
The Company's principal risks are: VCT qualifying status risk;
Operational risk; Regulatory and reputational risk, Valuation risk,
Investment risk, Financial risk; and Economic and price 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 30 November 2022. The Board has also considered emerging
risks, including the conflict in Ukraine, the ongoing inflationary
pressure and the unstable economic environment, which the Board
seeks to mitigate by setting policy and reviewing performance.
Otherwise, 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 ('Octopus'
or 'the Investment Manager') 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 GBP844,000 by Octopus as a management fee in the
period to 31 May 2023 (31 May 2022: GBP1,085,000 and 30 November
2022: GBP1,924,000). The management fee is payable quarterly and is
based on 2% of net assets measured at quarterly intervals.
The Company receives a reduction in the management fee for the
investments in other Octopus managed funds, being the Multi Cap
Income Fund, Micro Cap Growth Fund and Future Generations Fund, to
ensure the Company is not double charged on these products. This
amounted to GBP29,000 in the period to 31 May 2023 (31 May 2022:
GBP32,000 and 30 November 2022: GBP57,000). For further details
please refer to the Company's Annual Report and Accounts for the
year ended 30 November 2022.
As at 31 May 2023, Octopus Investments Nominees Limited (OINL)
held nil shares (2022: nil) in the Company as beneficial owner.
Throughout the period to 31 May 2023 OINL purchased nil shares
(2022: 3,632) at a cost of GBPnil (2022: GBP3,000) and sold 4,284
shares (2022: 3,632) for proceeds of GBP2,000 (2022: 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 half yearly reports.
9. Post-balance sheet events
The following events occurred between the balance sheet date and
the signing of these financial statements:
-- Partial disposals of FP Octopus UK Multi Cap Income Fund for
total consideration of GBP360,000;
-- A partial disposal of EKF Diagnostics Holdings plc for total
consideration of GBP250,000;
-- Partial disposals of Glantus Holdings plc for total
consideration of GBP86,000;
-- Investments totalling GBP360,000 into FP Octopus UK Micro Cap
Growth Fund;
-- An investment of GBP80,000 into FP Octopus UK Future
Generations;
-- On 15 June 2023, the Company purchased for cancellation
219,586 Ordinary shares at a price of 52.0p;
-- On 5 July 2023, the Company announced its intention to launch
a new offer for subscription later in the year;
-- On 13 July 2023, the Company purchased for cancellation
320,586 Ordinary shares at a price of 50.3p.
10. 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 (FVTPL) 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
period. The change in fair value for the current and previous
period is recognised through the profit and loss account.
Disclosure
Level 1: Quoted Level 3:
equity Unquoted equity
investments investments Total
GBP'000 GBP'000 GBP'000
Cost as at 1
December 2022 49,113 3,087 52,200
Opening unrealised
gain at 1 December
2022 15,159 4,890 20,049
Valuation at 1
December 2022 64,272 7,977 72,249
Purchases at cost 1,159 -- 1,159
Disposal proceeds (1,542) -- (1,542)
Profit on
realisation of
investments 402 -- 402
Change in fair
value in year (7,883) (534) (8,417)
Valuation at 31 May
2023 56,408 7,443 63,851
Cost at 31 May 2023 48,430 3,087 51,517
Closing unrealised
gain at 31 May
2023 7,978 4,356 12,334
Valuation at 31 May
2023 56,408 7,443 63,851
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 Interim
Management Report.
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 GBP400,000 (31 May 2022: GBP400,000
and 30 November 2022: GBP400,000) of convertible loan notes held at
cost, which is deemed to be current fair value, in addition to this
the Company holds six 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 cashflows or
net assets are used to determine a fair value for the
investments.
All capital gains or losses on investments are classified at
FVTPL. 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 May 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.
11. Half-Yearly Report
The unaudited half-yearly report for the six months ended 31 May
2023 will shortly be available to view at
https://octopusinvestments.com/our-products/venture-capital-trusts/octopus-aim-vcts/
For further information please contact:
Octopus Company Secretarial Services Limited
Tel: 020 3935 3803
LEI: 213800BW27BKJCI35L17
(END) Dow Jones Newswires
August 10, 2023 11:20 ET (15:20 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
Grafico Azioni Octopus Aim Vct 2 (LSE:OSEC)
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