REG-Octopus VCT PLC : Half-yearly report <Origin Href="QuoteRef">OVCT.L</Origin>
Octopus VCT PLC : Half-yearly report Octopus VCT plc
Half-Yearly Results
9 October 2014
Octopus VCT plc, managed by Octopus Investments Limited, today announces its half-yearly results for the six months ended 31 August 2014.
The results were approved by the Board of Directors on 9 October 2014.
Financial Summary
| Six months to 31 August 2014 | Six months to 31 August 2013 | Year to 28 February 2014 | |
| Net assets ('000s) | 51,427 | 49,354 | 50,402 |
| Net profit after tax ('000s) | 1,546 | 240 | 1,900 |
| Net asset value per share (NAV) | 98.8p | 94.6p | 96.9p |
| Cumulative dividends paid to date | 6.0p | 4.0p | 5.0p |
| Total return | 104.8p | 98.6p | 101.9p |
An interim dividend of 1.0p will be paid on 21 November 2014 to shareholders on the register on 24 October 2014.
Chairman's Statement
Introduction
I am delighted to present to you the half-yearly report for Octopus VCT plc for the period ended 31 August 2014.
Performance
The Company's performance has been pleasing in the period, with the total return of the Company (NAV plus cumulative dividends) increasing by 2.8%, from 101.9p as at 28 February 2014 to 104.8p as at 31 August 2014. This is due to the performance of the investment portfolio which generated an uplift in value of 1,257,000, excluding disposals, in the six months to 31 August 2014 together with income which exceeded expenses.
Possible Merger and Fundraising
An announcement was published on 29 September 2014 stating that your Board has entered into discussions with the Board of Octopus Apollo VCT plc ("Apollo") regarding a possible merger between the Company and Apollo. These discussions may or may not lead to an agreement to merge the companies. Further details of any proposed merger will be sent to all Shareholders in due course, together with the requisite notices of general meetings of the Company at which shareholders will be able to vote on the proposals.
If approved by shareholders, the Board expects the proposed merger to provide advantages to Octopus VCT shareholders through providing additional liquidity in 2015 and giving them access to an enlarged VCT with an evergreen mandate. The merger is therefore expected to give Octopus VCT shareholders the choice either to exit at the five year point, with returns predicted in the Octopus VCT prospectus, or to retain their shares in an enlarged VCT, whose objective is to generate steady returns.
Investment Portfolio
As at 31 August 2014, the Company held investments in 47 companies with a combined fair value of 48,190,000, representing 93.7% of net assets.
In March 2014, the 2,000,000 loan to Borro was fully repaid, along with all outstanding interest. In July 2014, the Company received a partial loan repayment from Michabo Power for 264,000, along with all the interest outstanding at that point in time.
The majority of the Company's portfolio is invested in the renewable energy sector which continues to perform in line with expectations.
Investment Strategy
The Company continues to be managed in line with the mandate that was set out in the prospectus, whereby investments are made with more of an emphasis on capital preservation than a typical VCT. The investment strategy is to derive sufficient return from the secured loan notes to achieve the Company's investment aims and to use the small equity exposure to boost returns.
The Investment Manager continues to identify appropriate investment opportunities to meet these objectives.
Dividend and Dividend Policy
As mentioned in my statement at the year end, due to the high level of interest income the Company generated from its investments, your Board proposed a dividend of 1.0 pence per share, which was paid to shareholders on 14 August 2014. Your Board has declared an interim dividend of 1.0 pence per share, which will be paid on 21 November 2014 to those shareholders on the register on 24 October 2014.
VCT Qualifying Status
A key requirement is to invest at least 70% of the funds raised into qualifying investments. As at 31 August 2014, 83.1% of the portfolio, as measured by HMRC rules, was invested in VCT qualifying investments. The Manager does not foresee any issues with maintaining the required investment hurdle of 70%.
Principal Risks and Uncertainties
The principal risks and uncertainties are set out in note 5 of the Notes to the Half-Yearly Report on page X.
Outlook
The outlook for the economy continues to improve and we are delighted with the uplift in the total return for the six months to 31 August 2014, which is the result of the solid capital performance of the investment portfolio and the Company's revenue profits from investments.
The Investment Manager remains committed to managing the existing portfolio which complements the mandate pursued by the Company. With this in mind, your Board remains confident that the Company will achieve its investment objectives and that the total return will continue to appreciate.
If you have any questions on any aspect of your investment, please call one of the team on 0800 316 2295.
James Otter
Chairman
9 October 2014
Responsibility Statement of the Directors in respect of the Half-Yearly Report
We confirm that to the best of our knowledge:
- the half-yearly financial statements have been prepared in accordance with the statement "Half-Yearly Financial Reports" issued by the UK Accounting Standards Board;
- the half-yearly report includes a fair review of the information required by the Financial Services Authority 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
James Otter
Chairman
9 October 2014
Income Statement
| Six months to 31 August 2014 | Six months to 31 August 2013 | Year to 28 February 2014 | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |
| '000 | '000 | '000 | '000 | '000 | '000 | '000 | '000 | '000 | |
| Income | 559 | - | 559 | 679 | - | 679 | 1,245 | - | 1,245 |
| Fixed asset investment losses on disposal | - | - | - | - | (176) | (176) | - | (172) | (172) |
| Fixed asset investment holding gains | - | 1,257 | 1,257 | - | - | - | - | 1,498 | 1,498 |
| Investment management fees | - | - | - | - | - | - | - | - | - |
| Other expenses | (270) | - | (270) | (263) | - | (263) | (528) | - | (528) |
| Profit/(loss) on ordinary activities before tax | 289 | 1,257 | 1,546 | 416 | (176) | 240 | 717 | 1,326 | 2,043 |
| Taxation on profit/(loss) on ordinary activities | - | - | - | - | - | - | (143) | - | (143) |
| Profit/(loss) on ordinary activities after tax | 289 | 1,257 | 1,546 | 416 | (176) | 240 | 574 | 1,326 | 1,900 |
| Profit/(loss) per share - basic and diluted | 0.6p | 2.4p | 3.0p | 0.8p | (0.3)p | 0.5p | 1.1p | 2.5p | 3.6p |
- 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 accompanying notes are an integral part of the half-yearly report.
- The Company has no recognised gains or losses other than those disclosed in the income statement.
| Reconciliation of Movements in Shareholders' Funds | |||
| Six months ended 31 August 2014 | Six months ended 31 August 2013 | Year to 28 February 2014 | |
| '000 | '000 | '000 | |
| Shareholders' funds at start of period | 50,402 | 49,635 | 49,635 |
| Profit on ordinary activities after tax | 1,546 | 240 | 1,900 |
| Dividends paid | (521) | (521) | (1,042) |
| Shares bought back for cancellation | - | - | (91) |
| Shareholders' funds at end of period | 51,427 | 49,354 | 50,402 |
Balance Sheet
| As at 31 August 2014 | As at 31 August 2013 | As at 28 February 2014 | ||||
| '000 | '000 | '000 | '000 | '000 | '000 | |
| Fixed asset investments | 48,190 | 46,699 | 49,197 | |||
| Current assets: | ||||||
| Investments - money market funds* | 5 | 5 | 5 | |||
| Debtors | 499 | 579 | 543 | |||
| Cash at bank | 2,975 | 2,459 | 946 | |||
| 3,479 | 3,043 | 1,494 | ||||
| Creditors: amounts falling due within one year | (242) | (388) | (289) | |||
| Net current assets | 3,237 | 2,655 | 1,205 | |||
| Net assets | 51,427 | 49,354 | 50,402 | |||
| Called up equity share capital | 520 | 521 | 520 | |||
| Special distributable reserve | 47,488 | 47,871 | 48,009 | |||
| Capital redemption reserve | 2 | 1 | 2 | |||
| Capital reserve holding gains and losses | 3,023 | 268 | 1,766 | |||
| Capital reserve gains on disposal | (172) | - | (172) | |||
| Revenue reserve | 566 | 693 | 277 | |||
| Total equity shareholders' funds | 51,427 | 49,354 | 50,402 | |||
| Net asset value per share | 98.8p | 94.6p | 96.9p | |||
| *Held at fair value through profit and loss |
There is a contingent liability with regard to the management fees payable by the Company which is not included in Creditors on the balance sheet. More information is given on this in note 6.
The statements were approved by the Directors and authorised for issue on 9 October 2014 and are signed on their behalf by:
James Otter
Chairman
Company Number: 06948448
Cash Flow Statement
| Six months ended 31 August 2014 | Six months ended 31 August 2013 | Year to 28 February 2014 | |
| '000 | '000 | '000 | |
| Net cash inflow from operating activities | 286 | 605 | 910 |
| Taxation | - | - | (210) |
| Financial investment: | |||
| Purchase of fixed asset investments | - | (4,616) | (5,616) |
| Sale of fixed asset investments | 2,264 | 6,279 | 6,283 |
| Management of liquid resources: | |||
| Purchase of current asset investments | - | - | - |
| Sale of current asset investments | - | - | - |
| Dividends paid | (521) | (521) | (1,042) |
| Financing: | |||
| Issue of own shares | - | - | - |
| Share issue expense | - | - | - |
| Purchase of own shares | - | - | (91) |
| Increase in cash at bank | 2,029 | 1,747 | 234 |
| Reconciliation of net cash flow to movement in net funds | |||
| Six months ended 31 August 2014 | Six months ended 31 August 2013 | Year to 28 February 2014 | |
| '000 | '000 | '000 | |
| Increase in cash at bank | 2,029 | 1,747 | 234 |
| Opening net cash resources | 951 | 717 | 717 |
| Net cash resources at end of period | 2,980 | 2,464 | 951 |
| Reconciliation of profit before taxation to cash flow from operating activities | |||
| Six months ended 31 August 2014 | Six months ended 31 August 2013 | Year to 29 February 2014 | |
| '000 | '000 | '000 | |
| Profit on ordinary activities before tax | 1,546 | 240 | 2,043 |
| Decrease in debtors | 44 | 147 | 183 |
| (Decrease)/increase in creditors | (47) | 42 | 10 |
| Loss on disposal of fixed asset investments | - | 176 | 172 |
| Holding gain on fixed asset investments | (1,257) | - | (1,498) |
| Net cash inflow from operating activities | 286 | 605 | 910 |
Notes to the Half-Yearly Report
1. Basis of preparation
The unaudited half-yearly results which cover the six months to 31 August 2014 have been prepared in accordance with the Accounting Standards Board's (ASB) statement on half-yearly financial reports (July 2007) and adopting the accounting policies set out in the statutory accounts of the Company for the year ended 28 February 2014, which were prepared under UK GAAP and in accordance with the Statement of Recommended Practice for Investment Companies issued by the Association of Investment Companies in January 2009.
2. Publication of non-statutory accounts
The unaudited half-yearly results for the six months ended 31 August 2014 do not constitute statutory accounts within the meaning of s.415 of the Companies Act 2006. The comparative figures for the year ended 28 February 2014 have been extracted from the audited financial statements for that period, 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 August 2014 is calculated on the basis of 52,035,840 (31 August 2013: 52,145,218 and 28 February 2014: 52,125,038) 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
The net asset value per share is calculated on the basis of 52,035,840 (31 August 2013: 52,145,218 and 28 February 2014: 52,035,840) shares in issue at that date.
- 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 2014. The Company's principal risks and uncertainties have not changed materially since the date of that report.
- Contingencies, guarantees and financial commitments
Under the terms of the Investment Management agreement, Octopus is entitled to an annual management fee of 2.0% of net assets. However, the annual management fee will be rolled up (without interest) and will only be paid to Octopus once shareholders have received dividends and distributions during the life of the Company totalling or exceeding 105p per share. It is anticipated that the total returns to shareholders will have reached 105p per share by the 5th anniversary of the Company. Therefore the Board are aware of the likelihood that the management fee will become payable at this point. The fee will only be payable on returns above 105p and, as such, will not cause total returns to fall below 105p. Octopus will only be entitled to receive an annual management fee for the period from the date on which shares were first allotted under the Offer until the date on which the general meeting is held (expected to be in August 2015).
Since the total return as at 31 August 2014 was less than 105p, no accrual has been made in respect of any management fee potentially payable, in respect of which there was a maximum contingent liability of 4,450,000 as at 31 August 2014 (31 August 2013: 3,450,000 and 28 February 2014: 3,950,000).
Provided that an intermediary continues to act for a shareholder and the shareholder continues to be the beneficial owner of the shares, intermediaries will be paid an annual trail commission up to 0.5% of the initial net asset value. Trail commission of 118,000 was paid during the six month period to 31 August 2014 (31 August 2013: 115,000 and 28 February 2014: 212,000) and there was nil outstanding at the period end.
There were no further contingencies, guarantees or financial commitments as at 31 August 2014 (31 August 2013: none and 28 February 2014: none).
- Related Party Transactions
Martijn Kleibergen, a non-executive director of Octopus VCT plc, is an employee of Octopus Investments Limited.
Octopus VCT plc has employed Octopus throughout the period as Investment Manager. Octopus VCT plc has paid Octopus nil in the period as a management fee and there is nil outstanding at the balance sheet date. No management fee shall be payable until certain performance targets have been met, as detailed in note 6 above.
The fee in respect of the accounting and administrative services, charged at 0.3% of the net asset value, is
payable quarterly in arrears and is calculated at annual intervals as at 28 February.
Octopus also provides company secretarial services for an additional fee of 15,000 per annum.
8. Other Information
Copies of this statement will be made available to all shareholders. Copies are also available from the registered office of the Company at 20 Old Bailey, London, EC4M 7AN, and will also be available to view on the Investment Manager's website at www.octopusinvestments.com.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Octopus VCT PLC via Globenewswire
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