Half-Yearly Results
06/11/2024 17:00
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Octopus AIM VCT plc
Half-Yearly Results
Octopus AIM VCT plc announces its unaudited half-yearly results for the six
months ended 31 August 2024.
Octopus AIM VCT plc (the ‘Company’) is a venture capital trust (VCT) which
aims to provide shareholders with attractive tax-free dividends and long-term
capital growth by investing in a diverse portfolio of predominantly AIM-traded
companies. The Company is managed by Octopus Investments Limited
(‘Octopus’ or the ‘Investment Manager’).
Financial summary
Six months to 31 August 2024 Six months to 31 August 2023 Year to 29 February 2024
Net assets (£’000) 117,750 120,131 129,109
Profit/(Loss) after tax (£’000) 2,521 (15,972) (17,734)
Net asset value (NAV) per share (p) 57.2 67.2 63.3
Total return (%) (1) 2.1 (11.2) (13.0)
Dividends per share paid in the period (p) 7.4 2.5 5.0
Special dividend declared (p) – – 4.9
Dividend declared (p) (2) 2.5 2.5 2.5
(1)Total return is an alternative performance measure calculated as movement
in NAV per share in the period plus dividends paid in the period, divided by
the NAV per share at the beginning of the period.
(2)The interim dividend of 2.5p will be paid on 10 January 2025 to those
shareholders on the register on 20 December 2024.
Chair’s statement
The six months to 31 August 2024 marked the beginning of a positive shift in
market sentiment, albeit a gradual one. Some of the key drivers of this shift
included better than expected UK GDP figures, a tempering of investor outflows
and ongoing corporate activity as private equity funds continued to seek
opportunities on public markets taking advantage of lower valuations.
Furthermore, lower inflation figures paved the way for an interest rate cut in
August, with further cuts anticipated by the end of the year. In summary, the
more stable macroeconomic outlook provided a much needed and expected boost to
UK capital markets in late Spring and early Summer. The more recent volatility
due to uncertainty related to potential measures in the Labour Government’s
first Budget, and more specifically possible adjustments to Business Property
Relief, have dampened any momentum in positive UK market sentiment,
particularly for the AIM market. As a result, by the end of the period under
review, the market had given back some of the gains made earlier in the year.
The Net Asset Value (NAV) of the VCT grew by 2.1% during the six-month period,
after adding back the final dividend of 2.5p and special dividend of 4.9p.
This growth lagged the AIM index which grew by 5.8%. It is encouraging to see
the Company return to growth following a lengthy period of negative
performance. Furthermore, we anticipate that more recent positive
macroeconomic indicators, coupled with the prospect of further interest rate
reductions, should benefit the operational performance of companies within
your portfolio. Encouragingly, market commentators generally believe that the
early signs of recovery evident in the late Spring and early Summer will
re-emerge once the fog of uncertainty surrounding the new Government’s first
Budget clears.
Encouragingly, the number of IPOs and follow on fundraisings on AIM continued
at a steady pace over the period. As a result, the Company made four
qualifying investments at a total cost of £2.1 million, an increase on the
£0.5 million invested in the corresponding period last year. Three of the
qualifying investments made in the period were follow-on investments into
existing holdings (Abingdon Health, Cambridge Cognition and PCI Pal). One new
investment was made into GETECH Group plc, a world-leading locator of
subsurface resources including critical metals vital for the world’s energy
transition.
Transactions with the Investment Manager
Details of amounts paid to the Investment Manager are disclosed in Note 8 to
the half-yearly report.
Share buybacks
In the six months to 31 August 2024, the Company bought back 2,761,321
Ordinary shares for a total consideration of £1,663,000. 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
5.0% to the selling shareholder after costs.
Share issues
In this period 4,779,938 new shares were issued, 4,742,400 of these being
issued through the Dividend Reinvestment Scheme (DRIS).
New share offer
Since the period end the Company has launched a new combined offer for
subscription alongside Octopus AIM VCT 2 plc to raise up to £20 million with
an over allotment of up to a further £10 million.
Dividends
On 15 August 2024, the Company paid a dividend of 2.5p and 4.9p per share,
being the final and special dividend for the year ended 29 February 2024. For
the period to 31 August 2024, the Board has declared an interim dividend of
2.5p. This will be paid on 10 January 2025 to shareholders on the register on
20 December 2024. 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 prior
year-end share price, whichever is the greater. This will usually be paid in
two instalments during each year.
Board composition
As anticipated in my statement in the Annual Report and Accounts for the year
ended 29 February 2024, Stephen Hazell-Smith, who had been a director of the
Company since 1998, stepped down from the Board with effect from the Annual
General Meeting held on 18 July 2024. I thank Stephen for his extensive
contribution to the success of the Company since its inception. Louise Nash
has joined the Board as a director with effect from 1 July 2024. Louise brings
to the Board her deep experience as a former fund manager specialising in UK
small and mid-cap companies.
Principal risks and uncertainties
The principal risks and uncertainties faced by the Company are set out in Note
7 to the half-yearly report.
Outlook
The UK’s improving macroeconomic conditions and rising investor confidence
following the recent Autumn Budget should create a more stable market
environment in the short to medium term. The focus is now on the timing of
further interest rate cuts and their anticipated boost to market certainty and
sentiment over the next six months. If this materialises, we expect a
re-rating of UK smaller company valuations and an increased appetite for risk,
positively impacting the performance of UK smaller growth company shares,
including those in your portfolio. Additionally, your VCT is invested in a
widely diversified portfolio of companies, and the recent fundraising
announcement means our Investment Manager is well-positioned to invest in new
opportunities as they arise.
Neal Ransome
Chair
Investment Manager’s review
Overview
Following a prolonged period of market and economic uncertainty, investor
sentiment in the six months to 31 August 2024 began on a more optimistic note.
Improved UK macroeconomic data strengthened market commentators’ belief that
the threat of a recession had diminished, high inflation was less of a
concern, and interest rates had reached their peak. With the UK economy
returning to growth this year, driven primarily by improvements in the service
and manufacturing sectors, rising consumer confidence, and a robust employment
market, the backdrop for market recovery appeared stronger than it had been
for a while. In August 2024, the Bank of England cut interest rates for the
first time in four years and further boosted market confidence. More recently,
since the end of the half year positive market sentiment has tempered. This
was fuelled by uncertainty surrounding the future of Business Property Relief
and its potential negative impact on AIM and UK capital markets, in the run-up
to the new Labour Government’s first Budget.
On a positive note, the growing stability of the UK macroeconomic environment
has led to improved operational performance for many companies in your
portfolio. Additionally, confidence in imminent further interest rate cuts has
grown following the recent announcement that inflation is well below the Bank
of England’s target, now standing at 1.7%. However, the quantum of interest
rate cuts this year remains unclear.
We continue to believe that UK equities remain significantly undervalued
compared to global peers, despite the intermittent signs of market recovery
this year. This is evident in the opportunistic corporate activity,
particularly on AIM. Furthermore, the steady rise in IPOs and further
fundraisings across UK capital markets this year had begun to renew interest
and investment in UK equity markets that had not been seen for a while.
Performance
In the period under review, the NAV total return grew by 2.1% in the six
months to 31 August 2024. This compares to a 5.8% rise in the AIM Index, a
19.4% increase of the FTSE Small Cap Index (ex-Investment Trusts) and a 12.6%
rise in the FTSE All-Share Index, all on a total return basis. The FTSE
All-Share and FTSE Small Cap Index (ex-Investment Trusts) outperformed,
reflecting a higher weighting in larger companies (particularly tech
companies) which are more liquid and began to see a re-rating this year due to
the improved economic and market environment. Despite the improved performance
of the larger indices during the period under review, there remains a relative
lack of appetite for small growth stocks, which your portfolio is invested in.
The UK market continues to experience outflows, with speculation over the
Budget adding significant uncertainty to AIM. Potential investors were
hesitant, awaiting the implications of the new Labour Government’s planned
tax changes. Now that this uncertainty has been resolved, we believe the
attractive valuations of companies within our universe will gradually draw
investors back, leading to a re-rating of smaller company shares over time.
There were several positive contributors to the Company’s performance this
half. Beeks Financial Cloud Group plc which has now secured contracts with
three major global exchanges for its Exchange Cloud product and has a strong
pipeline of opportunities with other significant exchanges. The company has
also secured a Proximity Cloud contract win and was awarded preferred cloud
computing and connectivity vendor status for one of the world’s largest
banking groups. Mattioli Woods plc was subject to a bid approach by Pollen
Street Capital at a 34% premium to the last traded share price prior to the
announcement. The bid was approved by shareholders and completed post the
period end. This company contributed strongly over many years to the portfolio
with this final price representing over six times the original book cost. We
are always disappointed to see companies leave public markets, but this
continued corporate activity is a clear demonstration of the wide discount
that exists in UK equities, which corporates and private equity are taking
advantage of. Breedon Group plc continued to perform strongly across its
markets, with construction confidence indicators in the UK and Ireland on the
rise. Excitingly, during the period, the company acquired US based BMC for
$300 million establishing a footprint in the US, offering new markets
particularly in the Mid-West. GENinCode plc announced a NICE recommendation
for its ROCA ovarian cancer test, as the preferred test for surveillance of
ovarian cancer in high-risk individuals not undertaking surgery. GB Group plc
performed well over the period, finishing the year strongly with operating
profit and cash exceeding market expectations.
Among the detractors from performance over the period was Equipmake Holdings
plc which reported disappointing results. The company achieved its revenue
forecast but incurred significantly higher costs than expected to deliver on
its contracted pipeline of orders. This weighed heavily on its share price,
particularly as it had reduced market expectations earlier in the year. Verici
Dx plc’s share price declined over the period despite ongoing operational
progress, including achieving a significant commercial milestone through its
partnership with Thermo Fisher. In its half-year trading update, Learning
Technologies Group plc highlighted that reduced corporate spend and hiring
activity continued to plague large US customers, further exacerbated by
unfavourable foreign exchange rates. Despite these headwinds, profitability
remains stable and its focus on improved margins should bear fruit once the
current macro headwinds subside.
Portfolio activity
In the first half of the year the Company made four qualifying investments
totalling £2.1 million, up from £0.5 million in the same period the year
before. Three of these were follow-on investments in existing holdings: £1.1
million in Abingdon Health plc, a diagnostic tests business, to support the
development of the company’s lab capacity, £0.2 million in PCI-Pal plc, a
payments solutions and services business, to bolster its US expansion, and
£0.5 million in Cambridge Cognition Holdings plc, a provider of digital
solutions to assess brain health, to support the growth of its commercial
strategy. We made a new investment of £0.3 million in existing AIM company
GETECH Group plc, a world-leading locator of subsurface resources, including
critical metals for the world’s energy transition. The new money raised by
GETECH Group plc will be used to fund business development and R&D.
We also invested £4.0 million into non-qualifying, main list stocks to
increase our UK equity market exposure. We invested £0.6 million into GSK plc
a multinational pharmaceutical and biotechnology company; £0.6 million into
Wise plc a global payments solutions business; £0.5 million into JTC plc a
global professional services business, £0.5 million into Bytes Technology
Group plc an IT solutions and services business, £0.6 million into Ricardo
plc a global strategic, environmental and engineering consultancy group, £0.6
million into Cranswick plc a leading UK food producers and £0.6 million into
Bloomsbury Publishing plc a leading independent publisher.
We made a number of disposals in the period which resulted in a net overall
loss of £2.7 million over book cost. These included the disposals of our
entire holdings in Renalytix plc, LoopUp Group plc, Cordel Group plc, Cirata
plc, Spectral AI and Eluceda as well as a partial disposal of Beeks Financial
Cloud Group plc where we took profits.
During the interim period, £0.4 million was invested in the FP Octopus Future
Generations Fund. The investments in FP Octopus Microcap and FP Octopus Multi
Cap have positively impacted performance in the period. We anticipate these
funds will continue to generate positive returns once stock markets stabilise
and equity valuations recover.
Unquoted investments
The Company is able to make investments in unquoted companies intending to
float. At 31 August 2024 8.7% (31 August 2023: 7.1% and 29 February 2024:
7.6%) of the Company’s net assets were invested in unquoted companies. This
uplift reflects an increase in the valuation of Hasgrove Limited, which
continues to trade strongly.
Outlook
The improving macroeconomic conditions in the UK, provide a stronger
foundation for continued market recovery. The recent Autumn Budget
announcement reaffirmed the new government’s commitment to a growth agenda.
According to the Office of Budget Responsibility, the UK economy is projected
to grow by just over 1% this year, rising to 2% by 2025, before stabilising at
1.5% thereafter. With the uncertainty surrounding the Budget now behind us,
there is greater clarity regarding the direction of the new government’s tax
agenda in the short and medium term, which will enhance investor confidence.
Additionally, the Chancellor has expressed strong support of VCT legislation,
highlighting the importance of VCTs as a vital funding source for small growth
companies and raising awareness of their impact within UK capital markets.
This, coupled with the anticipated continuation of monetary easing measures
this year, is expected to lead to a more vibrant IPO and further fundraising
environment, which had already sparked optimism in UK markets earlier this
year.
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 August 2023: 87 holdings and 29 February 2024: 88
holdings) across a range of businesses with exposure to some exciting new
technologies in the environmental and healthcare sectors. The Company
currently has funds available for new investments as well as supporting those
which are still on their journey to profitability. These are challenging
times, but the balance of the portfolio towards profitable companies remains,
and the Investment Manager is confident that there will continue to be
sufficient opportunities to invest our funds in good companies seeking more
growth capital at attractive valuations, which we expect will result in
improved future returns.
The Octopus Quoted Companies team
Octopus Investments
Directors’ responsibilities statement
We confirm that to the best of our knowledge:
* the half–yearly financial statements have been prepared in accordance with
Financial Reporting Standard 104 ‘Interim Financial Reporting’ issued by
the Financial Reporting Council;
* the half–yearly financial statements give a true and fair view of the
assets, liabilities, financial position, and profit or loss of the Company;
* the half–yearly report includes a fair review of the information required
by the Financial Conduct Authority’s Disclosure Guidance and Transparency
Rules, being: * we have disclosed an indication of the important events that
have occurred during the first six months of the financial year and their
impact on the condensed set of financial statements;
* we have disclosed a description of the principal risks and uncertainties for
the remaining six months of the year; and
* we have disclosed a description of related party transactions that have
taken place in the first six months of the current financial year that may
have materially affected the financial position or performance of the Company
during that period and any changes in the related party transactions described
in the last annual report that could do so.
By Order of the Board
Neal Ransome
Chair
Income statement
Unaudited Six months to 31 August 2024 Unaudited Six months to 31 August 2023 Audited Year to 29 February 2024
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 – (41) (41) – 139 139 – 813 813
Loss on disposal of current asset investments – – – – (52) (52) – (246) (246)
Gain/(loss) on valuation of fixed asset investments – 713 713 – (13,719) (13,719) – (16,322) (16,322)
Gain/(loss) on valuation of current asset investments – 1,851 1,851 – (1,794) (1,794) – (1,137) (1,137)
Investment income 1,370 – 1,370 920 – 920 2,060 – 2,060
Investment management fees (270) (810) (1,080) (304) (912) (1,216) (555) (1,666) (2,221)
Other expenses (292) – (292) (250) – (250) (681) – (681)
Profit/(loss) before tax 808 1,713 2,521 366 (16,338) (15,972) 824 (18,558) (17,734)
Tax _ _ _ _ _ _ _ _ _
Profit/(loss) after tax 808 1,713 2,521 366 (16,338) (15,972) 824 (18,558) (17,734)
Earnings per share – basic and diluted 0.4p 0.8p 1.2p 0.2p (9.1p) (8.9p) 0.4p (10.0p) (9.6p)
* The ‘Total’ column of this statement represents the statutory Income
Statement of the Company; the supplementary revenue return and capital return
columns have been prepared in accordance with the AIC Statement of Recommended
Practice.
* All revenue and capital items in the above statement derive from continuing
operations.
* The Company has no recognised gains or losses other than those disclosed in
the Income Statement.
* The Company has no other comprehensive income for the period.
* The accompanying notes are an integral part of the half-year report.
Balance sheet
Unaudited As at 31 August 2024 Unaudited As at 31 August 2023 Audited As at 29 February 2024
£’000 £’000 £’000 £’000 £’000 £’000
Fixed asset investments 86,354 87,322 80,350
Current assets:
Investments 16,155 14,873 13,897
Money market funds 13,267 16,485 33,641
Debtors 266 282 666
Cash at bank 2,389 1,921 1,276
Applications cash (1) 5 4 4
32,082 33,565 49,484
Creditors: amounts falling due within one year (686) (756) (725)
Net current assets 31,396 32,809 48,759
Total assets less current liabilities 117,750 120,131 129,109
Called-up equity share capital 2,058 1,789 2,038
Share premium 20,707 19,807 18,041
Capital redemption reserve 369 301 341
Special distributable reserve 107,619 112,000 124,213
Capital reserve realised (28,174) (24,586) (24,622)
Capital reserve unrealised 15,735 12,650 10,470
Revenue reserve (564) (1,830) (1,372)
Total equity shareholders’ funds 117,750 120,131 129,109
NAV per share - basic and diluted 57.2p 67.2p 63.3p
(1)Cash held but not yet allotted
The statements were approved by the Directors and authorised for issue on 6
November 2024 and are signed on their behalf by:
Neal Ransome
Chair
Company No: 03477519
Statement of changes in equity
Share capital Share premium Capital redemption reserve Special distributable reserves (1) Capital reserve realised (1) Capital reserve unrealised Revenue reserve (1 ) Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
As at 1 March 2024 2,038 18,041 341 124,213 (24,622) 10,470 (1,372) 129,109
Total comprehensive profit for the period – – – – (851) 2,564 808 2,521
Contributions by and distributions to owners:
Repurchase and cancellation of own shares (28) – 28 (1,663) – – – (1,663)
Issue of shares 48 2,666 – – – – – 2,714
Share issue costs – – – – – – – –
Dividends paid – – – (14,931) – – – (14,931)
Total contributions by and distributions to owners 20 2,666 28 (16,594) – – – (13,880)
Other movements:
Cancellation of share premium – – – – – – – –
Prior years’ holding losses now realised – – – – (2,701) 2,701 – –
Total other movements – – – – (2,701) 2,701 – –
As at 31 August 2024 2,058 20,707 369 107,619 (28,174) 15,735 (564) 117,750
(1)The sum of these reserves is an amount of £78,881,000 (31 August 2023:
£85,584,000 and 29 February 2024: £98,219,000) which is considered
distributable to shareholders.
Share capital Share premium Capital redemption reserve Special distributable reserves (1) Capital reserve realised (1) Capital reserve unrealised Revenue reserve (1 ) Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
As at 1 March 2023 1,798 18,924 279 118,015 (23,143) 27,545 (2,196) 141,222
Total comprehensive income for the period – – – – (825) (15,513) 366 (15,972)
Contributions by and distributions to owners:
Repurchase and cancellation of own shares (22) – 22 (1,564) – – – (1,564)
Issue of shares 13 883 – – – – – 896
Share issue costs – – – – – – – –
Dividends paid – – – (4,451) – – – (4,451)
Total contributions by and distributions to owners (9) 883 22 (6,015) – – – (5,119)
Other movements:
Cancellation of share premium – – – – – – – –
Prior years’ holding losses now realised – – – – (618) 618 – –
Total other movements – – – – (618) 618 – –
As at 31 August 2023 1,789 19,807 301 112,000 (24,586) 12,650 (1,830) 120,131
(1)The sum of these reserves is an amount of £85,584,000 which is considered
distributable to shareholders.
Share capital Share premium Capital redemption reserve Special distributable reserves (1) Capital reserve realised (1) Capital reserve unrealised Revenue reserve (1) Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
As at 1 March 2023 1,798 18,924 279 118,015 (23,143) 27,545 (2,196) 141,222
Comprehensive income for the year:
Management fee allocated as capital expenditure – – – – (1,666) – – (1,666)
Current year gains on disposal – – – – 571 – – 571
Current period gains on fair value of investments – – – – – (17,459) – (17,459)
Capital investment income – – – – – – – –
Profit after tax – – – – – – 824 824
Total comprehensive loss for the year – – – – (1,095) (17,459) 824 (17,730)
Contributions by and distributions to owners:
Repurchase and cancellation of own shares (62) – 62 (4,083) – – – (4,083)
Issue of shares 302 20,082 – – – – – 20,384
Share issue costs – (1,158) – – – – – (1,158)
Dividends paid – – – (9,526) – – – (9,526)
Total contributions by and distributions to owners 240 18,924 62 (13,609) – – – 5,617
Other movements:
Cancellation of share premium – (19,807) – 19,807 – – – –
Prior years’ holding gains now realised – – – – 2,871 (2,871) – –
Transfer in reserves – – – – (3,255) 3,255 – –
Total other movements – (19,807) – 19,807 (384) 384 – –
Balance as at 29 February 2024 2,038 18,041 341 124,213 (24,622) 10,470 (1,372) 129,109
(1)The sum of these reserves is an amount of £98,219,000 which is considered
distributable to shareholders.
Cash flow statement
Unaudited six months to 31 August 2024 £’000 Unaudited six months to 31 August 2023 £’000 Audited year to 29 February 2024 £’000
Cash flows from operating activities
Profit/(loss) before tax 2,521 (15,972) (17,734)
Adjustments for:
Decrease in debtors 400 72 131
(Decrease) in creditors (39) (105) (134)
Loss/(gain) on disposal of fixed assets 41 (139) (813)
Loss on disposal of current assets – 52 246
(Gain)/loss on valuation of fixed asset investments (713) 13,719 16,322
(Gain)/loss on valuation of current asset investments (1,851) 1,794 1,137
Net cash generated by/(used) in operating activities 359 (579) (845)
Cash flows from investing activities
Purchase of fixed asset investments (6,129) (453) (7,149)
Purchase of current asset investments (408) (1,259) (1,080)
Proceeds from sale of fixed asset investments 797 2,218 13,517
Proceeds from sale of current asset investments – 728 1,988
Net cash (used in)/generated by investing activities (5,740) 1,234 7,276
Cash flows from financing activities
Movement in applications account 1 1 (1)
Purchase of own shares (1,663) (1,564) (4,083)
Proceeds from share issues 24 28 18,558
Share issues costs – – (1,157)
Dividends paid (net of DRIS) (12,241) (3,583) (7,700)
Net cash (used in)/generated by financing activities (13,879) (5,118) 5,617
(Decrease)/increase in cash and cash equivalents (19,260) (4,463) 12,048
Opening cash and cash equivalents 34,921 22,873 22,873
Closing cash and cash equivalents 15,661 18,410 34,921
Cash and cash equivalents comprise
Cash at bank 2,389 1,921 1,276
Applications cash 5 4 4
Money market funds 13,267 16,485 33,641
Total cash and cash equivalents 15,661 18,410 34,921
Notes to the financial statements
1. Basis of preparation
The unaudited financial statements which covers the six months to 31 August
2024 has been prepared in accordance with the Financial Reporting Council’s
(FRC) Financial Reporting Standard 104 ‘Interim Financial Reporting’
(September 2024) and the Statement of Recommended Practice (SORP) for
Investment Companies re–issued by the Association of Investment Companies in
July 2022.
The principal accounting policies have remained unchanged from those set out
in the Company’s 2024 Annual Report and Accounts
2. Publication of non-statutory accounts
The unaudited financial statements for the six months ended 31 August 2024
does not constitute statutory accounts within the meaning of Section 415 of
the Companies Act 2006 and has not been delivered to the Registrar of
Companies. The comparative figures for the year ended 29 February 2024 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 is calculated on the basis of 202,899,157 Ordinary
shares (31 August 2023: 178,768,443 and 29 February 2024: 185,664,255), being
the weighted average number of shares in issue during the period.
There are no potentially dilutive capital instruments in issue and, therefore,
no diluted return per share figures are relevant. The basic and diluted
earnings per share are therefore identical.
4. Net asset value per share
The net asset value per share is based on net assets as at 31 August 2024
divided by 205,846,926 shares in issue at that date (31 August 2023:
178,882,114 and 29 February 2024: 203,828,309).
31 August 2024 31 August 2023 29 February 2024
Net assets (£’000) 117,750 120,131 129,109
Shares in issue 205,846,926 178,882,114 203,828,309
Net asset value per share 57.2p 67.2p 63.3p
5. Dividends
The interim dividend declared of 2.5p per Ordinary share will be paid on 10
January 2025 to those shareholders on the register on 20 December 2024.
6. Buybacks and share issues
During the six months ended 31 August 2024 the Company repurchased the
following shares.
Date No. of shares Price (p) Cost (£)
21 March 2024 691,776 62.1 429,600
25 April 2024 406,159 61.2 248,600
23 May 2024 346,056 63.2 218,700
20 June 2024 428,126 61.7 264,100
18 July 2024 230,467 62.3 143,600
15 August 2024 658,737 54.4 358,400
Total 2,761,321 1,663,000
The weighted average price of all buybacks during the period was 60.2p per
share.
During the six months ended 31 August 2024 the Company issued the following
shares.
Date No. of shares Price (p) Gross proceeds (£)
16 May 2024 (1) 37,538 65.1 24,000
15 August 2024 (DRIS) 4,742,400 56.7 2,690,000
Total 4,779,938 2,714,000
(1) Shares issued as a result of reduced adviser charges.
The weighted average allotment price of all shares issued during the period
was 56.8p per share.
7. Principal risks and uncertainties
The Company’s principal risks are investment performance, VCT qualifying
status risk, operational risk, information security, economic and price risk,
regulatory and reputational/legislative risk, liquidity/cash flow risk and
valuation risk. These risks, and the way in which they are managed, are
described in more detail in the Company’s Annual Report and Accounts for the
year ended 29 February 2024. The Board has also considered emerging risks,
including geo–political protectionism and climate change. The Board seeks to
mitigate risks 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 throughout the period as
Investment Manager. Octopus has also been appointed as Custodian of the
Company’s investments under a Custodian Agreement. The Company has been
charged £1,080,000 by Octopus as a management fee in the period to 31 August
2024 (31 August 2023: £1,216,000 and 29 February 2024: £2,221,000). The
management fee is payable quarterly and is based on 2% of net assets at
six–month intervals.
The Company has invested a further £0.4 million in Octopus managed funds (31
August 2023: £1.3 million and 29 February 2024: £1.9 million), being the
Multi Cap Income Fund, Micro Cap Growth Fund and Future Generations Fund. The
Company had no disposals of its holding in the Multi Cap Income Fund (31
August 2023: £0.7 million and 29 February 2024: £2.6 million) and has made
no loss over book cost (31 August 2023: £0.02 million and 29 February 2024:
£0.2 million). To make sure the Company is not double charged management fees
on these products, the Company receives a reduction in the management fee as a
percentage of the value of these investments. This amounted to £43,000 in the
period to 31 August 2024 (31 August 2023: £43,000 and 29 February 2024:
£80,000). For further details please refer to the Company’s Annual Report
and Accounts for the year ended 29 February 2024.
In the period, Octopus Investments Nominees Limited (OINL) purchased shares in
the Company from shareholders to correct administrative issues, on the
understanding that shares will be sold back to the Company in subsequent share
buybacks at the prevailing market price. As at 31 August 2024, OINL held nil
shares (31 August 2023: nil shares and 29 February 2024: nil shares) in the
Company as beneficial owner, with a nil book cost (31 August 2023: £nil and
29 February 2024: £nil). Throughout the period to 31 August 2024 OINL
purchased nil shares (31 August 2023: 2,657 shares and 29 February 2024: 2,791
shares) at a cost of £nil (31 August 2023: £2,372 and 29 February 2024:
£2,000) and sold nil shares (31 August 2023: 10,255 shares and 29 February
2024: 10,389 shares) for proceeds of £nil (31 August 2023: £7,238 and 29
February 2024: £7,000). This is classed as a related party transaction as
Octopus, the Investment Manager and OINL are part of the same group of
companies. Any such future transactions, where OINL takes over the legal and
beneficial ownership of Company shares, will be announced to the market and
disclosed in annual and financial statements.
9. Fixed asset investments
Accounting policy
The Company’s principal financial assets are its investments and the
policies in relation to those assets are set out below.
Purchases and sales of investments are recognised in the financial statements
at the date of the transaction (trade date).
These investments will be managed and their performance evaluated on a fair
value basis in accordance with a documented investment strategy and
information about them has to be provided internally on that basis to the
Board. Accordingly, as permitted by FRS 102, the investments are measured as
being fair value through profit or loss on the basis that they qualify as a
group of assets managed, and whose performance is evaluated, on a fair value
basis in accordance with a documented investment strategy. The Company’s
investments are measured at subsequent reporting dates at fair value.
In the case of investments quoted on a recognised stock exchange, fair value
is established by reference to the closing bid price on the relevant date or
the last traded price, depending upon convention of the exchange on which the
investment is quoted. This is consistent with the International Private Equity
and Venture Capital Valuation (IPEV) guidelines.
Gains and losses arising from changes in fair value of investments are
recognised as part of the capital return within the Income Statement and
allocated to the capital reserve unrealised. All investments are initially
recognised at transaction price and subsequently measured at fair value.
Changes in fair value are recognised in the Income Statement.
In the preparation of the valuations of assets the Directors are required to
make judgements and estimates that are reasonable and incorporate their
knowledge of the performance of the investee companies.
Fair value hierarchy
Paragraph 34.22 of FRS 102 suggests following a hierarchy of fair value
measurements for financial instruments measured at fair value in the Balance
Sheet, which gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1) and the lowest priority
to unobservable inputs (Level 3). This methodology is adopted by the Company
and requires disclosure of financial instruments to be dependent on the lowest
significant applicable input, as laid out below:
Level 1: The unadjusted, fully accessible and current quoted price in an
active market for identical assets or liabilities that an entity can access at
the measurement date.
Level 2: Inputs for similar assets or liabilities other than the quoted prices
included in Level 1 that are directly or indirectly observable, which exist
for the duration of the period of investment.
Level 3: This is where inputs are unobservable, where no active market is
available and recent transactions for identical instruments do not provide a
good estimate of fair value for the asset or liability.
There have been no reclassifications between levels in the year. The change in
fair value for the current and previous year is recognised through the profit
and loss account.
Disclosure
Level 1: Quoted equity investments £’000 Level 3: Unquoted investments £’000 Total £’000
Cost as at 1 March 2024 68,725 5,268 73,993
Opening unrealised gain at 1 March 2024 780 5,577 6,357
Valuation at 1 March 2024 69,505 10,845 80,350
Purchases at cost 6,129 – 6,129
Disposal proceeds (789) (8) (797)
Gain on realisation of investments (49) 8 (41)
Change in fair value in year 276 437 713
Closing valuation at 31 August 2024 75,072 11,282 86,354
Cost at 31 August 2024 71,614 4,969 76,583
Closing unrealised gain at 31 August 2024 3,458 6,313 9,771
Valuation at 31 August 2024 75,072 11,282 86,354
Level 1 valuations are valued in accordance with the bid–price on the
relevant date. Further details of the fixed asset investments held by the
Company are shown within the Investment Manager’s review.
Level 3 investments are reported at fair value in accordance with FRS 102
Sections 11 and 12, which is determined in accordance with the latest IPEV
guidelines. In estimating fair value, there is an element of judgement,
notably in deriving reasonable assumptions, and it is possible that, if
different assumptions were to be used, different valuations could have been
attributed to some of the Company’s investments.
Level 3 investments include £1,080,000 (31 August 2023: £600,000 and 29
February 2024: £1,080,000) of convertible loan notes held at cost, which is
deemed to be current fair value. In addition to this the Company holds eight
unquoted investments which are classified as level 3 in terms of fair value
hierarchy. These are valued based on a range of valuation methodologies,
determined on an investment specific basis. The price of recent investment is
used where a transaction has occurred sufficiently close to the reporting date
to make this the most reliable indicator of fair value. Where recent
investment is not deemed to indicate the most reliable indicator of fair value
i.e. the most recent investment is too distant from the reporting date for
this to be deemed a reasonable indicator, other market–based approaches
including earnings multiples, annualised recurring revenues, discounted cash
flows or net assets are used to determine a fair value for the investments.
All capital gains or losses on investments are classified at FVTPL (fair value
through profit or loss). Given the nature of the Company’s venture capital
investments, the changes in fair value of such investments recognised in these
financial statements are not considered to be readily convertible to cash in
full at the balance sheet date and accordingly these gains are treated as
holding gains or losses.
10. Post balance sheet events
The following events occurred between the balance sheet date and the signing
of these financial statements.
* A full disposal with proceeds totalling £3,180,000 completed in Mattioli
Woods plc.
* On 23 September 2024, a prospectus offer was launched alongside Octopus AIM
VCT 2 plc to raise a combined total of up to £20 million with a £10 million
over-allotment facility. The Offer will close on 22 September 2025, or earlier
if fully subscribed.
* A final order to cancel share premium amount to £18.1 million was granted
on 10 September 2024.
11. Half Yearly Report
The unaudited half-yearly report for the six months ended 31 August 2024 will
shortly be available to view on the Company’s website
http://www.octopusinvestments.com
A copy of the half-yearly report will be submitted to the National Storage
Mechanism and will shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
For further enquiries, please contact:
Rachel Peat
Octopus Company Secretarial Services Limited
Tel: +44 (0)80 0316 2067
LEI: 213800C5JHJUQLAFP619