REG-Oxford Technology 2 VCT plc : Half-year Report <Origin Href="QuoteRef">OXF2.L</Origin>
23/10/2017 07:06
For best results when printing this announcement, please click on link below:
http://pdf.reuters.com/htmlnews/htmlnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20171023:nGNEzkZq8
Oxford Technology 2 Venture Capital Trust Plc
Unaudited Half-Yearly Report
For the period
1 March 2017 to 31 August 2017
Financial Headlines
6 Months Ended 31 August 2017 Year Ended 28 February 2017
Net Assets at Period End £2.64m £2.53m
Net Asset Value per Share 38.9p 37.2p
Cumulative Dividend per Share 13.0p 13.0p
Total NAV Return per Share 51.9p 50.2p
Share Price at Period End 30.0p 20.0p
Earnings per Share 1.7p 9.0p
Company Number: 3928569
Registered Address: The Magdalen Centre, Oxford Science Park, Oxford OX4 4GA
Statement on behalf of the Board
I am pleased to present the unaudited results for the six month period ended
31 August 2017, which has been a busy time for your Company.
Results
The Company's net asset value (NAV) per share has increased from 37.2p at 28
February 2017 by 1.7p to 38.9p at 31 August 2017, mainly due to a slight
increase in the adjusted final sale price of OC Robotics and a value uplift
following a recent investment round in ImmunBiology Limited ("Immbio").
Sale of OC Robotics (OCR) and resultant Return of Funds to shareholders
The investment in OCR was sold to GE Aircraft Engine Services Ltd on 8 June
2017, yielding an immediate payment of £1,356k to OT2 with a further £327k
being held in escrow for 24 months against normal business warranties and an
estimated £98k of excess cash to be released shortly. In line with OT2's
normal practice, 50% of both the amount in escrow and the estimated excess
cash have been recognised in the NAV. OT2 originally invested £125k in 2001
when the company was a start-up, and then made additional investments over the
years taking the total investment to £311k by the date of the most recent
annual accounts to 28 February 2017, when it was valued at £1,535k. So far,
the investment has therefore returned a 5 fold uplift vs cost.
With significant cash proceeds available, the Board offered shareholders the
opportunity to sell 30% of their holding back to the Company via a Tender
Offer, together with further shares should other shareholders not take up
their Basic Entitlement. On 6 September 2017, just after the period end, the
Company completed the Tender Offer, with a total of 1,461,034 Ordinary Shares
being tendered. As this was less than the 2,037,877 shares that the Company
was authorised to buy back all the Ordinary Shares tendered by shareholders
were re-purchased, for £460k.
The Circular also indicated that a dividend would be paid to shareholders
still on the register after the completion of the Tender Offer. This is still
the intention, and as not all the funds earmarked for the Tender Offer were
required for that purpose, the Directors expect to declare a slightly higher
dividend of at least 8p per share, with a payment by 7 December 2017.
Portfolio Review
The 8 unlisted companies within the portfolio continue to develop, and where
required and permitted under VCT rules your Company continues to invest to
support that development. During the period, an additional investment of
£30k was made into Immbio: The company attended our recent AGM and its
presentation (along with that given by Arecor, another OT2 investee) can be
found on our website. The recent investment in Immbio was in a new class of
share with a significant preference. This has resulted in an uplift in its
valuation of nearly £100k.
Select Technology, a photocopier (or more generally Multi Function Device, or
MFD) software company, is now the largest holding in your Company's portfolio
(over a third of the total investment value). The company is profitable and
continues to grow, despite the strategic decision to reduce dependency on one
particular supplier, which is expected to increase business resilience.
Taking these developments into account, we have reverted to a valuation
methodology based on a sales multiple to more appropriately reflect the
prospects of the business, although the impact of this is small during the
half year period.
The Directors along with the Investment Advisor continue to take an active
interest in the remaining companies within the portfolio, both to support
their management teams to achieve company development, but also to prepare
companies for realisation at the appropriate time. It should however be noted
that approaches do occur at other times, and the ability of the Directors and
Investment Advisor to be able to provide support when such approaches occur is
essential for maximising value. This was demonstrated in the recent
realisation of OCR.
Liquidity
Given the illiquidity of the current portfolio, the level of dividend declared
above is set at a level such that the Company retains sufficient cash to
ensure it can continue to operate for the foreseeable future, and yet remain
VCT qualifying. Some portfolio companies will require further financing, and
as always, these will be considered on a case by case basis.
VCT qualifying status
The Board has procedures in place to ensure that the Company continues to
comply with the conditions laid down by HMRC for maintaining approval as a
VCT.
Presentation of half-yearly report
In order to reduce the length of this report, we have omitted details of the
Company's objectives and investment strategy, its Advisers and Registrar and
how to buy and sell shares in the Company. These details are all included in
the Annual Reports, which together with previous half-yearly reports, are
available for viewing on the Oxford Technology website.
Outlook
Your Directors continue to monitor changes to VCT legislation, and their
potential impact on both the VCT and its investee companies. The recent
publication of the Patient Capital Review makes many recommendations regarding
investment into early stage high growth companies. It is expected that this
may drive additional changes to tax efficient investment schemes. Your
Directors do not expect that this will have any material impact on the current
portfolios or on current investors as the VCT is fully invested. Likewise,
whilst the impact of Brexit remains unclear, your Directors do not expect its
eventual outcome to have a material impact on portfolio valuations.
In July, the Board announced that it was aware that due to recent
realisations, the VCT is becoming sub economic with unavoidable overheads on a
small asset base. The VCT has limited ability to increase the asset base on
its own, and a number of options to deal with this are under consideration. I
can confirm that discussions continue regarding these options, and am hopeful
that we can make a further announcement in the not too distant future. Once
a proposal that the Board considers to be in the best interests of existing
shareholders is sufficiently advanced, shareholders will be invited to
approve any new arrangements. However, there can be no certainty that any of
these discussions will lead to a concrete proposal, either at this time or in
the future.
The Directors' view remains that the portfolio, while concentrated, still
holds significant potential over the medium term but is not without risk. The
ongoing strategy is to seek to crystallise value from the portfolio and
distribute cash to shareholders when the opportunity arises.
Finally I would like to take this opportunity to thank shareholders, many of
whom we were able to welcome to our AGM in July, for their continued support.
Richard Roth
Chairman
20 October 2017
Investment Portfolio as at 31 August 2017
Company Description Net Cost of investment £'000 Carrying value at 31/8/17 £'000 Change in value for the 6 month period £'000 % Equity held OT2 % Equity held All OT % of fund investment value
Select Technology Photocopier interfaces 132 346 5 7.4 58.6 34.1
ImmBio Novel vaccines 255 189 127 2.0 16.2 18.7
Plasma Antennas Solid state antennas 188 142 13 5.6 48.9 14.0
Arecor Protein stabilisation 89 121 - 1.2 11.3 11.9
Orthogem Bone graft material 342 100 - 5.4 20.2 9.9
Insense Active would healing dressings 204 52 - 2.0 6.8 5.1
Inaplex Data transformation software 138 37 - 21.5 34.8 3.6
Oxis Energy Rechargeable batteries 540 27 - 0.2 0.5 2.7
Total Investments 1,889 1,014 145 100%
Other Net Assets 1,626
Net Assets 2,640
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 "Interim Financial Reporting" issued by the Financial Reporting
Council;
* 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.
* 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:
Richard Roth
Chairman
20 October 2017
Income Statement
Six months to 31 Aug 2017 Six months to 31 Aug 2016 Year to 28 February 2017
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gain on disposal of fixed asset investments - 33 33 - - - - - -
Unrealised gain on valuation of fixed asset investments - 115 115 - 20 20 - 653 653
Investment income - - - - - - 27 - 27
Investment management fees (3) (9) (12) (2) (8) (10) (5) (14) (19)
Other expenses (24) - (24) (23) - (23) (45) - (45)
Return on ordinary activities before tax (27) 139 112 (25) 12 (13) (23) 639 616
Taxation on ordinary activities - - - - - - - - -
Return on ordinary activities after tax (27) 139 112 (25) 12 (13) (23) 639 616
Earnings per share - basic and diluted (0.4)p 2.1p 1.7p (0.4)p 0.2p (0.2)p (0.4)p 9.4p 9.0p
* 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 only one class of business and derives its income from
investments made in shares and securities and from bank and money market
funds.
The Company has no recognised gains or losses other than the results for the
period as set out above. Accordingly a Statement of Comprehensive Income is
not required.
Balance Sheet
As at 31 Aug 2017 As at 31 Aug 2016 As at 28 February 2017
£'000 £'000 £'000 £'000 £'000 £'000
Fixed asset investments (At fair value through profit and loss) 1,014 1,672 2,405
Current assets:
Debtors 227 14 2
Creditors: Amounts falling due within one year (18) (23) (25)
Cash at Bank 1,417 245 146
Net current assets 1,626 236 123
Creditors: Amount falling due in more than one year - (9) -
Net assets 2,640 1,899 2,528
Called up equity share capital 679 679 679
Share premium 376 376 376
Unrealised capital reserve (874) (398) 235
Profit and Loss account reserve 2,459 1,242 1,238
Total equity shareholders' funds 2,640 1,899 2,528
Net asset value per share 38.9p 28.0p 37.2p
Statement of Changes in Equity
Share Capital £'000 Share Premium £'000 Unrealised Capital Reserve £'000 Profit & Loss Reserve £'000 Total £'000
As at 1 March 2016 679 376 (418) 1,275 1,912
Revenue return on ordinary activities after tax - - - (25) (25)
Expenses charged to capital - - - (8) (8)
Current period gains on fair value of investments - - 20 - 20
Balance as at 31 August 2016 679 376 (398) 1,242 1,899
As at 1 March 2016 679 376 (418) 1,275 1,912
Revenue return on ordinary activities after tax - - - (23) (23)
Expenses charged to capital - - - (14) (14)
Current period gains on fair value of investments - - 653 - 653
Balance as at 28 February 2017 679 376 235 1,238 2,528
As at 1 March 2017 679 376 235 1,238 2,528
Revenue return on ordinary activities after tax - - - (27) (27)
Expenses charged to capital - - - (9) (9)
Current period gains on fair value of investments - - 115 - 115
Current period gains on disposal - - - 33 33
Prior years' gains now realised - - (1,224) 1,224 -
Balance as at 31 August 2017 679 376 (874) 2,459 2,640
Statement of Cash Flows
Six months to 31 Aug 2017 Six months to 31 Aug 2016 Year to 28 February 2017
£'000 £'000 £'000
Cash flows from operating activities
Return on ordinary activities before tax 112 (13) 616
Adjustments for:
(Increase)/Decrease in debtors (225) 7 19
Decrease in creditors (7) (12) (19)
Gain on disposal of fixed asset investments (33) - -
Gain on valuation of fixed asset investments (115) (20) (653)
Movement in investment debtors and creditors 213 - -
Outflow from operating activities (55) (38) (37)
Cash flows from investing activities
Purchase of fixed asset investments (30) (50) (150)
Sale of fixed asset investments 1,356 - -
Total cash flows from investing activities 1,326 (50) (150)
Cash flows from financing activities
Dividends paid - - -
Total cash flows from financing activities - - -
Increase/(decrease) in cash and cash equivalents 1,271 (88) (187)
Opening cash and cash equivalents 146 333 333
Closing cash and cash equivalents 1,417 245 146
Notes to the Half-Yearly Report
1. Basis of preparation
The unaudited half-yearly results which cover the six months to 31 August 2017
have been prepared in accordance with the Financial Reporting Council's (FRC)
Financial Reporting Standard 104 Interim Financial Reporting ('FRS 104') and
the Statement of Recommended Practice (SORP) for Investment Companies
re-issued by the Association of Investment Companies in November 2014. Details
of the accounting policies and valuation methodologies are included in the
Annual Report.
2. Publication of non-statutory accounts
The unaudited half-yearly results for the six months ended 31 August 2017 do
not constitute statutory accounts within the meaning of Section 415 of the
Companies Act 2006. The comparative figures for the year ended 28 February
2017 have been extracted from the audited financial statements for that year,
which have been delivered to the Registrar of Companies. The independent
auditor's report on those financial statements, in accordance with chapter 3,
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 calculation of earnings per share for the period is based on the return
attributable to shareholders divided by the weighted average number of shares
in issue during the period. There are no potentially dilutive capital
instruments in issue and, therefore, no diluted returns per share figures are
relevant.
4. Net asset value per share
The net asset value per share is based on the net assets at the period end
divided by the number of shares in issue at that date (6,792,923 in each
case).
5. Principal risks and uncertainties
The Company's assets consist of equity and fixed 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 Venture Capital Trust, investment and strategic,
regulatory, reputational, operational and financial risks. These risks, and
the way in which they are managed, are described in more detail in the
Company's Annual Report and Accounts for the year ended 28 February 2017. The
Company's principal risks and uncertainties have not changed materially since
the date of that report.
6. Related party transactions
OT2 Managers Ltd, a wholly owned subsidiary, provides investment management
services to the Company for a fee of 1% of net assets per annum.
7. Events after the Balance Sheet Date
On 6 September 2017, the Company bought back, and cancelled, 1,461,034 shares
at 31.5p (representing 21.5% of the issued share capital), under the Tender
Offer Circular dated 26 July 2017. The number of shares now in issue is
5,331,889 Ordinary Shares.
8. Copies of this statement are available from Oxford
Technology Management, The Magdalen Centre, Oxford Science Park, Oxford OX4
4GA and on the Company's website - www.oxfordtechnology.com/vct2.
Board Directors: Richard Roth, Alex Starling, Robin Goodfellow, and David
Livesley
Investment Manager: OT2 Managers Ltd with services contracted to Oxford
Technology Management Ltd
Website: www.oxfordtechnology.com/vct2
Enquiries:
Lucius Cary, Oxford Technology Management
01865 784466
This announcement is distributed by Nasdaq Corporate Solutions on behalf of
Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for
the content, accuracy and originality of the information contained therein.
Source: Oxford Technology 2 VCT plc via GlobenewswireRecent news on Oxford Technology 2 Venture Capital Trust
See all newsREG - Official List - Official List Notice
AnnouncementREG - Stock Exch Notice - Admission to Trading - 01/07/2022
AnnouncementREG - Oxford Tech 2 VCT - Price Monitoring Extension
AnnouncementREG-Oxford Technology 2 VCT plc : Result of AGM
AnnouncementREG-Oxford Technology 2 VCT plc : 1st Quarter Results
Announcement