TIDMOTT
RNS
Oxford Technology 3 VCT Plc
Unaudited Half-Yearly Report
For the period 1 March 2020 to 31 August 2020
6 Months Ended Year Ended
31 August 2020 29 February 2020
-------------------------------- --------------- -----------------
Net Assets At Period End GBP3.37m GBP4.72m
-------------------------------- --------------- -----------------
Net Asset Value (NAV) Per Share 49.7p 69.6p
-------------------------------- --------------- -----------------
Cumulative Dividend Per Share 36.0p 36.0p
-------------------------------- --------------- -----------------
Total NAV Return Per Share 85.7p 105.6p
-------------------------------- --------------- -----------------
Share Price At Period End
(Mid-Market) 35.0p 55.0p
-------------------------------- --------------- -----------------
Earnings Per Share (19.9)p (19.9)p
-------------------------------- --------------- -----------------
Statement on behalf of the Board
I am pleased to present the unaudited results for the six month period
ended 31 August 2020. The period under review continues to be dominated
by the implications of the Covid-19 pandemic and the subsequent actions
of the UK government. Your Investment Adviser and the Directors have
continued to manage the VCT and its portfolio effectively together via
remote working during lockdown.
The six months to 31 August 2020 have been a volatile and uncertain
period for the economy and for businesses operating within this
environment. During this period, your Board has kept the impact of the
pandemic on your Company's investments closely under review as part of
our regular Board agenda.
On 19 May 2020, when we issued our annual report, we reviewed the
portfolio valuation since the year ended 29 February 2020 and this led
to us announce a reduction in the NAV per share from 69.6p to an
unaudited 56.6p. Since then, the pandemic along with the lockdown has
continued to impose great uncertainty for UK companies. However while
most of our overall technology portfolio has remained relatively stable,
Ixaris has faced strong headwinds from the continuing severe downturn in
the airline and travel sector.
Results and Dividend
The Company's net asset value (NAV) per ordinary share has decreased by
19.9p per share from 69.6p at 29 February 2020 to 49.7p per share as at
31 August 2020. Compared to 29 February 2020, operating costs reduced
the NAV per share by 0.8p during the period, with the remaining 19.1p
reduction being due to movements in the portfolio, the most significant
of which relate to Ixaris, and are explained in the Portfolio Review
section below.
As noted above, the NAV as at 31 August 2020 of 49.7p per ordinary share
is a reduction 6.9p since the mid-May update of 56.6p per share
primarily as result of longer than expected travel restrictions.
The Directors are not recommending the payment of a dividend at this
time.
Portfolio Review
The majority of the portfolio which contains 13 investments in total
(one of which is quoted on AIM) continues to develop. None have sought
funding from the VCT during this period, although Scancell Holdings Plc
("Scancell") did raise GBP15m in a round that was not VCT qualifying.
Ixaris still dominates the portfolio at over 50%. The company provides a
payment service to the international travel sector. It had been doing
very well and had accepted an offer for sale of more than GBP100m at the
end of 2019, (and which had the deal concluded would have enabled OT3
to pay the largest single dividend ever paid by a VCT). It has been
very badly affected by Covid-19 with sales falling by 95%, as air travel
collapsed. So the focus is now on survival. The company has made
widespread redundancies and pay cuts for those staff that remain. In
recent months, there has been some improvement as the holiday air travel
business has revived somewhat, but it has been a case of 3 steps forward,
2 steps backwards as restrictions on travel to different parts of the
world have come and gone and then come again. If Ixaris can survive, it
is likely to require some further investment and then the hope and
expectation is that it will again become valuable as the travel business
returns to normal. However the risks remain high.
Arecor now represents over 20% of the portfolio. It has published
excellent phase 1 clinical data for its ultra-rapid insulin. The trial
was only sized to demonstrate equivalence, which it did, and on average
the Arecor insulin delivered twice the early glucose lowering effect of
the fastest insulin on the market. The hope is that this will prove to
be fast enough to respond to glucose levels as they occur, instead of a
patient having to predict their insulin requirement. Arecor will be
continuing its clinical insulin programme and is expected to raise
further funds soon to progress this.
Scancell continues to develop its multiple technologies. The SCIB1 Phase
2 clinical trial programme will continue with further sites later this
year and the Modi-1 Phase1/2 trial is progressing for regulatory
submission with a planned study start in the UK in 1H21. In August,
Scancell announced it had been awarded a grant to develop its COVIDITY
Covid-19 vaccine based on its Immunobody platform into a Phase1 clinical
trial. In August, it also completed a fundraising to raise GBP15 million
at a price of 5.5p per share, and which included a significant new US
institutional investor (Redmile Group LLC). This funding will allow
planned trials to continue while partnering discussions are pursued. As
a result of all this news, the Scancell share price has seen much
volatility, both during the period to 31 August 2020 and later. Its
share price was 8p as at 31 August 2020 (on which these valuations are
based) and has subsequently doubled to 16p in early October.
The VCT sold GBP10k worth of Scancell shares prior to 31 August 2020,
another GBP30k during the middle of September 2020, and a further GBP20k
during October, thereby crystallising some of the gain on the VCT's
investment in Scancell and for liquidity purposes.
ImmBio - formally known as ImmunoBiology Ltd has licensed its
pneumococcal vaccine to China National Biotech Group. It has completed
certain parts of its technology transfer and is now seeking to start a
phase 2 study of the same vaccine. To do this it has been applying for
grants. It was turned down for several grants but has two more grant
applications pending. Coronavirus has again highlighted the importance
of vaccines to the world and in recent years pneumococcal disease has
claimed a similar number of deaths as Covid-19 in 2020. An existing
vaccine has reduced the death rate, but the existing vaccines only
protect against fewer than 20 of the 90 or so existing strains. As
ImmBio's ImmBioVax technology utilises heat shock proteins to activate
T-cell responses, it is hoped that it can be used to create vaccines for
a wide range of currently poorly served infectious diseases.
Select Technology distributes high quality document management software
via its global channel partners while adding significant further value
through its development team by providing integrations and bespoke
solutions. Sales have been significantly affected by Covid-19 with
sales from February to July, being about 50% down on the previous six
months. However, the greatest impact was in April and May: sales have
revived somewhat in the most recent months and the hope is that this
continues.
Insense is developing a treatment for fungal nail disease. Work is
continuing with formulation and stability testing. The hope is that a
clinical trial may start in late 2022, or possibly in 2023. It is not
anticipated that Covid-19 will have any significant impact on these
timescales.
Overall, as seen in the Income Statement, the net impact of valuation
changes across the portfolio during the first half of the 2020/2021 year
was a loss of GBP1,298k.
The Directors, along with the Investment Adviser, continue to take an
active interest in the 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 Adviser to be able to provide
support when such approaches occur is essential for maximising value.
VCT qualifying status
As I have previously flagged, the small size of the VCT means
significant focus is required to ensure we retain sufficient working
capital to manage the Company whilst meeting all the conditions laid
down by HMRC for maintaining approval as a VCT. The Board has procedures
in place to ensure that the Company continues to comply with these
conditions, in particular the new 80% qualifying holding limit which has
been in place since 1 March 2020. As noted earlier the top slicing of
Scancell will assist working capital management.
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
Nothing has changed in our plans for your Company. We continue to
believe your VCT is an appropriate structure to hold your Company's
investments, but it would be preferable to have a larger asset base to
share the operating costs. I have reported previously of our efforts to
seek prospective parties who are potentially interested in entering the
VCT industry. This initiative is currently on hold whilst any such
possible organisations are entirely focussed on more immediate actions
within their own businesses as a result of the Covid-19 pandemic. We
have always made clear that there is no certainty such a route can be
achieved, but the Directors will continue seeking such opportunities
when the future outlook has become clearer. Directors are also
revisiting the economics of a merger with some or all of the other
Oxford Technology VCTs. Such a transaction is not without risk and it is
by no means clear that it would be in your Company's best interests to
participate. We will update shareholders if and when these discussions
reach a conclusion, and in any event, shareholder approval will be
required before any transaction could proceed.
Apart from the change to investment qualifying levels, there have been
no recent changes to VCT legislation, or their potential impact on both
the VCT and its investee companies. It is still too early to fully
assess the impact of Covid-19, and the resulting government
interventions. Whilst the impact of Brexit remains unclear, your
Directors do not expect its eventual outcome to have a material impact
on portfolio valuations.
Your Board and Investment Adviser continue to work so as to best
position your VCT such that, when valuations and liquidity allow,
holdings can be exited and proceeds distributed to shareholders, whilst
keeping a keen eye on maintaining costs as low as possible in the
interim.
Finally, I would like to take this opportunity to thank shareholders for
their continued support. We were delighted a significant number of you
managed to attend our zoom AGM, and we will consider the merits of
future online forums in due course which allow a greater number of
shareholders to attend. We hope our shareholders have not been too
personally affected by the difficulties this year and look forward to a
return to an 'old normal' as soon as possible.
Robin Goodfellow
Chairman
8 October 2020
Investment Portfolio as at 31 August 2020
Carrying Change in value
Net Cost value at for the % Equity % Equity
of investment 31/08/20 6 month period held held All % Net
Company Description GBP'000 GBP'000 GBP'000 OT3 OTVCTs assets
---------------- --------------------- -------------- --------- --------------- -------- --------- -------
Ixaris Group
Holdings Internet payments 535 1,849 (1,233) 6.2 6.2 54.9
---------------- --------------------- -------------- --------- --------------- -------- --------- -------
Arecor Protein stabilisation 443 712 - 3.1 10.5 21.1
---------------- --------------------- -------------- --------- --------------- -------- --------- -------
Antibody based
Scancell cancer therapeutics 399 401 72 0.8 2.0 11.9
---------------- --------------------- -------------- --------- --------------- -------- --------- -------
ImmBio Novel vaccines 483 148 (100) 6.5 22.6 4.4
---------------- --------------------- -------------- --------- --------------- -------- --------- -------
Specialist
Select -- STL Photocopier
Management Ltd interfaces 47 108 (48) 2.8 58.6 3.2
---------------- --------------------- -------------- --------- --------------- -------- --------- -------
Wound healing
Insense dressings 333 60 - 2.3 6.8 1.8
---------------- --------------------- -------------- --------- --------------- -------- --------- -------
Invro Low power electronics 40 10 - 33.1 33.1 0.3
---------------- --------------------- -------------- --------- --------------- -------- --------- -------
Solid state
directional
Plasma Antennas antennas 358 4 1 12.4 48.8 0.1
---------------- --------------------- -------------- --------- --------------- -------- --------- -------
Data integration
Inaplex software 58 1 - 13.3 34.8 -
---------------- --------------------- -------------- --------- --------------- -------- --------- -------
Metal Production of
Nanopowders metal powders 153 - - 20.0 36.7 -
---------------- --------------------- -------------- --------- --------------- -------- --------- -------
Superhard Production of
Materials hard materials 11 - - 21.8 40.0 -
---------------- --------------------- -------------- --------- --------------- -------- --------- -------
Microarray Insense spinout 2 - - 0.2 0.2 -
---------------- --------------------- -------------- --------- --------------- -------- --------- -------
Total Investments 2,862 3,294 (1,308) 97.7
--------------------------------------- -------------- --------- --------------- -------- --------- -------
Other Net Assets 78 2.3
--------------------------------------- -------------- --------- --------------- -------- --------- -------
Net Assets 3,372 100.0
--------------------------------------- -------------- --------- --------------- -------- --------- -------
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.
-- The assets of the Company include cash and shares in an AIM quoted
company which is quite liquid and readily accessible. After reviewing the
forecast for the Company, the Directors have a reasonable expectation
that the Company has adequate resources to continue in operational
existence for the foreseeable future. The Company therefore continues to
adopt the going concern basis in preparing the half year accounts.
On behalf of the Board:
Robin Goodfellow
Chairman
8 October 2020
Income Statement
Six months to 31 Aug 2020 Six months to 31 Aug 2019 Year to 29 Feb 2020
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 - 2 2 - - - - (239) (239)
Unrealised (loss)/gain on valuation of fixed asset
investments - (1300) (1300) - 620 620 - (997) (997)
Investment income - - - - - - 1 - 1
Investment management fees (24) - (24) (7) (23) (30) (61) - (61)
Other expenses (28) - (28) (26) - (26) (54) - (54)
--------------------------------------------------- ------------- ------------- -------------
Return on ordinary activities before tax (52) (1298) (1350) (33) 597 564 (114) (1,236) (1,350)
Taxation on ordinary activities - - - - - - - - -
--------------------------------------------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
Return on ordinary activities after tax (52) (1298) (1350) (33) 597 564 (114) (1,236) (1,350)
--------------------------------------------------- ------------- ------------- ------------- ------------- -------------
Earnings per share -- basic and diluted (0.8)p (19.1)p (19.9)p (0.5)p 8.8p 8.3p (1.7)p (18.2)p (19.9)p
--------------------------------------------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
There was no other Comprehensive Income recognised during the year.
The 'Total' column of the Income Statement is the Profit and Loss
Account of the Company, the supplementary Revenue and Capital return
columns have been prepared under guidance published by the Association
of Investment Companies.
All Revenue and Capital items in the above statement derive from
continuing operations.
The Company has only one class of business and derives its income from
investments made in shares and securities and from bank and money market
funds.
Balance Sheet
As at 31 Aug As at 31 Aug As at 29 Feb
2020 2019 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ------- ------- --------
Fixed asset investments at
fair value 3,294 6,457 4,601
Debtors 13 18 21
Cash at Bank 74 167 121
Creditors: falling due within
one year (9) (6) (21)
Net current assets 78 179 121
Net assets 3,372 6,636 4,722
------------------------------ ------- ------- ------- ------- ------- --------
Called up share capital 679 679 679
Share premium reserve 718 718 718
Unrealised capital reserve 432 3,269 1,730
Profit and Loss account 1,543 1,970 1,595
Total equity shareholders'
funds 3,372 6,636 4,722
Net asset value per share 49.7p 97.8p 69.6p
------------------------------ ------- ------- ------- ------- ------- --------
Statement of Changes in Equity
Profit &
Unrealised Loss
Share Capital Share Premium Capital Reserve Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------- ------------- ---------------- -------- --------
As at 1
March 2019 679 718 2,649 2,026 6,072
Revenue
return on
ordinary
activities
after tax - - - (56) (56)
Current
period
gains on
fair value
of
investments - - 620 - 620
Balance as
at 31
August
2019 679 718 3,269 2,342 6,636
------------ ------------- ------------- ---------------- -------- --------
As at 1
March 2019 679 718 2,649 2,026 6,072
Revenue
return on
ordinary
activities
after tax - - - (114) (114)
Current
period loss
on
disposal - - - (239) (239)
Current
period
losses on
fair value
of
investments - - (997) - (997)
Prior period
unrealised
losses now
realised - - 78 (78) -
Balance as
at 29
February
2020 679 718 1,730 1,595 4,722
------------ ------------- ------------- ---------------- -------- --------
As at 1
March 2020 679 718 1,730 1,595 4,722
Revenue
return on
ordinary
activities
after tax - - - (52) (52)
Current
period
gains on
disposal - - - 2 2
Current
period
losses on
fair value
of
investments - - (1,300) - (1,300)
Prior years'
unrealised
losses now
realised - - 2 (2) -
Balance as
at 31
August
2020 679 718 431 1,543 3,372
------------ ------------- ------------- ---------------- -------- --------
Statement of Cash Flows
Six months to 31 Six months to 31 Year to 29 Feb
Aug 2020 Aug 2019 2020
GBP'000 GBP'000 GBP'000
-------------------------- ---------------- ---------------- --------------
Cash flows from
operating
activities
Return on ordinary
activities before
tax (1,350) 564 (1,350)
Adjustments for:
(Gain)/loss on disposal of
fixed asset investments (2) - 239
Loss/(gain) on
valuation of fixed
asset investments 1,300 (620) 997
(Decrease)/increase
in creditors (12) (6) 9
Decrease/(increase)
in debtors 7 (16) (19)
Outflow from operating
activities (57) (78) (124)
-------------------------- ---------------- ---------------- --------------
Cash flows from investing
activities
Purchase of fixed asset
investments - (21) (21)
Sale of fixed asset
investments 10 - -
-------------------------- ---------------- ---------------- --------------
Inflow/(outflow) from
investing activities 10 (21) (21)
Cash flows from financing
activities - - -
Total cash flows from
financing activities - - -
-------------------------- ---------------- ---------------- --------------
Decrease in cash and cash
equivalents (47) (99) (145)
Opening cash and cash
equivalents 121 266 266
-------------------------- ---------------- ---------------- --------------
Closing cash and cash
equivalents 74 167 121
-------------------------- ---------------- ---------------- --------------
Notes to the Half-Yearly Report
1. Basis of preparation
The unaudited half-yearly results which cover the six months to 31
August 2020 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
2020 do not constitute statutory accounts within the meaning of Section
415 of the Companies Act 2006. The comparative figures for the year
ended 29 February 2020 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 (6,785,233 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 29 February 2020. The Company's principal risks and uncertainties
have not changed materially since the date of that report.
6. Related party transactions
OT3 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 14 September 2020, following the period end, the Company sold 202,027
Scancell shares at a price of 15.0p following the sharp share price rise
on AIM surrounding news about the novel DNA vaccine against Covid-19
being worked on by Scancell. On 2 October 2020 the Company sold a
further 101,016 Scancell shares at a price of 20.0p. The bid price used
for valuation at the period end was 8.0p.
8. Copies of this statement are available from Oxford Technology
Management, Magdalen Centre, Oxford Science Park, Oxford OX4 4GA and on
the Company's website.
Board Directors: Robin Goodfellow, Richard Roth, Alex Starling and David
Livesley
Investment Manager: OT3 Managers Ltd with services contracted to Oxford
Technology Management Ltd
Website: www.oxfordtechnology.comvct/vct3.html
The information above is deemed by the Company to constitute inside
information as stipulated under the Market Abuse Regulations (EU No.
596/2014). Upon the publication of this announcement via a Regulatory
Information Service this inside information is now considered to be in
the public domain.
Enquiries -- Lucius Cary
Oxford Technology Management
01865 784466
(END) Dow Jones Newswires
October 09, 2020 02:00 ET (06:00 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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