TIDMOXH
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 Year Ended
31 August 2017 28 February 2017
Net Assets at Period End GBP2.64m GBP2.53m
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 GBP1,356k to OT2 with a
further GBP327k being held in escrow for 24 months against normal
business warranties and an estimated GBP98k 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 GBP125k in 2001 when the company was a
start-up, and then made additional investments over the years taking the
total investment to GBP311k by the date of the most recent annual
accounts to 28 February 2017, when it was valued at GBP1,535k. 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 GBP460k.
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 GBP30k 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 GBP100k.
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
Change
in
value
Net Cost for the
of 6 month
investment Carrying value at 31/8/17 period % Equity held % Equity held %
Company Description GBP'000 GBP'000 GBP'000 OT2 All OT of fund investment value
Select Photocopier
Technology interfaces 132 346 5 7.4 58.6 34.1
ImmBio Novel vaccines 255 189 127 2.0 16.2 18.7
Solid state
Plasma Antennas antennas 188 142 13 5.6 48.9 14.0
Protein
Arecor stabilisation 89 121 - 1.2 11.3 11.9
Bone graft
Orthogem material 342 100 - 5.4 20.2 9.9
Active would
healing
Insense dressings 204 52 - 2.0 6.8 5.1
Data
transformation
Inaplex software 138 37 - 21.5 34.8 3.6
Rechargeable
Oxis Energy 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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 As at 31 Aug As at 28 February
2017 2016 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Share Profit & Loss
Capital Premium Unrealised Capital Reserve Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Six months to 31 Aug Year to 28
31 Aug 2017 2016 February 2017
GBP'000 GBP'000 GBP'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 Globenewswire
http://www.oxfordtechnology.com
(END) Dow Jones Newswires
October 23, 2017 02:00 ET (06:00 GMT)
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