TIDMOXH
RNS
Oxford Technology 2 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 GBP1.29m GBP1.48m
-------------------------------- --------------- -----------------
Net Asset Value (NAV) Per Share 24.3p 27.8p
-------------------------------- --------------- -----------------
Cumulative Dividend Per Share 22.5p 22.5p
-------------------------------- --------------- -----------------
Total Nav Return Per Share 46.8p 50.3p
-------------------------------- --------------- -----------------
Share Price At Period End (Mid) 20.0p 22.5p
-------------------------------- --------------- -----------------
Earnings Per Share (3.5)p (2.1)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 27.8p to an
unaudited 25.0p. Since then, the pandemic along with the lockdown has
continued to impose great uncertainty for UK companies. However our
overall portfolio has remained relatively stable as the technology
sector has been less severely impacted than others.
Results and Dividend
The Company's net asset value (NAV) per share has decreased by 3.5p per
share from 27.8p at 29 February 2020 to 24.3p per share as at 31 August
2020. Compared to 29 February 2020, operating costs reduced the NAV per
share by 0.7p during the period, with the remaining 2.8p reduction being
due to movements in the portfolio, the most significant of which relate
to Select Technology and ImmBio,and are explained in the Portfolio
Review section below.
As noted above, the NAV as at 31 August 2020 of 24.3p per share is a
reduction 0.7p since the mid-May update of 25.0p per share.
The Directors are not recommending the payment of a dividend at this
time.
Portfolio Review
The majority of the portfolio which contains 8 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.
Arecor now represents nearly 40% 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 next 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.
Select Technology represents just over a quarter of the value of the
portfolio investments. Select 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.
ImmBio - formally known as ImmunoBiology Ltd has licensed its
pneumococcal vaccine to China National Biotech Group. It has completed
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 rejected for several grants but has two more 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.
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. It's
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 other two investments still with potential (both valued at GBP52k)
are Oxis Energy and Insense. Oxis continues with the development of its
battery manufacturing capabilities. In May, it signed a lease on a
manufacturing plant in Brazil which is scheduled to come online in 2023.
The factory will require an investment of $50m and be capable of
producing 5 million Lithium Sulphur cells a year. Whilst our holding has
been significantly diluted, Oxis still offers upside potential, although
it may still be several years before it is realised. Insense is
developing a treatment for fungal nail disease. Work is continuing with
formulation and stability testing, in preparation for a clinical trial
in late 2022, or possibly in 2023. Ultimate realisation is therefore
likely to be protracted.
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 GBP152k.
The Directors, along with the Investment Adviser, continue to take an
active interest in the companies within the portfolio, supporting
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.
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.
Cost Control
As we have previously reported, your Board continues to look at methods
of improving operational efficiency, reducing costs and, more generally,
putting in place appropriate plans to ensure that your VCT's operational
costs relative to its overall size remain within acceptable limits. Our
investment management fees, Directors' fees and auditors' remuneration
are amongst the lowest in the VCT industry. The largest remaining
elements of cost are the LSE listing fee at almost GBP10k and the FCA
fee of GBP6k per annum. The LSE has just proposed a 60% increase in its
fees for the coming year, which your Directors believe is unacceptable.
We have reopened our dialogue with the LSE and will continue to fight
for appropriate fees to be levied.
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 as we have indicated for some time, 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. Furthermore, whatever the outcome of the discussions with the
LSE, the seemingly relentless upward trajectory of these regulatory
costs has resulted in your Directors revisiting the economics of a
merger with some or all 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 in such a
transaction. We will update shareholders if and when these discussions
reach a conclusion, and in any event, shareholder approval would then 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 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.
Richard Roth
Chairman
8 October 2020
Investment Portfolio as at 31 August 2020
Carrying
Net Cost value at Change in value % Equity
of investment 31/08/20 for the 6 month % Equity held All %
Company Description GBP'000 GBP'000 period GBP'000 held OT2 OTVCTs Net Assets
---------------- ------------------------ -------------- --------- ---------------- --------- --------- -----------
Arecor Protein stabilisation 252 420 - 1.8 10.5 32.4
---------------- ------------------------ -------------- --------- ---------------- --------- --------- -----------
Select -- Specialist
STL Management photocopier interfaces 132 286 (126) 7.4 58.6 22.1
---------------- ------------------------ -------------- --------- ---------------- --------- --------- -----------
ImmBio Novel vaccines 295 110 (75) 3.1 22.6 8.5
---------------- ------------------------ -------------- --------- ---------------- --------- --------- -----------
Scancell (bid Antibody based
price 8.0p) cancer therapeutics 150 100 20 0.2 2.1 7.7
---------------- ------------------------ -------------- --------- ---------------- --------- --------- -----------
Wound healing
Insense dressings 204 52 - 2.0 6.8 4.0
---------------- ------------------------ -------------- --------- ---------------- --------- --------- -----------
Oxis Energy Battery technology 540 52 27 0.1 0.3 4.0
---------------- ------------------------ -------------- --------- ---------------- --------- --------- -----------
Solid state directional
Plasma Antennas antennas 188 40 2 5.6 48.8 3.1
---------------- ------------------------ -------------- --------- ---------------- --------- --------- -----------
Data integration
Inaplex software 138 2 - 21.5 34.8 0.2
---------------- ------------------------ -------------- --------- ---------------- --------- --------- -----------
Total Investments 1,899 1,062 (152) 82.0
------------------------------------------ -------------- --------- ---------------- --------- --------- -----------
Other Net
Assets 233 18.0
------------------------------------------ -------------- --------- ---------------- --------- --------- -----------
Net Assets 1,295 100.0
------------------------------------------ -------------- --------- ---------------- --------- --------- -----------
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 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:
Richard Roth
Chairman
8 October 2020
Income Statement
Six months to 31 Aug 2020 Six months to 31 Aug 2019 Year to 29 February 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 - - - - 159 159 - (10) (10)
Unrealised
loss on
valuation
of fixed
asset
investments - (152) (152) - (53) (53) - (36) (36)
Investment
income - - - - - - 4 - 4
Investment
management
fees (8) - (8) (2) (6) (8) (17) - (17)
Other
expenses (28) - (28) (25) - (25) (51) - (51)
Return on
ordinary
activities
before tax (36) (152) (188) (27) 100 73 (64) 46 (110)
Taxation on
ordinary
activities - - - - - - - - -
------------ ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
Return on
ordinary
activities
after tax (36) (152) (188) (27) 100 73 (64) 46 (110)
------------ ------------- ------------- ------------- ------------- -------------
Earnings per
share --
basic and
diluted (0.6)p (2.9)p (3.5)p (0.5)p 1.9p 1.4p (1.2)p (0.9)p (2.1)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 2020 As at 31 Aug 2019 As at 29 Feb 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Fixed asset investments at
fair value 1,062 1,346 1,214
Debtors 20 18 10
Cash at Bank 222 388 270
Creditors: amounts falling
due within one year (9) (6) (11)
Net current assets 233 400 269
-------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Net assets 1,295 1,746 1,483
-------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Called up share capital 533 533 533
Capital redemption reserve 146 146 146
Share premium reserve 376 376 376
Unrealised capital reserve (838) (934) (686)
Profit and Loss account 1,078 1,625 1,114
Total equity shareholders'
funds 1,295 1,746 1,483
-------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value per share 24.3p 32.8p 27.8p
-------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Statement of Changes in Equity
Capital Unrealised Profit
Redemption Share Capital & Loss
Share Capital Reserve Premium Reserve Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ------------- ----------- -------- ---------- -------- --------
As at 1 March 2019 533 146 376 (881) 1,499 1,673
Revenue return on ordinary activities
after tax - - - - (33) (33)
Current period gains on disposal - - - - 159 159
Current period losses on fair
value of investments - - - (53) - (53)
-------------------------------------- --------
Balance as at 31 August 2019 533 146 376 (934) 1,625 1,746
-------------------------------------- --------
As at 1 March 2019 533 146 376 (881) 1,499 1,673
Revenue return on ordinary activities
after tax - - - - (64) (64)
Current period losses on disposal - - - - (10) (10)
Current period losses on fair
value of investments - - - (36) - (36)
Prior years losses now realised - - - 231 (231) -
Dividends paid - - - - (80) (80)
Balance as at 29 February 2020 533 146 376 (686) 1,114 1,483
-------------------------------------- ------------- ----------- -------- ---------- -------- --------
As at 1 March 2020 533 146 376 (686) 1,114 1,483
Revenue return on ordinary activities
after tax - - - - (36) (36)
Current period losses on fair
value of investment - - - (152) - (152)
Balance as at 31 August 2020 533 146 376 (838) 1,078 1,295
-------------------------------------- ------------- ----------- -------- ---------- -------- --------
Statement of Cash Flows
Six months to
Six months to 31 Aug Year to 29 Feb
31 Aug 2020 2019 2020
GBP'000 GBP'000 GBP'000
----------------------------------------- ------------- ------------- ----------------------------------------------------
Cash flows from operating
activities
Return on ordinary activities
before tax (188) 72 (110)
Adjustments for:
(Gain)/Loss on disposal of fixed
asset investments - (159) 10
Losses on valuation of fixed asset
investments 152 53 36
Decrease in creditors (2) (5) (1)
(Increase)/Decrease in debtors (10) 150 158
Movement in investment debtors
and creditors - (164) (164)
----------------------------------------- ------------- ------------- ----------------------------------------------------
Outflow from operating activities (48) (53) (71)
----------------------------------------- ------------- ------------- ----------------------------------------------------
Cash flows from investing activities
Purchase of fixed asset investments - (8) (28)
Sale of fixed asset investments - 323 323
----------------------------------------- ------------- ------------- ----------------------------------------------------
Inflow from investing activities - 315 295
----------------------------------------- ------------- ------------- ----------------------------------------------------
Cash flows from financing activities
Dividends paid - - (80)
Total cash flows from financing
activities - - (80)
----------------------------------------- ------------- ------------- ----------------------------------------------------
(Decrease)/increase in cash and
cash equivalents (48) 262 144
----------------------------------------- ------------- ------------- ----------------------------------------------------
Opening cash and cash equivalents 270 126 126
Closing cash and cash equivalents 222 388 270
----------------------------------------- ------------- ------------- ----------------------------------------------------
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 (5,331,889 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
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. 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: Richard Roth, Alex Starling, Robin Goodfellow and David
Livesley
Investment Manager: OT2 Managers Ltd with services contracted to Oxford
Technology Management Ltd
Website: www.oxfordtechnologyvct.com/vct2.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)
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