Octopus AIM VCT PLC : Half-yearly report

Octopus AIM VCT PLC : Half-yearly report

Octopus AIM VCT plc
Half-Yearly Results

14 October 2013

Octopus AIM VCT plc, managed by Octopus Investments Limited, today announces the Half-Yearly results for the six months ended 31 August 2013.

These results were approved by the Board of Directors on 14 October 2013.

You may shortly view the Half-Yearly Report in full at www.octopusinvestments.com

About Octopus AIM VCT PLC

Octopus AIM VCT plc (the 'Company' or 'Fund') is a venture capital trust ('VCT') which aims to provide shareholders with attractive tax-free dividends and long-term capital growth through investing in AIM.

The investment manager is Octopus Investments Limited ('Octopus' or 'Manager'). The Company was launched as Close AIM VCT PLC in the spring of 1998 and raised £10.1 million from private investors through an issue of Ordinary shares.

Between October 2000 and March 2001 a further £20.0 million was raised through an issue of C shares. Furthermore, between 16 March 2004 and final closing on 5 April 2004 the Company raised £3.3 million by way of a D share issue.

The C shares were merged and converted into Ordinary shares on 31 May 2004, with C shareholders receiving 1.0765 Ordinary shares for each C share held.

A further £15.0 million was raised between 6 January 2005 and 8 April 2005 through an issue of New D shares.

On 31 May 2008, the Ordinary shares converted into D shares at a conversion ratio of 0.5448 D shares for each Ordinary share. The two classes of shares were combined and renamed Ordinary shares which is now the only class of share capital.

On 11 August 2010 the Company acquired the net assets of Octopus Phoenix VCT plc ("the merger"), with previous shareholders of Phoenix obtaining 0.42972672 shares in Octopus AIM VCT plc for every 1 Phoenix share held.

In addition to the merger, on the same date the Company announced a fundraising to raise up to £10 million.  The Offer was fully subscribed and closed on 19 April 2011.

In the six months to 31 August 2012, the Company raised a further £2.6 million by way of a Top-Up offer for subscription for Ordinary shares.

In the six months to 31 August 2013, the Company raised a further £5.6 million by way of an open offer for subscription for Ordinary shares. Since 31 August 2013, the Company has raised a further £2.1 million

Financial Summary

Six months to 31 August 2013Six months to 31 August 2012Year to
28 February 2013
Net assets (£'000s)53,59041,39144,123
Net (loss)/profit after tax (£'000s)6,6301,1555,471
Net asset value per share ("NAV")104.4p86.9p93.7p

An interim dividend of 2.5p will be paid on 16 January 2014 to shareholders on the register on 20 December 2013.

Chairman's Statement

The better market conditions which I commented on in the annual report for the year to February this year have continued over the summer months, and shareholders have been rewarded with a rise in the Net Asset Value and an increase of 12.6% in the market value of the company's shares in the six months to 31st August 2013.  This reflects a continuing increase in the value of the investment portfolio, a less cautious investor attitude to stockmarkets and a generally increased tolerance of risk which has resulted in smaller company shares outperforming their larger brethren as investors have sought out growth.  

The flow of investment opportunities has been steady rather than overwhelming in the six month period, although there has been an increase in the number of new issues which have come to the market, with momentum expected to build over the next six months if anecdotal chatter around the market is borne out.  Of the four new qualifying investments made in the period, two were in new issues, the third was in a private company and the fourth was in an existing AIM company. The fact that so many flotations from 2012 have landed positively has been encouraging for potential new candidates and their advisers and points to an AIM market which is still firmly open as a source of funding for small and growing companies.

Performance
Against the background of a steadily improving environment for smaller company shares, the NAV of the fund rose in the first six months of the financial year, by 14.1% if the 2.5p dividend paid to shareholders in July is added back. At the end of the period the fair value of the Company's investments was 53% more than the book cost. The FTSE Smaller Companies Index (ex Investment Trusts) rose by 17.1% in the six month period although the AIM Index only rose by 1.5%, held back by resource stocks and its higher exposure to very small companies whose share prices are typically the last to move in a rising market.

The good performance of the NAV was partly a result of a general re-rating of smaller companies but was also a reflection of encouraging newsflow from individual investee companies and some very positive contributions from some of the more recent investments made in the past two years. In particular, Mycelx, the water treatment Group, announced results showing strong growth, new contract momentum and a move into monthly profitability and was rewarded by a leap in the value of its shares. WANDisco, a software company which floated on AIM a year ago was once again a very good performer in the period as the market became excited by the 'Big Data' opportunity for its technology.  Among the more recent investments Quixant was also a significant contributor.

Some of the larger holdings in the portfolio also performed very well, helped by positive news about the growth of their businesses.  Advanced Computer Software and Breedon Aggregates both made well received acquisitions which helped their share prices and Staffline shares were re-rated as investors began to appreciate how well the Group was trading. Judges Scientific, Futura Medical, Netcall, Tasty, TLA, Plastics Capital, Adept Telecom and Mattioli Woods all performed well in the qualifying portfolio and Matchtech, Chime, RWS and SQS added value as non-qualifying holdings.

There have, inevitably been some holdings which suffered setbacks in the period.  In the software sector Brady and Idox both saw their shares react negatively to news that large contract wins had been delayed and saw their shares under short-term pressure after strong runs.  Craneware and Enteq are still suffering from delays in their growth plans caused by customer deferrals in orders.  

Portfolio Activity
£2.9m was invested in the six month period of which £2.4m was invested in four new VCT qualifying holdings.  The market in new issues has continued to improve, and it is no coincidence that these account for two of the four new investments.  Cambridge Cognition specializes in brain health diagnostics and has developed a new mobile test for Alzheimer's which can be easily used by doctors or trained nurses in surgery.  It has raised funds to open up this new market to add to its already established niche position providing tests to the research market. Quixant manufactures a specialist computer which sits inside gaming slot machines and enables the machine to meet local regulations in different markets.  It also allows players to switch between games more quickly than existing technologies.  An investment was made in Nektan, a private company supplying mobile games to the large industry players which is looking to float in the next six months. Another investment was made to support a further fundraising for an existing AIM company, Clean Air Power.  It has software technology to enable heavy duty trucks to switch between diesel and LPG to meet tightening emission standards.  In the non-qualifying portfolio holdings were added in Plus 500, a new issue, as well as EMIS, a software provider for medical practices.  We bought some more GB Group to add to the qualifying holding.

£2.1m was received from disposals in the period. Takeovers were once again on the agenda and as a result we lost our holdings in Active Risk Group and in Datong, both of which received a cash bid. Neither had succeeded as standalone public companies, remaining too small to justify the expense of a public listing.  As well as realising losses on these holdings, the Company also disposed of some of its other small holdings such as Daisy, Jelf, Corero and Inditherm.  The holding in Marwyn Management was also sold after it ceased to qualify.  The holding in Hasgrove was reduced in size after we accepted a tender offer by the company for the majority of our shares, and the company has now de-listed from AIM although it still has cash and a profitable business.  Twenty, another de-listed holding was wound up in the period, returning 1.05p a share.  The shares had been valued at 0 since they de-listed.  On a more positive note, we took some profits in WANDisco, Mycelx and Chime as well as disposing of the entire non-qualifying holding in Augean at a profit.

At the end of the period 81.6% of the portfolio was invested in qualifying holdings, comfortably above the HM Revenue and Customs requirement of 70% and your Company had liquid funds of £9.8m.

Risks and Uncertainties
The principle risks and uncertainties are set out in Note 6 to the Half Yearly Report on page x.

Dividend
Your Board is very conscious of the importance of dividends to shareholders. It aims to maintain an annual dividend of at least 5p per share which at the current market price of the Company's shares gives an attractive tax free yield of approximately 5.0%.  A dividend of 2.5p per share was paid to shareholders in July.

Your Board has approved the payment of an interim dividend of 2.5p per share which will be paid to shareholders on 16 January 2014 who are on the register on 20 December 2013.

Share issued and purchased
In February your Company issued a prospectus to raise up to £10 million by the issue of new shares.  This had raised a total of £7.7m at the date of this report and remains open until the end of January 2014 for all shareholders wishing to subscribe, unless fully subscribed earlier.

During the period, in furtherance of the board's policy to maintain the discount at which the Company's shares stand in the market of not more than 10%, 861,948 shares were purchased.

Outlook
It is encouraging that the good news which has been emanating from the majority of the portfolio's holdings has at last begun to impact on share prices and the NAV which has continued to appreciate since the period end and now stands at 107.9p. The news that AIM  shares are now eligible for inclusion in an ISA has helped to focus attention back onto smaller companies and the benefits that can be derived from investing in them. This should also help to provide welcome capital to small and growing businesses and benefit the Company by expanding the pool of qualifying companies seeking investment.

Many of the Companies in which we have invested have now grown to a substantial size, with 80% of the holdings by value being forecast to make average profits in excess of £8.0m. As these holdings mature they are being supplemented by newer, earlier stage investments funded by profit taking and the proceeds from new share issues.  Many investee companies have continued to make good progress and we are optimistic that this can translate into further share price gains as their profits grow.  The pick-up in new issue activity should also provide attractive opportunities to invest additional capital raised.

Michael Reeve
14 October 2013

Investment Portfolio

Investment portfolio as at 31 August 2013:

Quoted equity investmentsSectorBook cost as at 31 August 2013 (£'000)Movement in valuation as at 31 August 2013 (£'000)Fair value as at 31 August 2013 (£'000)Movement in the 6 months to 31 August 2013 (£'000)% equity held by AIM VCT% equity held by all funds managed by Octopus
Advanced Comp Software PlcSoftware 5771,8462,422(138)0.7%3.3%
MyCelx Technologies plcEquities8701,3262,1961,2073.2%7.4%
Breedon Aggregates LimitedConstruction 9021,2392,1414130.8%1.3%
Brooks MacDonald Group PlcFinance7461,2602,006231.2%2.8%
Staffline Recruitment PlcSupport Services3371,6481,9857181.5%11.5%
WANdisco PlcSoftware 2671,2881,5553510.7%2.6%
Idox Plc Software 3531,1361,490(856)1.3%4.2%
Netcall plc Telecommunication4371,0401,4771782.9%5.1%
Escher Group Holdings plcSoftware 1,0034711,473883.2%5.5%
EKF Diagnostics PlcHealthcare 9315371,46802.0%5.8%
Quixant plcTechnology 7187331,4527332.4%6.2%
Vertu Motors PlcGeneral Retailers1,2651221,3873330.8%5.6%
Tasty Plc Leisure 3699041,2735072.6%4.9%
Mattioli Woods PlcFinance5237211,2442652.0%3.2%
Matchtech Group Plc Support Services3467541,1013761.1%11.1%
TLA Worldwide plcMedia 8072821,0892024.6%11.4%
GB Group plcSupport Services4935571,0501530.9%2.0%
RWS Holdings PlcSupport Services3676169841960.3%3.9%
Animalcare Group PlcFood 3045868901482.6%8.1%
Judges Scientific PlcElectronics3005078072541.0%1.6%
Cello Group Plc Media 895(120)7752791.5%7.1%
Futura Medical Plc Pharmaceuticals 6139170351.4%4.3%
Brady plcSoftware569125693(212)1.2%2.0%
Clean Air Power LimitedIndustrial4851956801952.2%11.4%
DP Poland PlcLeisure 546127674(273)3.8%6.4%
Cambridge Cognition Group plcHealthcare60069669695.1%18.1%
Cohort PlcAerospace & Defence3003426421430.9%4.4%
Gooch & Housego PlcElectronics4891476361200.5%3.9%
Fusionex International plcSoftware2793296071620.4%1.4%
Omega Diagnostics PlcHealthcare53670606423.8%7.1%
Nektan LimitedSoftware600060003.0%10.4%
Active Risk Group PlcSoftware862(272)5913565.2%8.6%
Enteq Upstream PlcOil Services1,032(454)578(93)1.7%3.8%
Bond International Plc Software3542235771902.3%3.4%
Craneware Plc Software183362545(14)0.5%1.2%
Immunodiagnostic Systems PlcHealthcare52845321980.4%2.6%
Adept Telecom PlcTelecommunication 600(73)5272312.0%4.1%
Synectics PlcSupport Services3441835271380.6%1.0%
SQS Software PlcSoftware2912125041590.5%10.7%
Mears Group PlcSupport Services139354493430.1%0.1%
Sinclair Pharma Plc Pharmaceuticals & Biotech771(315)456280.4%1.2%
Plastics Capital Plc Engineering & Machinery40012412921.5%17.0%
Tangent Communications PlcSupport Services578(217)361(159)2.1%5.9%
Plus 500 LtdFinance28529314290.2%0.5%
Goals Soccer Centres PlcLeisure 20597302540.4%2.3%
Altitude Group Plc Media 600(308)29283.9%4.5%
Chime Communications PlcMedia 19484278570.1%0.4%
Corac PlcEngineering & Machinery348(99)249(75)0.8%1.7%
Access Intelligence PlcSoftware375(169)206(19)3.2%9.7%
Vianet Group PlcSupport Services359(160)199(83)1.1%4.6%
Woodspeen PlcSupport Services350(233)11705.4%11.3%
Hasgrove PlcMedia 88(9)79(18)1.7%10.2%
Work Group PlcSupport Services943(867)76184.2%6.3%
Tanfield Group PlcEngineering & Machinery226(155)71160.2%0.6%
In-Deed Online PlcSupport Services301(236)64(114)3.5%5.8%
SnackTime PlcSupport Services531(501)3072.1%7.4%
Dods Group PlcMedia 203(174)28(10)0.2%0.3%
Synarbor PlcSupport Services1572200.8%0.8%
28,93016,27345,2036,718
Fully realised investments still held as part of the portfolio480(480)--
Total investments29,41015,79345,2036,718
Money market funds451-451
Total fixed asset investments and money market funds29,86115,79345,654
Cash at bank9,357
Debtors less creditors(1,421)
Total net assets53,590

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 "Half-Yearly Financial Reports" issued by the UK Accounting Standards Board; 

  • 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; and 

  • 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

Michael Reeve
Chairman
14 October 2013

Income Statement
Six months to 31 August 2013Six months to 31 August 2012Year to 28 February 2013
RevenueCapitalTotalRevenueCapitalTotalRevenueCapitalTotal
£'000£'000£'000£'000£'000£'000£'000£'000£'000
Realised gain/(loss) on disposal of fixed asset investments-181181-(19)(19)-455455
Unrealised gain on valuation of fixed asset investment-6,7186,718-1,4231,423-5,5335,533
Income300-300260-260523-523
Investment management fees(109)(328)(437)(99)(296)(395)(202)(606)(808)
Other expenses(132)-(132)(114)-(114)(232)-(232)
(Loss)/profit on ordinary activities before tax596,5716,630471,1081,155895,3825,471
Taxation on (loss)/profit on ordinary activities---------
(Loss)/profit on ordinary activities after tax596,5716,630471,1081,155895,3825,471
Earnings per share - basic and diluted0.1p13.2p13.3p0.1p2.4p2.5p0.2p11.4p11.6p

  • 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 no recognised gains or losses other than those disclosed in the income statement.  

Reconciliation of Movements in Shareholders' Funds
Six months ended
31 August 2013		Six months ended
31 August 2012		Year to
29 February 2013
£'000£'000£'000
Shareholders' funds at start of period44,12339,68939,689
Profit/(loss) on ordinary activities after tax6,6301,1555,471
Shares purchased and cancelled(799)(507)(10,872)
Issue of equity4,8982,23412,071
Increase/(decrease) in shares to be issued--123
Shares to be issued---
Dividends paid(1,262)(1,180)(2,359)
Shareholders' funds at end of period53,59041,39144,123

Balance Sheet
As at 31 August 2013As at 31 August 2012As at 28 February 2013
£'000£'000£'000£'000£'000£'000
Fixed asset investments*45,20333,21137,491
Current assets:
Money market securities*4517,0565,799
Debtors478071
Cash at bank9,3571,076841
9,8558,2126,711
Creditors: amounts falling due within one year(1,468)(32)(79)
Net current assets8,3878,1806,632
Net assets53,59041,39144,123
Called up equity share capital513476467
Shares to be issued--402
Share premium account17,1842,48411,939
Capital redemption reserve1309121
Special distributable reserve44,38355,54745,182
Capital reserve realised(25,728)(21,904)(22,758)
Capital reserve unrealised16,7744,5468,495
Revenue reserve334233275
Total equity shareholders' funds53,59041,39144,123
Net asset value per share104.4p86.9p93.7

*Held at fair value through profit & loss

The accompanying notes form an integral part of the financial statements.

The statements were approved by the Directors and authorised for issue on 14 October 2013 and are signed on their behalf by:

Michael Reeve
Chairman
Company No: 03477519

Cash Flow Statement
Six months to
31 August 2013		Six months to
31 August 2012		Year to
28 February 2013
£'000£'000£'000
Net cash outflow from operating activities1,144(321)(533)
Financial investment :
Purchase of fixed asset investments(2,904)(1,639)(3,671)
Disposal of fixed asset investments2,0902682,604
Management of cash equivalent resources:
Purchase of current asset investment(5,911)(1,552)(7,859)
Disposal of current asset investment11,2603,10510,669
Net cash (outflow)/inflow from investing activities5,679(139)1,210
Dividends paid(1,262)(1,180)(2,359)
Financing:
Shares to be issued--402
Issue of equity4,8982,23411,792
Shares re-purchased(799)(507)(10,872)
2,837547(1,037)
Increase/(decrease) in cash at bank8,516408173

               

Reconciliation of Net Cash Flow to Movement in Net Funds
Six months to
31 August 2013		Six months to 31 August 2012Year to 28 February 2013
£'000£'000£'000
Increase/(decrease) in cash at bank8,516408173
(Decrease)/increase in cash equivalents(5,348)(1,553)(2,810)
Opening net liquid resources6,6409,2779,277
Net cash resources at end of period9,8088,1326,640

Reconciliation of Profit before Taxation to Cash Flow from Operating Activities
Six months to
31 August 2013		Six months to
31 August 2012		Year to 29 February 2013
£'000£'000£'000
Profit/(loss) on ordinary activities before tax6,6301,1555,471
(Gain)/loss on realisation of investments(181)19(455)
(Gain)/loss on valuation of investments(6,718)(1,423)(5,533)
Decrease/(increase) in debtors24(24)(15)
Increase/(decrease) in creditors1,389(48)(1)
Net cash outflow from operating activities1,144(321)(533)

Notes to the Half-Yearly Report

1.        Basis of preparation
The unaudited interim results which cover the six months to 31 August 2013 have been prepared in accordance with applicable accounting standards and adopting the accounting policies set out in the statutory accounts of the Company for the year ended 28 February 2013.

2.   Publication of non-statutory accounts
The unaudited interim results for the six months ended 31 August 2013 do not constitute statutory accounts within the meaning of s.415 of the Companies Act 2006 and have not been delivered to the Registrar of Companies.  The comparative figures for the year ended 28 February 2013 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 of 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 at 31 August 2013 is calculated on the basis of 49,940,509 (28 February 2013: 47,141,571 and 31 August 2012: 46,971,685) shares, 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 calculation of net asset value per share is based on the net assets at 31 August 2013 and on 51,324,649 (28 February 2013: 47,088,019 and 31 August 2012: 47,615,243) shares being the number of shares in issue, excluding shares held in Treasury, at the same date.

5.   Dividends
The interim dividend declared of 2.5 pence per Ordinary share will be paid on 16 January 2014 to those shareholders on the register on 20 December 2013.

6         Risks and uncertainties
The Company's assets consist of equity and fixed-rate 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 VCT, 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 2013. The Company's principal risks and uncertainties have not changed materially since the date of that report.

7.   Related Party Transactions
Octopus acts as the investment manager of the Company. Under the management agreement, Octopus receives a fee of 2.0 per cent per annum of the net assets of the Company for the investment management services. During the period, the Company incurred management fees of £437,000 (28 February 2013: £808,000 and 31 August 2012: £395,000) payable to Octopus. At the period end there was £Nil (28 February 2013: £Nil and 31 August 2012: £Nil) outstanding to Octopus.  

8.        This statement will be made available to all shareholders. Copies are also available from the registered office of the Company at 20 Old Bailey, London, EC4M 7AN, and will also be available to view on the Investment Manager's website at www.octopusinvestments.com.



This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients.

The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.

Source: Octopus AIM VCT PLC via Thomson Reuters ONE
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