Oxford Technology

Half-year report

Half-year report

Oxford Technology Venture Capital Trust Plc

Unaudited Half-Yearly Report

For the period

1 March 2018 to 31 August 2018

Financial Headlines


 6 Months Ended
31 August 2018
Year Ended
28 February 2018
Net Assets at Period End£2.77m£2.84m
Net Asset Value per Share51.0p52.4p
Cumulative Dividend per Share55.0p55.0p
Total NAV Return per Share106.0p107.4p
Share Price at Period End (Mid-Market)40.0p40.0p
Earnings per Share(1.4)p0.2p

                                                                                                  

Company Number: 3276063
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 2018.

Results and Dividends

The Company’s net asset value (NAV) per share has decreased by 1.4p from 52.4p at 28 February 2018 to 51.0p at 31 August 2018.  The fall in NAV per share 1.4p was mainly as a result of a reduction in the value of the Company’s listed holding in Scancell Holdings Plc (Scancell), which had a bid price at 31 August 2018 of 11.5p per share (28 February 2018: 14.0p per share).  This fall in value of the Company’s holding in Scancell was partially offset by an increase in value of your Company’s unlisted holdings and a small amount of dividend income.

Portfolio Review

The four companies within the portfolio continue to exhibit progress, albeit without major change in valuation.

Select Technology, a photocopier (or more generally Multi Function Device, or MFD) software company, remains the largest holding in your Company’s portfolio.  The company continues to grow, despite the continued execution of a transition away from a dependency on one particular supplier, which has had the effect of increasing business resilience.  Despite being loss-making for a period during this transition, Select Technology has been making good progress with IDEA - the International Document Evolution Alliance.  This is a global network of distributors who all understand software, networks and the document management business, and who can offer global distribution at a stroke, which is attractive to developers.  Sales and profit margins have been increasing and the prospects for the future are encouraging.  The company attended our recent AGM and its presentation can be found on our website.

Scancell is developing a number of exciting new potential breakthrough cancer treatments, has a number of active initiatives and continues to make scientific and regulatory progress. In the last few months, it has established manufacture of Moditope, extended the Trichor delivery mechanism deal for SCIB1 and is busy preparing for the clinical trials which were signed up earlier in the year.

The rest of the portfolio is unchanged in valuation terms over the six month period to 31 August 2018: Getmapping is trading reasonably well in a challenging market; Biocote continues to make good progress, with sales and profits growing steadily, and a small dividend was paid during the period.

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 and also to prepare companies for realisation at the appropriate time.  It should be noted that the current portfolio is highly concentrated with Select representing 57% and Scancell 29% of the VCT’s equity – your Company’s NAV is therefore very sensitive to changes in the valuations of these two portfolio companies.

Liquidity

At period end the Company had net current assets of £46k.

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.

Change of Auditor

James Cowper Kreston, our auditors for the last 13 years, have decided to withdraw from auditing Public Interest Entities for the time being due to the increasing regulatory landscape and associated costs. Unfortunately, this includes VCTs. The Board would like to thank them for all their support and constructive feedback during their period in office. Shareholders will recall that last year, we carried out a tender for the audit. The Audit Committee was also impressed by one of the other firms who responded, and on its recommendation, the Board is therefore pleased to appoint UHY Hacker Young LLP ("UHY") to fill the casual vacancy that has arisen. UHY will audit the Company’s 2019 annual results, and shareholders will be asked to reappoint them at next year’s AGM for the following year’s audit.

Presentation of half-yearly report

In order to reduce the length of this report, details of the Company’s objectives and investment strategy, its Advisers and Registrar and how to buy and sell shares in the Company have been omitted. 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.

Planning for the Future

Your Directors continue to monitor changes to VCT legislation and their potential impact on both the VCT and its investee companies.  Recent rule changes to tax efficient investment schemes are not expected to have any material impact on the current portfolios or on current investors as the VCT is fully invested.  However, our efforts to lobby HMT for a small change to the recent legislation that increases the level of qualifying investments that a VCT must hold (from 70% to 80%) were unsuccessful.  Given the nature of OT1’s portfolio, additional investee management will be required in future to ensure dividend income from the portfolio does not cause an inadvertent breach of VCT rules.

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 2017 the Board announced that, as it is not intending to increase the size of the Company’s portfolio in terms of the number of investments, it wishes to have in place appropriate plans to ensure any further realisations do not result in your VCT becoming sub-economic.  Your Board is continuing to consider options and looks forward to updating shareholders in due course; however, there can be no certainty that any of these discussions will lead to a concrete proposal, at this time or in the future.

Finally, I would like to take this opportunity to thank shareholders, many whom we were able to welcome to our AGM in July, for their continued support.

Alex Starling
Chairman
23 October 2018


Investment Portfolio as at 31 August 2018

CompanyDescriptionNet Cost of investment £’000Carrying value at 31/08/18
£’000
Change in value for the
6 month period £’000
% Equity held OT1% Equity held All OTVCTs% Net assets
Select TechnologyPhotocopier interfaces4881,570132 30.058.556.7
Scancell
(bid price 11.5p)
Antibody based cancer therapeutics344791(172)1.73.328.6
Getmapping

 
Aerial photography518223- 3.73.78.1
BiocoteBactericidal powder coating85139- 6.66.65.0
Total Investments

 
 1,4352,723(40)  98.4
Other Net Assets

 
  46   1.6
Net Assets

 
  2,769   100

Responsibility Statement of the Directors in respect of the half-yearly report

We confirm that to the best of our knowledge:

On behalf of the Board:


Alex Starling - Chairman
23 October 2018

Income Statement

 Six months to 31 Aug 2018Six months to 31 Aug 2017Year to 28 Feb 2018
 RevenueCapitalTotalRevenueCapitalTotalRevenueCapitalTotal
 £'000£’000£’000£’000£’000£’000£’000£’000£’000
Unrealised (loss)/ gain on valuation of fixed asset investments- (40)(40)- 55 55 - 86 86 
Investment income7 - 7 7 - 7 7 - 7 
Investment management fees(4)(11)(15)(4)(11)(15)(7)(22)(29)
Other expenses(27)- (27)(27)- (27)(55)- (55)
Return on ordinary activities
before tax
(24)(51)(75)(24)44 20 (55) 64 9 
Taxation on ordinary activities- - - - - - - - - 
Return on ordinary activities
after tax
(24)(51)(75)(24)44 20 (55) 64 9 
Earnings per share – basic and diluted(0.5)p(0.9)p(1.4)p(0.4)p0.8p0.4p(1.0)p1.2p0.2p

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 2018As at 31 Aug 2017As at 28 Feb 2018
 £’000£’000£’000£’000£'000£'000
Fixed asset investments
(At fair value through profit and loss)
 2,723 2,732 2,763
Current assets:      
Debtors21  14  2  
Creditors: Amounts falling due within one year(19) (9) (12) 
Cash at Bank44  118  91  
Net current assets 46 123 81
Net assets 2,769 2,855 2,844
Called up equity share capital 543 543 543
Share premium 176 176 176
Unrealised capital reserve 1,288 1,297 1,328
Profit and Loss account reserve 762 839 797
Total equity shareholders' funds 2,769 2,855 2,844
Net asset value per share 51.0p 52.6p 52.4p



Statement of Changes in Equity

 Share Capital £’000 Share Premium £’000Unrealised Capital Reserve
£’000
Profit & Loss
  Reserve
£’000
Total
 £’000
As at 1 March 20175431761,242 928 2,889 
Revenue return on ordinary activities after tax--- (24)(24)
Expenses charged to capital--- (11)(11)
Current period gains on fair value of investments--55 - 55 
Dividends paid--- (54)(54)
Balance as at 31 August 20175431761,297 839 2,855 
As at 1 March 20175431761,242 928 2,889 
Revenue return on ordinary activities after tax--- (55)(55)
Expenses charged to capital--- (22)(22)
Current period gains on fair value of investments--86 - 86 
Dividends paid--- (54)(54)
Balance as at 28 February 20185431761,328 797 2,844 
As at 1 March 20185431761,328 797 2,844 
Revenue return on ordinary activities after tax--- (24)(24)
Expenses charged to capital--- (11)(11)
Current period losses on fair value of investments--(40)- (40)
Dividends paid--- -  
Balance as at 31 August 20185431761,288 762 2,769 


Statement of Cash Flows

 Six months to 31 Aug
2018
Six months to 31 Aug 2017Year to 28 Feb 2018
 £'000£’000£'000
Cash flows from operating activities   
Return on ordinary activities before tax(75)20 9 
Adjustments for:   
Increase in debtors(19)(12)- 
Increase in creditors7 2 5 
Loss/(gain) on valuation of fixed asset
investments
40 (55)(86)
(Outflow)/inflow from operating
activities
(47)(45)(72)
Cash flows from investing activities   
Purchase of fixed asset investments- - - 
Disposal of investments- - - 
Total cash flows from investing activities- - - 
Cash flows from financing activities   
Dividends paid- (54)(54)
Total cash flows from financing activities- (54)(54)
Decrease in cash and cash equivalents(47)(99)(126)
Opening cash and cash equivalents91 217 217 
Closing cash and cash equivalents44 118 91 

  

Notes to the Half-Yearly Report

1.         Basis of preparation

The unaudited half-yearly results which cover the six months to 31 August 2018 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 2018 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 2018 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 (5,431,655 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 2018. The Company’s principal risks and uncertainties have not changed materially since the date of that report.

6.         Related party transactions

OT1 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, The Magdalen Centre, Oxford Science Park, Oxford OX4 4GA and on the Company’s website – www.oxfordtechnology.com/vct1.

Board Directors: Alex Starling, Robin Goodfellow, Richard Roth and David Livesley

Investment Manager: OT1 Managers Ltd with services contracted to Oxford Technology Management Ltd

Website: www.oxfordtechnology.com/vct1