Octopus VCT Octopus Vct Plc : Half-yearly Report

 
TIDMOVCT 
 
 
   Octopus VCT plc 
 
   Half-Yearly Results 
 
 
 
   9 October 2014 
 
   Octopus VCT plc, managed by Octopus Investments Limited, today announces 
its half-yearly results for the six months ended 31 August 2014. 
 
   The results were approved by the Board of Directors on 9 October 2014. 
 
 
 
   Financial Summary 
 
 
 
 
                            Six months to    Six months to        Year to 
                            31 August 2014   31 August 2013   28 February 2014 
 
Net assets (GBP'000s)               51,427           49,354             50,402 
Net profit after tax 
 (GBP'000s)                          1,546              240              1,900 
Net asset value per share            98.8p            94.6p              96.9p 
 (NAV) 
Cumulative dividends paid             6.0p             4.0p               5.0p 
 to date 
Total return                        104.8p            98.6p             101.9p 
 
 
   An interim dividend of 1.0p will be paid on 21 November 2014 to 
shareholders on the register on 24 October 2014. 
 
   Chairman's Statement 
 
   Introduction 
 
   I am delighted to present to you the half-yearly report for Octopus VCT 
plc for the period ended 31 August 2014. 
 
   Performance 
 
   The Company's performance has been pleasing in the period, with the 
total return of the Company (NAV plus cumulative dividends) increasing 
by 2.8%, from 101.9p as at 28 February 2014 to 104.8p as at 31 August 
2014. This is due to the performance of the investment portfolio which 
generated an uplift in value of GBP1,257,000, excluding disposals, in 
the six months to 31 August 2014 together with income which exceeded 
expenses. 
 
   Possible Merger and Fundraising 
 
   An announcement was published on 29 September 2014 stating that your 
Board has entered into discussions with the Board of Octopus Apollo VCT 
plc ("Apollo") regarding a possible merger between the Company and 
Apollo. These discussions may or may not lead to an agreement to merge 
the companies. Further details of any proposed merger will be sent to 
all Shareholders in due course, together with the requisite notices of 
general meetings of the Company at which shareholders will be able to 
vote on the proposals. 
 
   If approved by shareholders, the Board expects the proposed merger to 
provide advantages to Octopus VCT shareholders through providing 
additional liquidity in 2015 and giving them access to an enlarged VCT 
with an evergreen mandate. The merger is therefore expected to give 
Octopus VCT shareholders the choice either to exit at the five year 
point, with returns predicted in the Octopus VCT prospectus, or to 
retain their shares in an enlarged VCT, whose objective is to generate 
steady returns. 
 
   Investment Portfolio 
 
   As at 31 August 2014, the Company held investments in 47 companies with 
a combined fair value of GBP48,190,000, representing 93.7% of net 
assets. 
 
   In March 2014, the GBP2,000,000 loan to Borro was fully repaid, along 
with all outstanding interest. In July 2014, the Company received a 
partial loan repayment from Michabo Power for GBP264,000, along with all 
the interest outstanding at that point in time. 
 
   The majority of the Company's portfolio is invested in the renewable 
energy sector which continues to perform in line with expectations. 
 
   Investment Strategy 
 
   The Company continues to be managed in line with the mandate that was 
set out in the prospectus, whereby investments are made with more of an 
emphasis on capital preservation than a typical VCT. The investment 
strategy is to derive sufficient return from the secured loan notes to 
achieve the Company's investment aims and to use the small equity 
exposure to boost returns. 
 
   The Investment Manager continues to identify appropriate investment 
opportunities to meet these objectives. 
 
   Dividend and Dividend Policy 
 
   As mentioned in my statement at the year end, due to the high level of 
interest income the Company generated from its investments, your Board 
proposed a dividend of 1.0 pence per share, which was paid to 
shareholders on 14 August 2014. Your Board has declared an interim 
dividend of 1.0 pence per share, which will be paid on 21 November 2014 
to those shareholders on the register on 24 October 2014. 
 
   VCT Qualifying Status 
 
   A key requirement is to invest at least 70% of the funds raised into 
qualifying investments. As at 31 August 2014, 83.1% of the portfolio, as 
measured by HMRC rules, was invested in VCT qualifying investments. The 
Manager does not foresee any issues with maintaining the required 
investment hurdle of 70%. 
 
   Principal Risks and Uncertainties 
 
   The principal risks and uncertainties are set out in note 5 of the Notes 
to the Half-Yearly Report on page X. 
 
   Outlook 
 
   The outlook for the economy continues to improve and we are delighted 
with the uplift in the total return for the six months to 31 August 
2014, which is the result of the solid capital performance of the 
investment portfolio and the Company's revenue profits from investments. 
 
   The Investment Manager remains committed to managing the existing 
portfolio which complements the mandate pursued by the Company. With 
this in mind, your Board remains confident that the Company will achieve 
its investment objectives and that the total return will continue to 
appreciate. 
 
   If you have any questions on any aspect of your investment, please call 
one of the team on 0800 316 2295. 
 
   James Otter 
 
   Chairman 
 
   9 October 2014 
 
   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 
 
   James Otter 
 
   Chairman 
 
   9 October 2014 
 
   Income Statement 
 
 
 
 
                                          Six months to 31 August    Six months to 31 August 
                                                   2014                       2013              Year to 28 February 2014 
                                         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 
 
Income                                       559        -      559      679        -      679    1,245        -     1,245 
 
Fixed asset investment losses on 
 disposal                                      -        -        -        -    (176)    (176)        -    (172)     (172) 
 
  Fixed asset investment holding gains         -    1,257    1,257        -        -        -        -    1,498     1,498 
 
  Investment management fees                   -        -        -        -        -        -        -        -         - 
 
Other expenses                             (270)        -    (270)    (263)        -    (263)    (528)        -     (528) 
 
Profit/(loss) on ordinary activities 
 before tax                                  289    1,257    1,546      416    (176)      240      717    1,326     2,043 
 
Taxation on profit/(loss) on ordinary 
 activities                                    -        -        -        -        -        -    (143)        -     (143) 
 
Profit/(loss) on ordinary activities 
 after tax                                   289    1,257    1,546      416    (176)      240      574    1,326     1,900 
Profit/(loss) per share - basic and         0.6p     2.4p     3.0p     0.8p   (0.3)p     0.5p     1.1p     2.5p      3.6p 
 diluted 
 
 
   -- 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  Six months ended       Year to 
                          31 August 2014    31 August 2013    28 February 2014 
                             GBP'000           GBP'000            GBP'000 
Shareholders' funds at 
 start of period                   50,402            49,635             49,635 
Profit on ordinary 
 activities after tax               1,546               240              1,900 
Dividends paid                      (521)             (521)            (1,042) 
Shares bought back for 
 cancellation                           -                 -               (91) 
Shareholders' funds at 
 end of period                     51,427            49,354             50,402 
 
 
   Balance Sheet 
 
 
 
 
                                                             As at 28 February 
                As at 31 August 2014  As at 31 August 2013                2014 
                 GBP'000    GBP'000    GBP'000    GBP'000   GBP'000   GBP'000 
 
Fixed asset 
 investments                  48,190                46,699              49,197 
Current 
assets: 
Investments - 
 money market 
 funds*                 5                     5                    5 
Debtors               499                   579                  543 
Cash at bank        2,975                 2,459                  946 
                    3,479                 3,043                1,494 
Creditors: 
 amounts 
 falling due 
 within one 
 year               (242)                 (388)                (289) 
Net current 
 assets                        3,237                 2,655               1,205 
 
Net assets                    51,427                49,354              50,402 
 
Called up 
 equity share 
 capital                         520        521                  520 
Special 
 distributable 
 reserve                      47,488     47,871               48,009 
Capital 
 redemption 
 reserve                           2          1                    2 
Capital 
 reserve 
 holding gains 
 and losses                    3,023        268                1,766 
Capital 
 reserve gains 
 on disposal                   (172)          -                (172) 
Revenue 
 reserve                         566        693                  277 
Total equity 
 shareholders' 
 funds                        51,427                49,354              50,402 
Net asset                      98.8p                 94.6p               96.9p 
 value per 
 share 
 
 
 
 
*Held at fair value through profit and loss 
 
 
   There is a contingent liability with regard to the management fees 
payable by the Company which is not included in Creditors on the balance 
sheet. More information is given on this in note 6. 
 
   The statements were approved by the Directors and authorised for issue 
on 9 October 2014 and are signed on their behalf by: 
 
   James Otter 
 
   Chairman 
 
   Company Number: 06948448 
 
   Cash Flow Statement 
 
 
 
 
                         Six months ended  Six months ended       Year to 
                          31 August 2014    31 August 2013    28 February 2014 
                             GBP'000           GBP'000            GBP'000 
 
Net cash inflow from 
 operating activities                 286               605                910 
 
Taxation                                -                 -              (210) 
 
Financial investment: 
Purchase of fixed asset 
 investments                            -           (4,616)            (5,616) 
Sale of fixed asset 
 investments                        2,264             6,279              6,283 
 
Management of liquid 
resources: 
Purchase of current 
asset investments                       -                 -                  - 
Sale of current asset 
investments                             -                 -                  - 
 
Dividends paid                      (521)             (521)            (1,042) 
 
Financing: 
Issue of own shares                     -                 -                  - 
Share issue expense                     -                 -                  - 
Purchase of own shares                  -                 -               (91) 
Increase in cash at 
 bank                               2,029             1,747                234 
 
 
 
 
Reconciliation of net cash flow to movement in net 
 funds 
                         Six months ended  Six months ended       Year to 
                          31 August 2014    31 August 2013    28 February 2014 
                             GBP'000           GBP'000            GBP'000 
Increase in cash at 
 bank                               2,029             1,747                234 
Opening net cash 
 resources                            951               717                717 
Net cash resources at 
 end of period                      2,980             2,464                951 
 
 
 
 
Reconciliation of profit before taxation to cash flow 
 from operating activities 
                         Six months ended  Six months ended       Year to 
                          31 August 2014    31 August 2013    29 February 2014 
                             GBP'000           GBP'000            GBP'000 
Profit on ordinary 
 activities before tax              1,546               240              2,043 
Decrease in debtors                    44               147                183 
(Decrease)/increase in 
 creditors                           (47)                42                 10 
Loss on disposal of 
 fixed asset 
 investments                            -               176                172 
Holding gain on fixed 
 asset investments                (1,257)                 -            (1,498) 
Net cash inflow from 
 operating activities                 286               605                910 
 
 
   Notes to the Half-Yearly Report 
 
   1.         Basis of preparation 
 
   The unaudited half-yearly results which cover the six months to 31 
August 2014 have been prepared in accordance with the Accounting 
Standards Board's (ASB) statement on half-yearly financial reports (July 
2007) and adopting the accounting policies set out in the statutory 
accounts of the Company for the year ended 28 February 2014, which were 
prepared under UK GAAP and in accordance with the Statement of 
Recommended Practice for Investment Companies issued by the Association 
of Investment Companies in January 2009. 
 
   2.         Publication of non-statutory accounts 
 
   The unaudited half-yearly results for the six months ended 31 August 
2014 do not constitute statutory accounts within the meaning of s.415 of 
the Companies Act 2006. The comparative figures for the year ended 28 
February 2014 have been extracted from the audited financial statements 
for that period, 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 earnings per share at 31 August 2014 is calculated on the basis of 
52,035,840 (31 August 2013: 52,145,218 and 28 February 2014: 52,125,038) 
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 net asset value per share is calculated on the basis of 52,035,840 
(31 August 2013: 52,145,218 and 28 February 2014: 52,035,840) shares in 
issue at that date. 
 
 
 
   1. Principal 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 2014. The Company's principal risks and uncertainties 
have not changed materially since the date of that report. 
 
 
   1. Contingencies, guarantees and financial commitments 
 
 
   Under the terms of the Investment Management agreement, Octopus is 
entitled to an annual management fee of 2.0% of net assets.  However, 
the annual management fee will be rolled up (without interest) and will 
only be paid to Octopus once shareholders have received dividends and 
distributions during the life of the Company totalling or exceeding 105p 
per share. It is anticipated that the total returns to shareholders will 
have reached 105p per share by the 5(th) anniversary of the Company. 
Therefore the Board are aware of the likelihood that the management fee 
will become payable at this point. The fee will only be payable on 
returns above 105p and, as such, will not cause total returns to fall 
below 105p. Octopus will only be entitled to receive an annual 
management fee for the period from the date on which shares were first 
allotted under the Offer until the date on which the general meeting is 
held (expected to be in August 2015). 
 
   Since the total return as at 31 August 2014 was less than 105p, no 
accrual has been made in respect of any management fee potentially 
payable, in respect of which there was a maximum contingent liability of 
GBP4,450,000 as at 31 August 2014 (31 August 2013: GBP3,450,000 and 28 
February 2014: GBP3,950,000). 
 
   Provided that an intermediary continues to act for a shareholder and the 
shareholder continues to be the beneficial owner of the shares, 
intermediaries will be paid an annual trail commission up to 0.5% of the 
initial net asset value. Trail commission of GBP118,000 was paid during 
the six month period to 31 August 2014 (31 August 2013: GBP115,000 and 
28 February 2014: GBP212,000) and there was GBPnil outstanding at the 
period end. 
 
   There were no further contingencies, guarantees or financial commitments 
as at 31 August 2014 (31 August 2013: none and 28 February 2014: none). 
 
 
   1. Related Party Transactions 
 
 
   Martijn Kleibergen, a non-executive director of Octopus VCT plc, is an 
employee of Octopus Investments Limited. 
 
   Octopus VCT plc has employed Octopus throughout the period as Investment 
Manager. Octopus VCT plc has paid Octopus GBPnil in the period as a 
management fee and there is GBPnil outstanding at the balance sheet 
date. No management fee shall be payable until certain performance 
targets have been met, as detailed in note 6 above. 
 
   The fee in respect of the accounting and administrative services, 
charged at 0.3% of the net asset value, is 
 
   payable quarterly in arrears and is calculated at annual intervals as at 
28 February. 
 
   Octopus also provides company secretarial services for an additional fee 
of GBP15,000 per annum. 
 
   8.         Other Information 
 
   Copies of 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 NASDAQ OMX Corporate Solutions on 
behalf of NASDAQ OMX 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: Octopus VCT PLC via Globenewswire 
 
   HUG#1861974