Oxford Tech 2 VCT Oxford Technology 2 Vct Plc : Half-year Report

 
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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