Final Results
Octopus AIM VCT plc
Final Results
Octopus AIM VCT plc today announces the final
results for the year ended 29 February 2024.
Octopus AIM VCT plc (the ‘Company’) is a venture
capital trust (VCT) which aims to provide shareholders with
attractive tax-free dividends and long-term capital growth by
investing in a diverse portfolio of predominantly AIM-traded
companies. The Company is managed by Octopus Investments Limited
(‘Octopus’ or the ‘Investment Manager’).
Financial summary
|
Year to 29 February 2024 |
Year to 28 February 2023 |
Net assets (£’000) |
129,109 |
141,222 |
(Loss) after tax (£’000) |
(17,734) |
(33,414) |
Net asset value (NAV) per share
(p) |
63.3 |
78.5 |
Dividends per share paid in year
(p) |
5.0 |
5.5 |
Total return (%)1 |
(13.0) |
(19.8) |
Special dividend proposed
(p)2 |
4.9 |
- |
Final dividend proposed
(p)2 |
2.5 |
2.5 |
Ongoing charges (%)3 |
2.1 |
2.1 |
1 Total return is an alternative
performance measure calculated as movement in NAV per share in the
period plus dividends paid in the period, divided by the NAV per
share at the beginning of the period.
2The proposed final dividend and proposed special
dividend will be paid on 15 August 2024 to shareholders on the
register on 26 July 2024.
3Ongoing charges is an alternative performance measure
calculated using the AIC recommended methodology.
Chair’s statement
Introduction
Firstly, I would like to welcome all new shareholders who have
joined us in the past year.
The year to 29 February 2024 was another
extremely challenging period for investors in smaller companies.
Appetite for risk was affected by persistent inflation which
resulted in interest rates rising further and remaining at their
peak for longer than had originally been expected, prolonging the
pain for the share prices of companies exposed to growth sectors.
Against this background the Alternative Investment Market (AIM)
index was once again the worst performing UK index and the NAV gave
up further ground and finished the year 13.0% down on a total
return basis.
The AIM market raised £1.7 billion for new and
existing companies in the year under review, a decrease on the £2.1
billion raised in the previous year. It was the second year that
the majority of fundraisings in the year under review were for
existing AIM companies seeking further capital as new issues stood
back in response to volatile market conditions. Your Investment
Manager was, however, able to make some investments in existing AIM
companies at attractive valuations, with a total of £7.7 million
invested in qualifying companies in the period, up from the £4.9
million invested in the previous year. Although significant
geo-political risks remain, market sentiment has improved more
recently, with market commentators and economists taking a more
optimistic stance on inflation and interest rates in 2024. The
Investment Manager expects the pipeline of potential new issues to
strengthen later this year, supplementing existing companies
seeking further finance.
Performance
The NAV on 29 February 2024 was 63.3p per share, a significant
decrease on the NAV of 78.5p per share reported at 28 February
2023. Adding back the 5p of dividends paid in the year gives a
total negative return of 13.0%. In the same year, the FTSE AIM
All-Share Index fell by 12.6%, the FTSE SmallCap (excluding
investment companies) Index rose by 0.5% and the FTSE All-Share
Index rose by 0.6%, all on a total return basis. AIM was the worst
performing UK Index by some margin, highlighting the trend for
investors to seek value in more traditional sectors which has now
been the case for the past two years.
Once again stock specific factors had an impact
on our performance, both positive and negative, and these are
covered in more detail in the Investment Manager’s review. In
addition, economic concerns played a significant part in the
valuations of shares during the year. The year started as inflation
levels were still increasing, which encouraged central banks to
raise interest rates to a high point of 5.25% in August 2023. As it
became apparent that inflationary pressures were proving more
stubborn than had been hoped, expected interest rate cuts were
firmly pushed into 2024. This meant that the low appetite for risk
which had been apparent since the end of 2021 persisted, continuing
to impact the share prices of both profitable growth companies as
well as earlier stage companies exposed to the new
economy.
Some companies in the portfolio found themselves
having to raise new capital at a deep discount to previous
valuation levels. The purpose of a VCT is to provide capital for
small growing companies and as a result those companies exposed to
the new economy in the software, technology and healthcare sectors
make up a significant proportion of our investment portfolio. This
worked against us in the year under review.
Dividends
In January 2024 an interim dividend for the year to 29 February
2024 of 2.5p was paid to all shareholders. This was in addition to
the 2.5p final dividend that had been paid in August 2023 and which
related to the previous financial year ended 28 February 2023. The
Board has considered the level of dividend in the context of the
NAV fall during the period and on this occasion is recommending a
final dividend of 2.5p.
In addition, as a result of taking exceptional
profits in a number of long-term holdings during the year, most
notably the full disposal of Ergomed, the Board is proposing a
special dividend of 4.9p which will be paid at the same time as the
final dividend. Including the special dividend, the total dividend
in respect of the year is 9.9p which is a 16.6% yield based on the
share price of 59.5p on 29 February 2024.
It remains the Board’s target to pay an annual
dividend of 5.0p or 5% of the year-end share price, whichever is
greater at the time.
Board changes
Stephen Hazell-Smith, who has been a director of the Company since
1998, will be stepping down from the Board with effect from the
Annual General Meeting on 18 July 2024. I would like to thank
Stephen, on behalf of the Board and the shareholders, for his
extensive contribution to the success of the Company since its
inception. We wish him well for the future.
As announced on 5 June 2024, I am pleased to
report that Louise Nash will be joining the Board as a director
with effect from 1 July 2024. Louise will bring to the Board her
extensive experience as a former fund manager specialising in UK
small and mid-cap companies. In accordance with the Company’s
Articles of Association, a resolution to elect Louise will be put
to the Annual General Meeting on 18 July 2024.
Cancellation of share premium
account
At the last Annual General Meeting, shareholders voted to cancel
share premium to increase the pool of distributable reserves to the
amount of £19.8 million. This is a regular occurrence, and common
practice, to enable the continued payment of dividends and buyback
of shares. A further resolution to cancel share premium is being
proposed at this year’s Annual General Meeting.
Dividend reinvestment
scheme
In common with many other VCTs in the industry, the Company has
established a Dividend Reinvestment Scheme (DRIS). Many
shareholders have already taken advantage of this opportunity. For
investors who do not require income, but value the additional tax
relief on their reinvested dividends, this is an attractive scheme
and I hope more shareholders will find it useful. In the course of
the year 2,781,086 new shares have been issued under this scheme,
returning £1.8 million to the Company. The final dividend referred
to above will be eligible for the DRIS.
Share buybacks
During the year to 29 February 2024 the Company continued to buy
back shares in the market from selling shareholders and purchased
6,351,314 ordinary shares for a total consideration of £4.1
million. We have maintained a discount of approximately 4.5% to NAV
(equating to up to a 5.0% discount to the selling shareholder after
costs), which the Board monitors and intends to retain as a policy
which fairly balances the interests of both remaining and selling
shareholders. Buybacks remain an essential practice for VCTs, as
providing a means of selling is an important part of the initial
investment decision and has enabled the Company to grow. As such, I
hope you will all support the appropriate resolution at the
AGM.
Share issues
On 14 September 2023, a prospectus offer was launched alongside
Octopus AIM VCT 2 plc to raise a combined total of up to £20
million, with a £10 million over-allotment facility. The offer
closed fully subscribed on 21 December 2023. The Company issued
27,555,671 shares under the offer, raising £17.4 million after
costs, net of the DRIS.
VCT status
Shoosmiths LLP were engaged throughout the year to provide the
Board and Investment Manager with advice concerning continuing
compliance with HMRC regulations for VCTs. The Board has been
advised that the Company is in compliance with the conditions laid
down by HMRC for maintaining approval as a VCT. A key requirement
is to maintain at least an 80% qualifying investment level. As at
29 February 2024, 86.0% of the Company’s portfolio was in VCT
qualifying investments.
Last year I reported to you that the Government
had yet to renew the ‘sunset clause’ which provides that income tax
relief for new VCT subscriptions will cease on 5 April 2025. I am
pleased to report that the Government announced in last November’s
Autumn Statement that the sunset clause will be renewed until 2035.
Under EU State Aid regulations, this renewal does require EU
approval which, at the time of writing, is still awaited.
Annual General Meeting
(AGM)
The AGM will take place on 18 July 2024 at 10.30am. The Investment
Manager will also give a live presentation to shareholders on the
day of the AGM. This will enable shareholders to receive an update
from the Investment Manager and provide an opportunity for
questions to the Board and the Investment Manager. Formal notices
will be sent to shareholders by their preferred method (email or
post) and shareholders are encouraged to submit their votes by
proxy. We always welcome questions from our shareholders at the
AGM. Please send any questions via email to
AimAGM@octopusinvestments.com by 5.00pm on 12 July 2024.
Outlook
Although significant geo-political and economic risks remain,
recent strong positive stock market reactions to lower inflation
figures have demonstrated how quickly share prices can turn when
commentators begin to believe that interest rates will start to
fall in response to a more encouraging macro-economic environment.
Interest rate cuts are now expected later this year, particularly
in light of the recent announcement by the UK Prime Minister
calling for an earlier than predicted General Election in the
Summer.
Company results have been robust in the first
results season of the year and forecasts appear to be
conservatively set at this stage. Valuations have not yet recovered
from last year’s falls, leaving many of the larger and faster
growing shares in the portfolio on ratings still well below their
long-term averages, a fact that has been reinforced by the
appearance of significant takeover bid activity in the past few
months. The Investment Manager’s assessment is that the underlying
businesses of these companies remain generally robust, giving good
prospects for uplifts in valuations as overall market sentiment
improves.
The portfolio contains 88 holdings across a
range of sectors with exposure to some exciting new technologies in
the environmental and healthcare sectors in particular. Many of
these companies remain well funded, although the challenge of
raising further capital in the current market environment cannot be
dismissed. The balance of the portfolio towards profitable
companies remains, and the Investment Manager remains confident
that there will continue to be sufficient opportunities to invest
our funds in good companies seeking more growth capital at
attractive valuations.
Neal Ransome
Chair
Investment Manager’s review
Introduction
Amidst a backdrop of continued geopolitical conflict in Europe and
the Middle East, fluctuating inflation indicators, rising interest
rates and a subsequent squeeze in consumer incomes, capital UK
market performance remained lacklustre, and sentiment struggled to
regain a positive stance in the period under review. Investors
continued to be more risk averse, seeking refuge in larger listed
companies in safer sectors as they grappled with the market
uncertainty throughout the year. Consequently, lower appetite for
risk had a negative impact on the share price performance of
earlier stage investments within the portfolio, leading to
de-ratings and a further retreat of AIM growth stocks throughout
2023.
However, the tide of market sentiment began to
turn at the start of 2024 as global macroeconomic data showed more
consistent signs of recovery. The direction of stock market
movements remains closely linked to inflation figures and
expectations of interest rate cuts; with UK inflation data
confirming its continued downward trend, economic analysts are
confident that rate cuts will follow suit and we will likely see
the first fall in the third quarter of 2024. Consensus on the
quantum of the rate cuts is between 0.25% to 0.5% in this calendar
year. This will be dependent on the steady decline of inflation as
wage growth continues to slow down and food prices remain stable.
Interest rate cuts will provide much needed and long-awaited
support for equity markets.
Despite the less favourable background for
smaller growth companies over the period under review, AIM raised
further capital for existing listed companies and the AIM Initial
Public Offering (IPO) market started to gain pace at the beginning
of 2024 and has continued post the period end in line with
improving market confidence. Furthermore, with many UK small
companies trading below their long-term valuation range, there has
been a notable uptick in corporate activity over the last year.
This highlights the size of the stored value within UK smaller
companies, and the opportunity for potential revaluation when stock
markets recover.
The Alternative Investment
Market
Despite the occasional glimmers of optimism, the last couple of
years have tested investors’ resilience. Global markets have
remained fragile, and in the face of persistent global challenges
(both macroeconomic and geopolitical), investor appetite for risk
has stayed subdued. In addition to global headwinds, the spectre of
a looming recession and rising interest rates cast a shadow over
the UK market, and smaller company indices bore the brunt of equity
market de-rating. Over the year to 29 February 2024, the AIM index
declined by 12.6% compared to a FTSE SmallCap index (excluding
investment companies) rise of 0.5% and a FTSE All-Share increase of
0.6% on a total return basis. The performance of AIM was impacted
by its high exposure to growth companies in the technology and
healthcare sectors, highlighting the movement away from growth and
momentum driven shares. While VCTs face additional investment
constraints, the AIM index remains the most relevant broad equity
market index for comparative analysis, given the nature of the
underlying investments. The FTSE SmallCap and FTSE All-Share
indices provide wider context for understanding market
dynamics.
In light of uncertain market conditions, the
pace of initial public offerings (IPOs) and further fundraisings
for existing listed businesses across all UK industries continued
to be slow. There was a total of 17 IPOs on AIM over the period,
compared to 13 the previous financial year. Additionally, AIM saw a
number of exits fairly consistent with historic levels and now
stands at 742 companies as at the end of February, down 8% on the
previous year due to lower IPO activity. We still believe that
equity markets (and VCTs in particular), continue to be a critical
platform for funding smaller companies. This significance was
underscored by the ongoing flow of further fundraisings on AIM
throughout the year, albeit at a slower pace than the previous
year. In the year to 29 February 2024, AIM raised £1.7 billion of
capital for new and existing companies, compared to £2.1 billion in
the previous year.
Performance
Adding back the 5p of dividends paid in the year, the NAV total
return fell by 13.0%. This compares with a fall in the FTSE AIM
All-Share Index of 12.6%, a rise in the FTSE SmallCap (excluding
investment companies) of 0.5% and a rise in the FTSE All-Share
Index of 0.6%, all on a total return basis.
The year to 29 February 2024 was marked by
significant market volatility, driven by both global and local
economic uncertainty. The prevailing themes were rising inflation
and expectations of higher interest rates, which dampened consumer
confidence. The reality of the consumer credit crunch impacted many
in the UK, which was exacerbated by the realisation that the
impending expiration of fixed mortgage rates would add further
uncertainty. Although the fall in energy and food prices provided
somewhat of a soft landing, the squeeze on consumer spending
persisted as interest rate expectations continued to rise more
steeply than anticipated. Between December 2021 and August 2023,
the Bank of England increased interest rates a total of 14 times
from a low of 0.1% to the year-end level of 5.25%. Against this
background, performance in the FTSE AIM All-Share Index was
affected by the momentum away from smaller growth companies and the
move towards lower risk appetite drove the investment in
traditional sectors and larger, well-established companies. This
largely explains the fall in the NAV in the year under review. The
portfolio’s relatively high exposure to small growth companies
(particularly in the healthcare and technology sectors), was
detrimental to performance in a market environment where risk
averse investors have little appetite for earlier stage growth
stocks. Predictably, volatile market dynamics lead to greater
investor focus not just on product and service offering, but on
healthy balance sheets and the ability to access financing.
Some of the larger, profitable holdings in the
portfolio, including GB Group and Brooks MacDonald, were affected
by the poor market sentiment towards AIM growth stocks
generally.
SDI Group, which designs and manufactures
specialist scientific products, was the largest detractor to
performance over the period under review. The company had a couple
of disappointing downgrades over the year due to the end of a
contract with Atik cameras, which had been lucrative over the COVID
period. However, we are encouraged by the recent change in the
management team and the new CEO comes with a wealth of operational
experience in the sector, which has started to feed through
positively over the last few months.
Learning Technologies, a provider of e-learning
services and technologies, was another big detractor to the
performance of the portfolio as trading performance was affected by
the challenging macro environment which impacted both transaction
and project-based work. However, this has prompted a much needed
refocus on profitability and technology redevelopment. Furthermore,
the company recently embarked on a plan to accelerate its support
of higher growth areas of the business that are more aligned with
its core proposition of digital learning and talent management
through the sale of non-core assets, which should enable it to fund
future value-enhancing acquisitions.
Libertine Holdings, which develops linear
generator technologies for use in industry, had a very challenging
year, despite which the company continues to support the
integration of its HEXAGEN™ technology platform with Hyliion
Holdings Corp. and develop its intelliGEN™ technology platform
alongside a number of other commercial projects. However, the need
for further capital to enable the development of its technology
weighs down on the share price performance.
Sosandar, the women’s clothing retailer,
announced its decision to open own-branded retail outlets in the UK
and its move away from being a pure play retail online business
came as a surprise to the market. Though the decision will likely
increase the costs of the business in the short term, the instore
retail offering allows the company to capitalise on the growth of
its brand visibility and popularity in existing major UK retail
stores (both instore and online) which include Sainbury’s Tu, NEXT
and Marks & Spencer. The company’s products serve a fairly
resilient market demographic, and its increasing popularity has
opened up opportunities to expand internationally. Encouragingly,
and despite slowing down its discount strategy, the company had a
strong calendar year-end trading period and has returned to
quarterly profitability.
Feedback, the specialist medical imaging
technology company, has made considerable progress over the last
year. The company announced that it had secured a series of
contracts for a pilot programme with the Community Diagnostic
Centres (CDCs) in the UK and has now received an extension to the
pilot contract with Queen Victoria Hospital (QVH). The pilots will
build on the pilot contract for Sussex ICS with QVH and are also
expected to enable direct GP access into CDC diagnostic services,
further streamlining the patient pathway. Furthermore, the company
continues to focus on the development of its Bleepa product, and
its commercial release should underpin its sales prospects going
forward. Despite the trading progress, concerns regarding well
publicised issues with the NHS and muted investor interest in the
healthcare sector, has impacted the share price negatively.
On the positive side, we have seen many
companies in the portfolio report solid trading performances over
the period which have been reflected in their share prices and
contribute positively to the portfolio performance. This included
construction materials group Breedon, who continued to benefit from
its dynamic pricing strategy and focus on operational excellence
throughout the year, putting them in a strong position despite
macro-economic and industry headwinds. As a result, the company had
a series of revenue and profit upgrades during the year.
Craneware, a provider of data systems to US
healthcare providers, recently posted interim results which
highlighted a return to positive trading and new momentum against a
backdrop of improving market conditions across its market. The
company reported significant increases in sales to both existing
and new customers, with customer retention at an all-time high. The
management team remains committed to growth and is confident in the
short-term and longer-term trading outlook. Craneware is positioned
as a leader in Value Cycle Solutions for the US healthcare market
and remains well placed to benefit from positive market dynamics as
the industry recovers. We believe that the size of the market
opportunity is significant, and the company continues to invest in
R&D and innovation to capitalise on this opportunity.
Ergomed, a pharmaceutical services company,
performed strongly during the first half of the year, recording
strong revenue and profit growth. Later in the year the company was
approached by Permira, a private equity firm, and the bid was duly
accepted, and hence we sold our shares for £9.8 million proceeds,
recognising a profit on disposal of £8.6 million.
In our private company holdings both Popsa and
Hasgrove had their valuations increased over the year; Popsa was
valued upwards during the period due to good trading performance
over the year and Hasgrove has a growing recurring revenue base and
a strong balance sheet. This, coupled with general market weakness
that impacted quoted company share price performance, resulted in
an increased proportion of unquoted investments in the
portfolio.
Portfolio activity
Having made one qualifying investment at a total cost of £0.5
million in the first half of the year, we added one further
qualifying investment of £1.6 million as well as five follow-on
investments totalling £3.7 million in the second half of the year.
This made a total investment of £5.8 million in qualifying
investments for the year, an increase on last year’s £4.9 million.
Post the year end, we have invested a further £0.2 million into one
qualifying investment.
We invested in two new qualifying issues in the
year, Tan Delta Systems plc and Eden Research plc. In the second
half of the year we made follow-on investments into Haydale
Graphene Industries plc, Rosslyn Data Technologies plc, GENinCode
plc, Equipmake Holdings plc and Verici Dx plc. In August 2023, we
made a £0.5 million investment in Tan Delta Systems plc, a global
manufacturer of real-time oil quality monitoring sensors and
systems and a new entrant to AIM. In September 2023, we invested
approximately £1.6 million in Eden Research plc, a company that
develops and supplies biopesticide products and natural
microencapsulation technologies.
During the year we took profits from rising
share prices, selling part of our holdings in nine companies. We
also fully disposed of eight holdings, Adept Telecom plc, Ergomed
plc, Osirium Technologies plc, Itsarm plc, Clean Power Hydrogen
plc, Velocys plc, Polarean Imaging plc and Glantus Holdings plc.
Disposals made a £3.5 million gain over original cost and generated
£14.0 million of cash proceeds. Due to taking exceptional profits
on some of these disposals, most notably the full disposal of
Ergomed, the Board is proposing a special dividend of 4.9p which
will be paid at the same time as the final dividend.
Non-qualifying investments are used to manage
liquidity while awaiting new qualifying investment opportunities.
Although we still hold some existing non-qualifying AIM holdings
where we see the opportunity for further share price progress, we
continued to reduce some of these holdings in the year under
review. During the year we increased our holdings in the FP Octopus
Micro Cap Fund, FP Octopus Multi Cap Income Fund and the FP Octopus
Future Generation Fund, investing a total of £1.7 million over the
period. We also disposed of part of our holding in FP Octopus UK
Multi Cap Income Fund for £2.6 million.
Liquidity
The issue of liquidity within investment funds has remained a topic
of discussion this year. Shareholders may be interested to know
that at the year end 53.8% of the Company’s net assets were held in
individual quoted shares, 7.6% were held in unquoted single company
investments and 37.8% were held in cash or collective investment
funds providing short-term liquidity. Shareholders should be aware
that a proportion of the quoted holdings may have limited liquidity
owing to the size of the investee company and the overall
proportion held by the Company.
VCT regulations
There have been no further changes to the VCT regulations since the
publication of the previous set of audited accounts, however the
sunset clause was extended to 2035 in the Autumn statement. The key
requirements are that 30% of funds raised should be invested in
qualifying holdings within twelve months of the end of the
accounting period in which the shares were issued, and the Company
has to maintain a minimum of 80% of the portfolio (at cost)
invested in qualifying holdings. We remain committed to maintaining
a threshold of quality and to invest where we see the potential for
returns from growth. Over time there has been a gradual change to
the profile of the portfolio towards earlier-stage companies.
However, we continue to hold the larger market capitalisation
companies, in which we invested several years ago as qualifying
companies, or which we bought in the market prior to the rule
changes, where we see the potential for them to continue to
grow.
In order to qualify, companies must:
• have fewer than 250 full-time equivalent employees;
• have less than £15 million of gross assets at the time of
investment and no more than £16 million immediately post
investment;
• be less than seven years old from the date of their first
commercial sale (or ten years if a knowledge intensive company) if
raising State Aided (i.e. VCT) funds for the first time;
• have raised no more than £5 million of State Aided funds in the
previous 12 months and less than the lifetime limit of £12 million
(or £10 million in 12 months and a £20 million lifetime limit if a
knowledge intensive company); and
• produce a business plan to show that the funds are being raised
for growth and development.
Outlook and future
prospects
The portfolio contains 88 holdings with investments across a wide
range of sectors. The balance of holdings in the portfolio is
towards profitable companies and many are still trading in line or
above market expectations. With many small companies trading below
their long-term average, we still see good growth potential when
the market recovers.
Macro-economic dynamics remain a key focus and
the timing of interest rate cuts will be critical. Although the
consensus among economists indicates that interest rates have
peaked, a cut in interest rates sooner rather than later will
likely be a strong catalyst for a much-needed market sentiment
boost. However, the timing of the interest rate cut will likely be
impacted by the Prime Minister’s recent decision to call a general
election on 4 July, earlier than the expected Autumn date.
The Octopus Quoted Companies team
Viability statement
In accordance with provision 4.31 of the UK
Corporate Governance Code 2018, the Directors have assessed the
prospects of the Company over a longer period than the twelve
months required by the ‘going concern’ provision. The Board
conducted this review for a period of five years, which was
considered to be a reasonable time horizon given that the Company
has raised funds under an offer for subscription which closed to new
applications on 21 December 2023 and, under VCT rules, subscribing
investors are required to hold their investment for a five-year
period in order to benefit from the associated tax reliefs. The
Board regularly considers the Company’s strategy, including
investor demand for the Company’s shares, and a five-year period is
considered to be a reasonable time horizon for this.
The Board carried out a robust assessment of the
emerging and principal risks facing the Company and its current
position. This includes the impact of the cost of living crisis,
the unstable economic environment and any other risks which may
adversely impact its business model, future performance, solvency
or liquidity. Particular consideration was given to the Company’s
reliance on, and close working relationship with, the Investment
Manager. The principal risks faced by the Company and the
procedures in place to monitor and mitigate them are set out
below.
The Board has also considered the liquidity of
the underlying investments and the Company’s cash flow projections
considering the material inflows and outflows of the Company
including investment activity, buybacks, dividends and fees and
found these to be realistic and reasonable. The Company’s cash flow
includes cash equivalents which are short-term, highly liquid
investments.
Based on the above assessment the Board confirms
that it has a reasonable expectation that the Company will be able
to continue in operation and meet its liabilities as they fall due
over the five-year period to 28 February 2029.
Risk and risk management
Principal risks, risk management and regulatory
environment
In accordance with the Listing Rules under which the Company
operates, the Board is required to comment on the potential risks
and uncertainties which could have a material impact on the
Company’s performance.
The Board carries out a review of the risk
environment in which the Company operates. The main areas of risk
identified by the Board are as follows:
Risk |
Mitigation |
Investment performance: The focus of the Company’s
investments is into VCT qualifying companies quoted on AIM and the
AQSE, which by their nature entail a higher level of risk and lower
liquidity than investments in larger quoted companies. |
The Investment Manager has significant experience and a strong track
record of investing in AIM and AQSE companies, and appropriate due
diligence is undertaken on every new investment. The overall risk
in the portfolio is mitigated by maintaining a wide spread of
holdings in terms of financing stage, age, industry sector and
business models. The Board reviews the investment portfolio with
the Investment Manager on a regular basis. |
VCT qualifying status risk: The Company is
required at all times to observe the conditions for the maintenance
of HMRC approved VCT status. The loss of such approval could lead
to the Company and its investors losing access to the tax benefits
associated with VCT status and, in certain circumstances, to
investors being required to repay the initial income tax relief on
their investment.
|
Prior to investment, the Investment Manager seeks assurance from
the Company’s VCT status adviser that the investment will meet the
legislative requirements for VCT investments.
On an ongoing basis, the Investment Manager monitors the Company’s
compliance with VCT regulations on a current and forecast basis to
ensure ongoing compliance with VCT legislation. Regular updates are
provided to the Board throughout the year.
The VCT status adviser formally reviews the Company’s compliance
with VCT regulations on a bi-annual basis and reports their results
to the Board. |
Operational risk (reliance on Octopus): The Board
is reliant on the Investment Manager to manage investments
effectively, and manage the services of a number of third parties,
in particular the registrar and tax advisers. A failure of the
systems or controls at the Investment Manager or third-party
providers could lead to an inability to provide accurate reporting
and to ensure adherence to VCT and other regulatory rules. |
The Board reviews the system of internal control, both financial and
non-financial, operated by the Investment Manager (to the extent the
latter are relevant to the Company’s internal controls). These
include controls that are designed to ensure that the Company’s
assets are safeguarded, that proper accounting records are
maintained, and that regulatory reporting requirements are met.
Feedback on other third parties is reported to the Board on at
least an annual basis, including adherence to Service Level
Agreements where relevant. |
Information security: A loss of key data could
result in a data breach and fines. The Board is reliant on the
Investment Manager and third parties to take appropriate measures
to prevent a loss of confidential customer information. |
Annual due diligence is conducted on third parties which includes a
review of their controls for information security. The Investment
Manager has a dedicated information security team and a third party
is engaged to provide continual protection in this area. A security
framework is in place to help prevent malicious events. The
Investment Manager reports to the Board on an annual basis to
update them on relevant information security arrangements.
Significant and relevant information security breaches are escalated
to the Board when they occur. |
Economic and price risk: Events such as an
economic recession, movement in interest rates, inflation, political
instability and rising living costs could cause volatility in the
market, adversely impacting the valuation of investments. This
could result in a reduction in the value of the Company’s
assets. |
The Company invests in a diverse portfolio of companies across a
range of sectors, which helps to mitigate against the impact of
performance in any one sector. The Company also maintains adequate
liquidity to make sure it can continue to provide follow-on
investment to those portfolio companies which require it and which
is supported by the individual investment case.
The Investment Manager monitors the impact of macroeconomic
conditions on an ongoing basis and provides updates to the Board at
least quarterly. |
Regulatory and reputational risk/legislative: A
change to the VCT regulations could adversely impact the Company by
restricting the companies the Company can invest in under its
current strategy. Similarly, changes to VCT tax reliefs for
investors could make VCTs less attractive and impact the Company’s
ability to raise further funds.
Failure to adhere with other relevant legislation and regulation
could result in reputational damage and/or fines. |
The Investment Manager engages with HM Treasury and industry bodies
to demonstrate the positive benefits of VCTs in terms of growing UK
companies, creating jobs and increasing tax revenue, and to help
shape any change to VCT legislation.
The Investment Manager employs individuals with expertise across
the legislation and regulation relevant to the Company. Individuals
receive ongoing training and external experts are engaged where
required. |
Liquidity/cash flow risk: The risk that the
Company’s available cash will not be sufficient to meet its financial
obligations. The Company invests in smaller companies, which are
inherently less liquid than stocks on the main market. Therefore,
these may be difficult to realise for their fair market value at
short notice. |
The Investment Manager prepares cash flow forecasts to make sure
cash levels are maintained in accordance with policies agreed with
the Board. The Company’s overall liquidity levels are monitored on
a quarterly basis by the Board, with close monitoring of available
cash resources. The Company maintains sufficient cash and readily
realisable securities, including money market funds and OEICs,
which can be accessed at short notice. As at 29 February 2024,
27.0% of net assets were held in cash and cash equivalents and
10.8% in OEICs, realisable in seven business days. |
Valuation risk: For smaller companies or illiquid
shares, establishing a fair value can be difficult due to the lack of
readily available market data for similar shares, resulting in a
limited number of external reference points. |
Investments in companies traded on AIM and AQSE are valued by the
Investment Manager using closing bid prices as reported on
Bloomberg. Where investments are in unquoted companies or where
there are indicators bid price is not appropriate, alternative
valuation techniques are used in accordance with the International
Private Equity and Venture Capital (IPEV) guidelines.
Valuations of unquoted portfolio companies are performed by
appropriately experienced staff, with detailed knowledge of both the
portfolio company and the market in which it operates. These
valuations are then subject to review and approval by the Octopus
Valuations Committee, comprised of staff who are independent of the
Investment team and with relevant knowledge of unquoted company
valuations. The Board reviews valuations after they have been
agreed by the Octopus Valuations Committee.
Investment in FP Octopus UK Micro Cap Growth Fund, FP Octopus UK
Multi Cap Income Fund and FP Octopus UK Future Generations Fund are
all valued with reference to the daily prices which are published
by Fund Partners, the Authorised Corporate Director. |
Emerging risks
The Board has considered emerging risks. The Board seeks to
mitigate emerging risks and those noted below by setting policy,
regular review of performance and monitoring progress and
compliance. In the mitigation and management of these risks, the
Board applies the principles detailed in the Financial Reporting
Council’s Guidance on Risk Management, Internal Control and Related
Financial and Business Reporting.
The following are some of the potential emerging
risks that the Board and the Investment Manager are currently
monitoring:
• Geo-political protectionism.
• Climate change.
Directors' responsibilities
statement
The Directors are responsible for preparing the annual report and
accounts in accordance with applicable law and regulations.
Company law requires the Directors to prepare
financial statements for each financial year. Under that law the
Directors are required to prepare the financial statements and have
elected to prepare the Company’s financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law) including FRS 102
– ‘The Financial Reporting Standard applicable in the UK and
Republic of Ireland’. Under company law the Directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and of the profit or loss for the Company for that
period.
In preparing these financial statements, the
Directors are required to:
• select suitable accounting policies and then
apply them consistently;
• make judgements and accounting estimates that are reasonable and
prudent;
• state whether applicable UK accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
• prepare a strategic report, a Director’s report and Director’s
remuneration report which comply with the requirements of the
Companies Act 2006.
The Directors are responsible for keeping
adequate accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable accuracy at
any time the financial position of the Company and enable them to
ensure that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for ensuring that
the annual report and accounts, taken as a whole, are fair,
balanced, understandable and provide the information necessary for
shareholders to assess the Company’s position and performance,
business model and strategy.
Website publication
The Directors are responsible for ensuring the annual report and
the accounts are made available on a website. Financial statements
are published on the Investment Manager’s website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company’s website is the responsibility of the Directors.
The Directors’ responsibility also extends to the ongoing integrity
of the financial statements contained therein.
Directors’ responsibilities pursuant to
Disclosure Guidance and Transparency Rule 4 (DTR4)
Neal Ransome (Chair), Andrew Boteler, Stephen
Hazell-Smith and Joanne Parfrey, the Directors, confirm to the best
of their knowledge that:
• the financial statements have been prepared in
accordance with the Financial Reporting Standard applicable in the
United Kingdom and Republic of Ireland (‘FRS 102’) and give a true
and fair view of the assets, liabilities, financial position and
profit and loss of the Company; and
• the annual report includes a fair review of
the development and performance of the business and the financial
position of the Company, together with a description of the
principal risks and uncertainties that it faces.
By Order of the Board
Neal Ransome
Chair
Income statement
|
Year to 29 February 2024 |
Year to 28 February 2023 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£'000 |
£’000 |
£’000 |
£'000 |
£’000 |
£’000 |
Gain on disposal of fixed asset investments |
- |
813 |
813 |
- |
207 |
207 |
Loss on disposal of current asset investments |
- |
(246) |
(246) |
- |
- |
- |
Loss on valuation of fixed asset investments |
- |
(16,322) |
(16,322) |
- |
(29,192) |
(29,192) |
Loss on valuation of current asset investments |
- |
(1,137) |
(1,137) |
- |
(2,233) |
(2,233) |
Investment income |
2,060 |
- |
2,060 |
1,068 |
24 |
1,092 |
Investment management fees |
(555) |
(1,666) |
(2,221) |
(650) |
(1,949) |
(2,599) |
Other expenses |
(681) |
- |
(681) |
(689) |
- |
(689) |
Profit/(loss) before tax |
824 |
(18,558) |
(17,734) |
(271) |
(33,143) |
(33,414) |
Tax |
- |
- |
- |
- |
- |
- |
Total comprehensive loss after tax |
824 |
(18,558) |
(17,734) |
(271) |
(33,143) |
(33,414) |
Earnings per share – basic and diluted |
0.4p |
(10.0p) |
(9.6p) |
(0.2p) |
(20.0p) |
(20.2p) |
• The ‘Total’ column of this statement represents the statutory
income statement of the Company; the supplementary revenue return
and capital return columns have been prepared in accordance with
the AIC Statement of Recommended Practice.
• 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, as well as OEIC 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.
The accompanying notes are an integral part of the Financial
Statements.
Balance sheet
|
As at 29 February 2024 |
As at 28 February 2023 |
|
£’000 |
£’000 |
£’000 |
£’000 |
Fixed asset investments |
|
80,350 |
|
102,667 |
Current assets: |
|
|
|
|
Investments |
13,897 |
|
16,188 |
|
Money market funds |
33,641 |
|
21,433 |
|
Debtors |
666 |
|
354 |
|
Applications cash1 |
4 |
|
3 |
|
Cash at bank |
1,276 |
|
1,437 |
|
|
49,484 |
|
39,415 |
|
Creditors: amounts falling due within one year |
(725) |
|
(860) |
|
Net current assets |
|
48,759 |
|
38,555 |
Total assets less current liabilities |
|
129,109 |
|
141,222 |
Called up equity share capital |
|
2,038 |
|
1,798 |
Share premium |
|
18,041 |
|
18,924 |
Capital redemption reserve |
|
341 |
|
279 |
Special distributable reserve |
|
124,213 |
|
118,015 |
Capital reserve realised |
|
(24,622) |
|
(23,143) |
Capital reserve unrealised |
|
10,470 |
|
27,545 |
Revenue reserve |
|
(1,372) |
|
(2,196) |
Total equity shareholders’ funds |
|
129,109 |
|
141,222 |
NAV per share – basic and diluted |
|
63.3p |
|
78.5p |
1Cash held but not yet allotted
The statements were approved by the Directors and authorised for
issue on 6 June 2024 and are signed on their behalf by:
Neal Ransome
Chair
Company number: 03477519
The accompanying notes are an integral part of
the Financial Statements.
Statement of changes in
equity
|
Share capital |
Share premium |
Capital redemption reserve |
Special distributable
reserves1 |
Capital reserve
realised1 |
Capital reserve unrealised |
Revenue reserve1 |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
As at 1 March 2023 |
1,798 |
18,924 |
279 |
118,015 |
(23,143) |
27,545 |
(2,196) |
141,222 |
Comprehensive income for the year: |
|
|
|
|
|
|
|
|
Management fee allocated as
capital expenditure |
- |
- |
- |
- |
(1,666) |
- |
- |
(1,666) |
Current period gain on
disposal |
- |
- |
- |
- |
571 |
- |
- |
571 |
Current period loss on
revaluation of investments |
- |
- |
- |
- |
- |
(17,459) |
- |
(17,459) |
Capital investment income |
- |
- |
- |
- |
- |
- |
- |
- |
Profit after tax |
- |
- |
- |
- |
- |
- |
824 |
824 |
Total comprehensive loss for the year |
- |
- |
- |
- |
(1,095) |
(17,459) |
824 |
(17,730) |
Contributions by and
distributions
to owners: |
|
|
|
|
|
|
|
|
Repurchase and cancellation of
own shares |
(62) |
- |
62 |
(4,083) |
- |
- |
- |
(4,083) |
Issue of shares |
302 |
20,082 |
- |
- |
- |
- |
- |
20,384 |
Share issue costs |
- |
(1,158) |
- |
- |
- |
- |
- |
(1,158) |
Dividends paid |
- |
- |
- |
(9,526) |
- |
- |
- |
(9,526) |
Total contributions by and distributions to
owners: |
240 |
18,924 |
62 |
(13,609) |
- |
- |
- |
5,617 |
Other
movements |
|
|
|
|
|
|
|
|
Cancellation of share
premium |
- |
(19,807) |
- |
19,807 |
- |
- |
- |
- |
Prior years’ holding gains now
realised |
- |
- |
- |
- |
2,871 |
(2,871) |
- |
- |
Transfer in reserves |
- |
- |
- |
- |
(3,255) |
3,255 |
- |
- |
Total other movements |
- |
(19,807) |
- |
19,807 |
(384) |
384 |
- |
- |
Balance as at 29 February 2024 |
2,038 |
18,041 |
341 |
124,213 |
(24,622) |
10,470 |
(1,372) |
129,109 |
|
Share capital |
Share premium |
Capital redemption reserve |
Special distributable
reserves1 |
Capital reserve
realised1 |
Capital reserve unrealised |
Revenue reserve1 |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
As at 1 March 2022 |
1,605 |
25,450 |
236 |
105,258 |
(20,762) |
58,307 |
(1,925) |
168,169 |
Comprehensive income for the year: |
|
|
|
|
|
|
|
|
Management fee allocated as
capital expenditure |
- |
- |
- |
- |
(1,949) |
- |
- |
(1,949) |
Current period gain on
disposal |
- |
- |
- |
- |
207 |
- |
- |
207 |
Current period loss on
revaluation of investments |
- |
- |
- |
- |
- |
(31,425) |
- |
(31,425) |
Capital investment income |
- |
- |
- |
- |
24 |
- |
- |
24 |
Loss after tax |
- |
- |
- |
- |
- |
- |
(271) |
(271) |
Total comprehensive loss for the year |
- |
- |
- |
- |
(1,718) |
(31,425) |
(271) |
(33,414) |
Contributions by and
distributions
to owners: |
|
|
|
|
|
|
|
|
Repurchase and cancellation of
own shares |
(43) |
- |
43 |
(3,567) |
- |
- |
- |
(3,567) |
Issue of shares |
236 |
19,742 |
- |
- |
- |
- |
- |
19,978 |
Share issue costs |
- |
(668) |
- |
- |
- |
- |
- |
(668) |
Dividends paid |
- |
- |
- |
(9,276) |
- |
- |
- |
(9,276) |
Total contributions by and distributions to
owners: |
193 |
19,074 |
43 |
(12,843) |
- |
- |
- |
6,467 |
Other
movements |
|
|
|
|
|
|
|
|
Cancellation of share
premium |
- |
(25,600) |
- |
25,600 |
- |
- |
- |
- |
Prior years’ holding gains now realised |
- |
- |
- |
- |
(663) |
663 |
- |
- |
Total other movements |
- |
(25,600) |
- |
25,600 |
(663) |
663 |
- |
- |
Balance as at 28 February 2023 |
1,798 |
18,924 |
279 |
118,015 |
(23,143) |
27,545 |
(2,196) |
141,222 |
1Included in these reserves is an amount of
£98,219,000 (2023: £92,676,000) which is considered distributable
to shareholders.
Cash flow statement
|
Year to 29 February
2024 |
Year to 28 February
2023 |
|
£'000 |
£'000 |
Cash flows from operating activities
|
|
|
|
|
Loss before tax |
(17,734) |
(33,414) |
Adjustments for: |
|
|
Decrease/(increase) in
debtors |
131 |
(25) |
(Decrease)/increase in
creditors |
(134) |
(794) |
Gain on disposal of fixed asset
investments |
(813) |
(207) |
Loss on disposal of current asset
investments |
246 |
– |
Loss on valuation of fixed asset
investments |
16,322 |
29,192 |
Loss on valuation of current
asset investments |
1,137 |
2,233 |
Non-cash distributions |
– |
(24) |
Cash utilised in operations |
(845) |
(3,039) |
Income
taxes paid |
– |
– |
Net cash utilised in operating activities |
(845) |
(3,039) |
|
|
|
Cash flows from
investing activities |
|
|
Purchase of fixed asset
investments |
(7,149) |
(4,880) |
Proceeds from sale of fixed asset
investments |
13,517 |
2,478 |
Purchase of current asset
investments |
(1,080) |
(1,878) |
Proceeds from sale of current asset investments |
1,988 |
– |
Total cash flows generated from/(utilised in)
investing activities |
7,276 |
(4,280) |
|
|
|
Cash flows from
financing activities |
|
|
Movement in applications
account |
(1) |
243 |
Purchase of own shares |
(4,083) |
(3,567) |
Proceeds from share issues |
18,558 |
18,217 |
Share issue costs |
(1,157) |
(668) |
Dividends paid (net of DRIS) |
(7,700) |
(7,515) |
Net cash flows from financing activities |
5,617 |
6,710 |
Increase/(decrease) in cash and cash
equivalents |
12,048 |
(609) |
Opening cash and cash equivalents |
22,873 |
23,482 |
Closing cash and cash equivalents |
34,921 |
22,873 |
|
|
|
Cash and cash
equivalents is represented by: |
|
|
Cash at bank |
1,276 |
1,437 |
Applications cash |
4 |
3 |
Money
market funds |
33,641 |
21,433 |
Total cash and cash equivalents |
34,921 |
22,873 |
The accompanying notes are an integral part of
the Financial Statements.
Post balance sheet events
The following events occurred between the balance sheet date and
the signing of these financial statements.
• A follow-on
investment totalling £196,000 completed in PCI-Pal plc.
• A follow-on
investment totalling £108,000 completed in FP Octopus UK Future
Generations Fund
• A partial disposal
of 257,924 shares in Spectral AI inc. for total consideration of
£340,000.
• A full disposal of 226,273 shares in
Renalytix plc for total consideration of £123,000.
• A full disposal of 295,600 shares in
LoopUp Group plc for total consideration of £1,000.
• A full disposal of
2,955,131 shares in Cordel Group plc for total consideration of
£97,000.
• A full disposal of
45,376 shares in Cirata plc for total consideration of £22,000.
The following shares have been bought back since
the year end:
• 21 March 2024:
691,776 shares at a price of 62.1p per share.
• 25 April 2024: 406,159 shares at a
price of 61.2p per share.
• 23 May 2024:
346,056 shares at a price of 63.2p per share.
Notes to the financial
statements
1. Principal accounting
policies
The Company is a Public Limited Company (plc) incorporated in
England and Wales and its registered office is 33 Holborn, London
EC1N 2HT.
The Company’s principal activity is to invest in
a diverse portfolio of predominantly AIM-traded companies with the
aim of providing shareholders with attractive tax-free dividends
and long-term capital growth.
Basis of preparation
The financial statements have been prepared under the historical
cost convention, except for the measurement at fair value of
certain financial instruments, and in accordance with UK Generally
Accepted Accounting Practice (‘GAAP’), including Financial
Reporting Standard 102 – The Financial Reporting Standard
applicable in the United Kingdom and Republic of Ireland’ (‘FRS
102’), and with the Companies Act 2006 and the Statement of
Recommended Practice (‘SORP’) ‘Financial Statements of Investment
Trust Companies and Venture Capital Trusts’ (issued in July
2022).
The principal accounting policies have remained
unchanged from those set out in the Company’s 2023 annual report
and accounts.
2. Income
Accounting policy
Investment income includes interest earned on money market
securities is shown net of income tax withheld at source. Dividend
income is shown net of any related tax credit. Dividends are
allocated to revenue or capital depending on whether the dividend
is of a revenue or capital nature.
Dividends receivable are brought into account
when the Company’s right to receive payment is established and it
is probable that payment will be received. Fixed returns on debt
and money market securities are recognised on a time apportionment
basis so as to reflect the effective yield, provided there is no
reasonable doubt that payment will be received in due course.
Disclosure
|
29
February |
28
February |
|
2024 |
2023 |
|
£’000 |
£’000 |
Dividends receivable from fixed asset investments |
866 |
834 |
In-specie dividend1 |
– |
24 |
Loan note interest receivable |
41 |
45 |
Income receivable on money market securities |
1,153 |
189 |
|
2,060 |
1,092 |
1In the prior year, the Company
received shares in Verici Dx PLC as a result of an in-specie
dividend from EKF Diagnostics Holdings plc. These have been treated
as capital income.
3. Investment management fees
|
29 February 2024 |
28 February 2023 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Investment management fee |
555 |
1,666 |
2,221 |
650 |
1,949 |
2,599 |
Octopus provides investment management and
accounting and administration services to the Company under a
management agreement which initially ran with Close Investment
Limited from 3 February 1998 and was then novated to Octopus for a
period of five years with effect from 29 July 2008 and may be
terminated at any time thereafter by not less than twelve months’
notice given by either party. No compensation is payable in the
event of terminating the agreement by either party, if the required
notice period is given. The fee payable, should insufficient notice
be given, will be equal to the fee that would have been paid should
continuous service be provided, or the required notice period was
given. The management fee is an annual charge set at 2% of the
Company’s net assets, less deductions outlined below, calculated on
a quarterly basis. The Investment Manager is not entitled to any
annual performance incentive scheme.
During the year Octopus charged gross management
fees of £2,614,000 (2023: £3,067,000). When the various allowances
detailed below are included, the net management fees for the year
are £2,221,000 (2023: £2,599,000). At the year end there was
£499,000 payable to Octopus (2023: £580,000). Octopus received
£243,000 as a result of upfront fees charged on allotments of
Ordinary shares (2023: £282,000).
The Company now pays ongoing adviser charges to
independent financial advisers (‘IFAs’). Ongoing adviser charges
are an ongoing fee of up to 0.5% per annum for a maximum of nine
years paid to advisers who are on an advised and ongoing fee
structure. The Company is rebated for this cost by way of a
reduction in the annual management fee. For the year to 29 February
2024 the rebate received was £140,000 (2023: £183,000).
The Company also facilitates upfront fees to
IFAs where an investor has invested through a financial adviser and
has received upfront advice. Where an investor agrees to an upfront
fee only, the Company can facilitate a payment of an initial
adviser charge of up to 4.5% of the investment amount. If the
investor chooses to pay their intermediary/adviser less than the
maximum initial adviser charge, the remaining amount will be used
for the issue and allotment of additional new shares for the
investor. In these circumstances the Company does not facilitate
ongoing annual payments. To make sure that the Company is not
financially disadvantaged by such payment, a notional ongoing
adviser charge equivalent to 0.5% per annum will be deemed to have
been paid by the Company for a period of nine years. The Company is
rebated for this cost, also by way of a reduction in the annual
management fee. For the year to 29 February 2024 the rebate
received was £171,000 (2023: £202,000).
The Company also receives a reduction in the
management fee for the investments in other Octopus managed funds,
being the Multi Cap, Micro Cap and Future Generations products, to
ensure the Company is not double charged on these products. This
amounted to £80,000 for the year to 29 February 2024 (2023:
£83,000).
The management fee has been allocated 25% to
revenue and 75% to capital, in line with the Board’s expected
long-term return in the form of income and capital gains,
respectively, from the Company’s investment portfolio.
4. Other expenses
Accounting policy
All expenses are accounted for on an accruals basis and are charged
wholly to revenue, apart from management fees which are charged 25%
to revenue and 75% to capital.
The transaction costs incurred when purchasing or selling assets
are written off to the income statement in the period that they
occur.
Disclosure
|
29
February |
28
February |
|
2024 |
2023 |
|
£’000 |
£’000 |
IFA charges |
140 |
183 |
Directors’ remuneration |
103 |
98 |
Registrars’ fees |
69 |
65 |
Audit fees |
48 |
43 |
Printing and postage |
19 |
23 |
VCT monitoring fees |
17 |
13 |
Directors’ and officers’ liability insurance |
49 |
50 |
Broker’s fees |
6 |
6 |
Other administration expenses |
230 |
208 |
|
681 |
689 |
The fees payable to the Company’s auditor are
stated net of VAT and the VAT is included within other
administration expenses. No non-audit services were provided by the
Company’s auditor.
The ongoing charges of the Company were 2.1% of
average net assets during the year to 29 February 2024 (2023:
2.1%). Ongoing charges are calculated using the AIC methodology and
exclude exceptional costs and trail commission.
5. Tax
Accounting policy
Corporation tax payable is applied to profits
chargeable to corporation tax, if any, at the current rate. The tax
effect of different items of income/gain and expenditure/loss is
allocated between capital and revenue return on the ‘marginal’
basis as recommended in the SORP.
Deferred tax is recognised on an undiscounted
basis in respect of all timing differences that have originated but
not reversed at the balance sheet date, except as otherwise
indicated.
Deferred tax assets are only recognised to the
extent that it is probable that they will be recovered against the
reversal of deferred tax liabilities or other future taxable
profits.
The corporation tax charge for the year was £nil
(2023: £nil).
Disclosure
|
29
February |
28
February |
|
2024 |
2023 |
Tax reconcilation |
£’000 |
£’000 |
Loss before tax |
(17,733) |
(33,414) |
Current tax at 24.49% (2023:19.0%) |
(4,329) |
(6,349) |
Effects of |
|
|
Non-taxable income |
(492) |
(199) |
Non-taxbale capital gains |
4,123 |
5,932 |
Non-deductible expenses |
(6) |
(4) |
Excess management expenses on which deferred tax not
recognised |
704 |
620 |
Total tax charge |
- |
- |
Approved VCTs are exempt from tax on capital
gains within the Company. Since the Directors intend that the
Company will continue to conduct its affairs so as to maintain its
approval as a VCT, no deferred tax has been provided in respect of
any capital gains or losses arising on the revaluation or disposal
of investments.
As at 29 February 2024 there is an unrecognised
deferred tax asset of £7,211,000 (2023: £6,551,000) in respect of
accumulated surplus management expenses of £28,844,000 (2023:
£26,204,000), based on a prospective corporation tax rate of 25%
(2023: 25%). This deferred tax asset could in future be used
against taxable profits.
Provided the Company continues to maintain its
current investment profile, it is unlikely that the expenses will
be utilised and that the Company will obtain any benefit from this
asset.
6. Dividends
Accounting policy
Dividends payable are recognised as
distributions in the financial statements when the Company’s
liability to make payment has been established. This liability is
established on the record date, the date on which those
shareholders on the share register are entitled to the
dividend.
Disclosure
|
29
February |
28
February |
|
2024 |
2023 |
|
£’000 |
£’000 |
Dividends paid on Ordinary shares during the
year |
|
|
Final dividend – 2.5p paid 10 August 2023 (2023: 3.0p) |
4,451 |
4,775 |
Interim dividend – 2.5p paid 8 January 2024 (2023: 2.5p) |
5,075 |
4,501 |
|
9,526 |
9,276 |
During the year £1,826,000 (2023: £1,761,000) of dividends were
reinvested under the DRIS.
|
|
|
|
29
February |
28
February |
|
2024 |
2023 |
|
£’000 |
£’000 |
Dividends paid
and proposed in
respect of the
year |
|
|
Interim dividend – 2.5p paid 12 January 2024 (2023: 2.5p) |
5,075 |
4,501 |
Special dividend proposed: 4.9p payable 15 August 2024 (2023:
nil) |
9,934 |
- |
Final dividend proposed: 2.5p payable 15 August 2024 (2023:
2.5p) |
5,068 |
4,462 |
|
20,077 |
8,963 |
Under Section 32 of FRS 102 ‘Events After Balance Sheet Date’,
dividends payable at year end are not recognised as a liability in
the financial statements.
The above proposed final dividend is based on the number of shares
in issue at the date of this report. The actual dividend paid may
differ from this number as the dividend payable will be based on
the number of shares in issue on the record date and will reflect
any changes in the share capital between the year end and the
record date.
|
7. Earnings per share
|
29 February 2024 |
28 February 2023 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
Loss attributable to ordinary shareholders (£’000) |
824 |
(18,558) |
(17,734) |
(271) |
(33,143) |
(33,414) |
Earnings per ordinary share (p) |
0.4p |
(10.0p) |
(9.6p) |
(0.2p) |
(20.0p) |
(20.2p) |
The earnings per share is based on 185,664,255 Ordinary shares
(2023: 165,688,082, being the weighted average number of shares in
issue during the year), and the loss on ordinary activities after
tax for the year of £17,734,000 (2023: loss £33,414,000).
There are no potentially dilutive capital instruments in issue
and, as such, the basic and diluted earnings per share are
identical.
8. Net asset value per share
|
29
February |
28
February |
|
2024 |
2023 |
Net assets (£’000) |
129,109 |
141,222 |
Shares in issue |
203,828,309 |
179,802,084 |
NAV per share (p) |
63.3 |
78.5 |
There are no potentially dilutive capital instruments in issue
and, as such, the basic and diluted NAV per share are
identical.
9. Related party
transactions
As at 29 February 2024, Octopus Investments Nominees Limited (OINL)
held 0 shares (2023: 7,598) in the Company as beneficial owner from
shareholders to protect their interests after delays or errors with
shareholder instructions and other similar administrative tasks.
Throughout the period to 29 February 2024 OINL purchased 2,791
shares (2023: 9,875) at a cost of £2,000 (2023: £9,000) and sold
10,389 shares (2023: 3,166) for proceeds of £7,000 (2023: £3,000).
In accordance with the listing rules, this is classed as a related
party transaction as Octopus, the Investment Manager, and OINL are
part of the same group of companies. Any such future transactions,
where OINL takes over the legal and beneficial ownership of Company
shares will be announced to the market and disclosed in annual and
half yearly reports.
Octopus received £nil (2023: £nil) transaction
fees and directors’ fees from portfolio companies.
The Company holds £4,000 (2023: £3,000) of cash
on behalf of the Company and AIM VCT 2 plc. Of this, £2,000
(2023:£2,000) is attributable to the Company.
10. 2024 financial
information
The figures and financial information for the year ended 29
February 2024 are extracted from the Company’s annual financial
statements for the period and do not constitute statutory accounts.
The Company’s annual financial statements for the year to 29
February 2024 have been audited but have not yet been delivered to
the Registrar of Companies. The Auditors’ report on the 2024 annual
financial statements was unqualified, did not include a reference
to any matter to which the auditors drew attention without
qualifying the report, and did not contain any statements under
Sections 498(2) or 498(3) of the Companies Act 2006.
11. 2023 financial
information
The figures and financial information for the period ended 28
February 2023 are compiled from an extract of the published
financial statements for the period and do not constitute statutory
accounts. Those financial statements have been delivered to the
Registrar of Companies and included the Auditors’ report which was
unqualified, did not include a reference to any matter to which the
auditors drew attention without qualifying the report, and did not
contain any statements under Sections 498(2) or 498(3) of the
Companies Act 2006.
12. Annual Report and financial
statements
The Annual Report and financial statements will be posted to
shareholders in June and will be available on the Company’s
website. The Notice of Annual General Meeting is contained within
the Annual Report.
13. General information
Registered in England & Wales. Company No. 03477519
LEI: 213800C5JHJUQLAFP619
14. Directors
Neal Ransome (Chair), Stephen Hazell-Smith, Joanne Parfrey and
Andrew Boteler
15. Secretary and registered
office
Octopus Company Secretarial Services Limited
33 Holborn, London EC1N 2HT
Octopus Aim Vct (LSE:OOA)
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