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Octopus AIM VCT PLC (OOA)

Octopus AIM VCT PLC

Annual Financial Report
Annual Financial Report

Octopus AIM VCT plc

Final Results

21 May 2020

Octopus AIM VCT plc, managed by Octopus Investments Limited, today announces the final results for the year ended 29 February 2020.

These results were approved by the Board of Directors on 21 May 2020.

You may view the Annual Report in full at www.octopusinvestments.com in due course. All other statutory information will also be found there.

Financial Summary

   29 February 2020 28 February 2019
     
Net assets (£’000) 115,110 122,504
Profit/(loss) after tax (£’000) 992 (13,097)
Net asset value (“NAV”)  per share (p) 93.3 101.0
Dividends paid in year (p) 9.0 5.5
Total return (%) * 1.3 (8.3)
Final dividend proposed (p)** 3.0 3.0
Total ongoing charges (%) 1.9 2.1

*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.
**Subject to shareholder approval at the Annual General Meeting, the proposed final dividend will be paid on 7 August 2020 to shareholders on the register on 10 July 2020.

Chairman’s Statement

Introduction
Much of the year to 29 February 2020 was still dominated by the challenges around international trade, politics and Brexit which had caused domestic company shares to lag the larger more internationally exposed constituents of the FTSE 100. There was a dramatic change in sentiment after the December General Election and smaller companies outperformed for the next two months as investors turned their attention back to domestic companies and the potential for growth against a more certain political backdrop and the promise of an end to the Brexit impasse. Towards the end of February, sentiment changed again as reports first from China and then from Italy emerged about the seriousness of the Coronavirus and the measures that were going to be needed to combat it. It is now apparent that market volatility could continue for some time to come as the Government works out how to lift the lockdown measures that have been put in place with minimal costs to lives and long term damage to the economy.

The level of new fundraisings on AIM was subdued in the year ended 29 February 2020, with the number of new issues particularly weak compared with recent years. However, the level of fundraising for existing AIM companies was more robust demonstrating that AIM continues to do its job for its participants. In the year under review AIM has raised £3.7 billion of new capital for companies, a decrease from the £5.2 billion raised in the previous year. Against this background the AIM VCT made £6.2 million of new VCT qualifying investments in the period.

In the year under review, the Company raised £4.5 million net of costs through the issue of new shares and continued to buy back shares from shareholders wishing to sell. Since the period end it has made two further allotments of shares raising a total of £9.1 million net of costs. This is available for new and follow-on investments and we are already seeing opportunities to invest it to help companies navigate the current crisis.

Performance
Adding back the 9.0p of dividends paid out in the year, the NAV per share total return was +1.3%. To provide context in the same twelve months the FTSE AIM All-Share Index fell by 4.4%, the FTSE SmallCap (excluding investment companies) Index rose by 2.6% and the FTSE All-Share Index fell by 1.4%, all on a total return basis.

Once again stock specific factors had a significant impact on performance, both positive and negative, and these are covered in more detail in the Manager’s report. For much of the year smaller companies underperformed as the stock market focused on domestic political problems which weakened sterling and confidence in companies exposed to the domestic economy. This changed with the General Election result in December and domestic companies outperformed in December and January. February was a negative month for the whole stock market as it began to focus on the impact of the spread of Coronavirus although at that stage the main concern was a sharp interruption to Chinese growth rather than any wider consequences of it spreading to the rest of the world.

Further details of performance are contained in the Investment Manager’s Review.

Dividends
In January 2020 an interim dividend of 2.5p and a special dividend of 3.5p were paid to all shareholders in addition to the 3.0p final dividend that had been paid in August 2019. The special dividend was made following a number of partial and total sales of holdings from the portfolio in the year. The Board hopes to be able to continue to pay a minimum of 2.5p each half year and to adjust the final dividend annually, based on the year-end share price, so that shareholders receive either 5p per annum or a 5% yield, whichever is the greater at the time. The Board has considered the level of dividend in the context of recent share price movements and on this occasion has chosen to maintain the final dividend of 3.0p, which brings the total dividend for the year to 5.5p which is a 5.9% yield based on the share price of 93.0p on 29 February 2020 and greater than the targeted minimum of 5p.

Cancellation of Share Premium Account
At the last General Meeting, shareholders voted to cancel share premium to create a pool of distributable reserves to the amount of £21.6 million.

Dividend Reinvestment Scheme
In common with many other VCTs in the industry, the Company has established a Dividend Reinvestment Scheme (“DRIS”). Some 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 1,727,105 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 2020 the Company continued to buy back and cancel shares in the market from selling shareholders and purchased 3,965,450 Ordinary shares for a total consideration of £3.8 million. We have maintained a discount of approximately 4.5% to NAV (equating 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 and this has been considered with the Coronavirus pandemic, 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
An offer to raise up to £12 million with an overallotment facility of up to a further £6 million alongside the Octopus AIM VCT 2 plc was launched on 29 November 2019. The offer closed to new applications on 27 February 2020. As at 29 February 2020 there was £10 million outstanding in the applications accounts to be allotted and subsequently £8.8 million net of costs was allotted on 6 March 2020 with £0.3 million net of costs allotted on 16 April 2020.

VCT Status
PricewaterhouseCoopers LLP (“PwC”) provides the Board and Investment Manager with advice concerning continuing compliance with HMRC regulations for VCTs. The Board has been advised that Octopus AIM VCT is in compliance with conditions laid down by HMRC for maintaining approval as a VCT. From 1 March 2020 a key requirement is to maintain at least an 80% qualifying investment level, up from the previous level of 70%. As at 29 February 2020 91.9% of the portfolio as measured by HMRC rules was invested in qualifying investments.

Annual General Meeting (“AGM”)
Your Board has been deliberating the potential impact of the Coronavirus outbreak on the arrangements for our forthcoming Annual General Meeting (“AGM”). We are required by law to hold an AGM within 15 months of the previous AGM, therefore a lengthy postponement or adjournment is not possible. Hence our AGM will be held at 12.00pm on 15 July 2020, at 33 Holborn, London, EC1N 2HT.

In light of the current Coronavirus ‘stay at home’ measures in the UK, and given that the Company’s Articles of Association do not allow for a “virtual” meeting, the AGM will be run as a closed meeting and shareholders will not be able to attend in person. Shareholders attempting to attend the AGM will be refused entry. The meeting will still comply with the minimum legal requirements for an AGM.

Shareholders will be updated of any changes through regulatory announcements and on our Manager’s website at
www.octopusinvestments.com/coronavirus-updates. Formal notices will be sent to shareholders by their preferred method (e-mail or post) and shareholders are encouraged to submit their votes by proxy, as they will not be able to do so in person. Full details of the business to be conducted at the AGM are given in the Notice of the Meeting.

We always welcome questions from our shareholders at the AGM but this year, to ensure we are able to respond to any questions you may have for either the Investment Manager or AIM VCT Board, please send these via email to AimAGM@octopusinvestments.com by 5.00pm. on 10 July 2020.

Outlook
At the time of writing the Coronavirus epidemic has caused a temporary suspension to what we know as ‘normal trading conditions’ as it has created lockdowns around the globe. This dramatically increased the short-term volatility of share prices. The Company saw substantial changes in weekly NAV movements, moving from 102.3p at the start of February to 93.3p at the year end. There was a further drop by the end of March to 81.6p. In April however, the NAV made a recovery and the most recent NAV on 18 May 2020 was 91.4p. As the Company is invested in listed businesses, it is exposed to market movements and short term volatility, which is not necessarily indicative of underlying performance issues. Governments around the world have put in place substantial financial packages to counter the economic effects of a lockdown and attention is now focused on finding a way for economies to emerge from this situation without starting a second wave of the pandemic, but the full impact is yet to be understood.

Companies will be affected to varying degrees, and we have been in active dialogue with many of the management teams to ensure that the businesses have the balance sheet strength to navigate a range of scenarios. The trading outcome for many companies this year will depend on how soon the lockdown is eased and companies can get back to full capacity. In the short-term we expect companies to be focused on looking after their stakeholders, particularly employees and customers. Conserving cash will be important over the next few months, so we expect dividend payments to be cancelled or delayed in the short-term and for some to be raising money in the stock market. VCT rules do not always permit us to support companies with follow-on investments but we do have some portfolio companies where this is still possible.

The portfolio now contains 88 holdings across a range of sectors and many of them have already demonstrated their management’s ability to grow their businesses successfully despite difficult market conditions. Short-term trading issues aside, the balance of the portfolio towards profitable companies remains, and the cash available for new investments will allow us to take advantage of any future lowering of valuations resulting from the current period of share price weakness and to support existing holdings where we can.

Roger Smith

Chairman

21 May 2020

Investment Manager’s Review

Introduction
The very small appreciation in the NAV total return in the year to 29 February 2020 of 1.3% understates what was a very turbulent year. For much of the period under review the now well aired problems of international trade tensions, concerns around Brexit and continuing disarray in domestic politics dominated and smaller companies underperformed as investors favoured the relative security of the FTSE 100 with its superior liquidity and exposure to foreign currency earnings. This was followed by a two-month period between December and January when the stock market reacted to a decisive General Election result with an improvement in sentiment and increased enthusiasm for smaller domestic stocks. By the middle of February, it had become apparent that the spread of Coronavirus was an emerging global issue. The NAV fell by 8.8% in February, giving up its more recent gains and setting the tone for the increase in volatility we have seen since as the seriousness of the situation has revealed itself.

In the year to 29 February 2020 AIM continued to raise new capital for its constituents even though new flotations were at historically low levels in a hesitant market. The Company has deployed existing cash throughout the year as well as raising £4.5 million net of costs for future investments, with a further £9.1 milion allotted since the year end. Anecdotally, investment opportunities were delayed first by Brexit worries and then by the General Election and now new issues continue to be impacted by market conditions as all eyes are on the Coronavirus pandemic and the impact of global lockdowns on companies. However, this change can present us with the demand for additional capital from existing companies and create opportunities to invest into some exciting businesses we have been tracking. We have already seen the Company invest a further £3.3 million in existing qualifying companies as well as £1.7 million in new investments since the year end and therefore remain positive.

The Alternative Investment Market
After two years of outperformance, AIM trailed larger company indices in the year, producing a negative total return of 4.4% in the twelve months to February. This was well behind the FTSE All-Share Index which achieved a smaller negative return of 1.4% over the same period and behind the Smaller Companies Index (ex-Investment Trusts) which returned a positive return of 2.6%. For much of the period the stock market was in ‘risk averse’ mode apart from a brief period of exuberance post the General Election in December and before worries about the effect of Coronavirus started to take hold in February. The AIM index suffered from a combination of some of its large constituents such as Fevertree and ASOS being de-rated and its relatively high proportion of very small companies which held it back. Interestingly, despite some headwinds for smaller companies liquidity and average daily volumes of stocks traded on AIM have held up well and have been particularly strong since the beginning of 2020.

Companies have continued to raise new capital throughout the year. In the twelve months to 29 February 2020 AIM raised a further £3.2 billion of new capital for existing companies as well as a total of £0.5 billion for new companies floating on the market, demonstrating AIM’s ability to provide finance for good growth companies even at a time when attracting new entrants was difficult. VCTs play a significant part in that funding process and we identify below the companies we have invested in during the second half of the year.

Performance
Adding back the 9p of dividends paid during the year to show the total return, the NAV increased by 1.3% in the year (2019: 8.3% decrease). This compares with a total return for the FTSE All-Share Index ex-Investment Trusts of -1.4% and for the FTSE AIM All-Share Index of -4.4%. The FTSE SmallCap Index ex-Investment Trusts fared better, showing a positive total return of 2.6%. Although the NAV total return did not make much progress, there were some very marked movements in individual stock prices with a few share prices having a significant effect both positively and negatively. Investors have not lost their wariness of smaller companies that have yet to make a profit (of which there are several in the Company), and this has resulted in the share prices of some of our newer investments at this stage of development struggling to gain any traction in noisy market conditions.

Among the larger and more established holdings, GB Group had an excellent year, successfully integrating the substantial acquisition of IDology which was followed by upgrades to forecasts and strong interim results. It was also a beneficiary of weak sterling for much of the period. Ergomed was another very good performer in the year, which has increased the profitability of its business and now has a range of services it can offer large pharmaceutical companies, including the monitoring of drugs for regulatory purposes and the conducting of orphan drugs trials. We expect it to continue to achieve good profitable organic growth in the coming year and it has already announced its involvement in two clinical drugs trials for possible targets against Coronavirus.

RWS also performed very well, helped by upgrades to forecasts and we took the opportunity to take some profits. Learning Technologies also produced robust trading statements and was rewarded with a recovery in its share price from depressed levels at the beginning of the year and ended up being the single largest contributor   to performance in the period. Since the period end, it has put together a detailed assessment relating to various outcomes of the Coronavirus pandemic, considering its possible impact and liquidity available to the Group. The impact is yet to be seen, but a number of our portfolio companies are making these type of assessments.

Judges was another very good performer benefitting from upgrades to forecasts as a result of good demand for its specialist equipment and currency tail-winds. It expects to experience delays rather than wholesale loss of orders from its predominately research customers in the current environment and has a strong balance sheet.

Breedon saw its share price recover from a depressed level which had resulted from earlier fears about its exposure to the UK economy. As a result of the lockdown in UK, it has now had to suspend operations and will be using all the government initiatives to preserve its capacity for the expected strong demand for its products once building is allowed to re-start.

Among the more recent investments, Ixico made excellent progress, announcing some meaningful contracts on large drugs trials which involve the monitoring of the brain using scans. The company is now profitable. Renalytix, spun out of EKF diagnostics has continued to make good progress with the validation and commercialisation of its test that can predict chronic kidney disease before it is apparent.

Diaceutics also got off to a good start and has announced better than expected maiden figures. Sosandar also produced higher than expected sales growth with new product lines launched at the beginning of 2020. We made a follow-on investment to finance marketing spend. Spend has been put on hold and cash is being preserved until normality post Coronavirus returns.

Some individual companies suffered from specific headwinds which resulted in poor share price performances. The biggest detractor from performance in the year was Staffline which we wrote about in the interim accounts. Unfortunately, having been unable to publish its 2018 accounts on time it experienced further challenges as its customers changed their demand patterns around the time of Brexit and then delayed the ramp up to Christmas until after the General Election in December. This was a particular problem in the People Plus division which is dependent on Government contracts. Since then, the Chief Executive has announced that he will be departing once a replacement is found and the share price reflects nervousness around the balance sheet which still has debt.

The other major detractor was Quixant where its biggest customer lost out to competitors in 2019 resulting in downgrades to sales expectations and forecasts. It has come out with final results for 2019 post the period end and although there remains a significant uncertainty over the outcome for 2020 due to Coronavirus where their customers have had to shut for business they do have net cash on the balance sheet and sales should recover in 2021. It also has some exciting new products aimed at the broadcasting sector which have yet to establish themselves.

Craneware saw its shares fall from a high after the sales growth rate disappointed as a result of a slower than expected uptake from its new Trisus platform. The company retains its strong positioning in the US hospital market and stands out as a cash generative software company with growing annual recurring revenues.

Among other negative contributors were Mycelx Technologies and Loop-up Group. Mycelx had a series of downgrades to forecasts as a result of lower than expected revenues from its Saudi Arabian based operations. Other markets have been slower than hoped to open up although the potential opportunity for its water cleaning technology remains significant although the current weakness in the oil price will not be helping. Loop-up disappointed after the acquisition of Meetingzone failed to deliver the expected benefits although it is now benefitting from a huge increase in demand for its tele-conferencing services.

Portfolio Activity
Having made four qualifying investments at a total cost of £3.9 million in the first half of the year, we added four further new qualifying holdings at a cost of £2.4 million in the second half.

One of the four new qualifying investments, DXS plc, was a new issue on the NEX Exchange where we took a very small holding in a company supplying clinical decision support software to the NHS. We expect to support it further as it grows and comes to AIM in due course. C4X Discovery has a drug design platform that saves large pharmaceutical companies time and money when they are developing new compounds. The Company has been on AIM for some time. Cloudcall is a communications software company with recurring revenues. The final investment was a follow-on into Osirium via a convertible instrument. It has taken longer than we expected, but is finally gaining sales traction for its PAM security software.

The non-qualifying element of the equity portfolio comprises the funds raised in share offers awaiting deployment into qualifying investments. The manager continued to use non-qualifying investments to manage liquidity while awaiting new qualifying investment opportunities. We have held onto existing AIM holdings where we see the opportunity for further development but have invested any new funds raised into a mixture of the Octopus managed portfolios with a small proportion going into the FP Octopus UK Micro Cap Growth fund and the FP Octopus UK Multi Cap Income fund. This strategy is designed to obtain a better return on funds awaiting investment than the very low rates available on cash and in the year we have seen this to be the driver of positive value growth.

During the year we sold part of the holdings in RWS, Clinigen, Gamma, Restore, Next Fifteen, Advanced Medical Solutions, LoopUp, Ixico, Learning Technologies and VR Education as well as disposing of the entire Abcam and Iomart holdings, all at a profit. Synnovia, Nasstar and Brady, all longer term holdings, were sold as the result of takeover bids and the entire holding in Immotion was sold at a small loss. In all disposals raised £7.1 million in cash and made an aggregated profit on original cost of £3.1 million.

VCT Regulations
There have been no further changes to the VCT regulations since publication of the previous set of audited accounts. As a reminder, the current requirements are that any funds raised after 6 April 2019 should be 30% invested in qualifying holdings within 12 months of the end of the accounting period in which the shares were issued, and for financial years beginning after 6 April 2019 the portfolio will also have to maintain a minimum of 80% invested at cost in qualifying holdings. We are determined to maintain a threshold of quality and to invest where we see the potential for returns from growth. However, the emphasis of the new regulations is definitely to encourage investment into earlier stage companies and to that extent, it seems likely over a number of years, that the portfolio will see a rise in the number of smaller companies receiving our initial investment. We would expect to invest further in those companies as they demonstrate their ability to grow. At present there has been little change to the profile of the portfolio, as 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 10 years if a knowledge intensive company) if raising State Aided (ie 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 from 6 April 2018 £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.

Coronavirus
For the past two months the team has been working from home, absorbing a torrent of information being published by companies and communicating with each other. The team continue to operate business as usual.

The initial concern is about balance sheet strength for more mature companies and funding for those that have not yet reached the point of profitability and are likely to be unable to get there on existing resources as a result of the current situation.

In the first category, the majority of the more established companies in the portfolio have already published fairly detailed trading statements including banking relationships and balance sheet headroom. We have been very impressed by how efficiently many companies have handled this, sometimes having to react twice in the space of a week to changing information. It is also interesting to note that the AIM market has been fulfilling its function to fund companies and there have been several examples of this in action over the past weeks both within and outside the portfolio. The priority for many of them is to come out of this situation on the front foot and in a position to take advantage of any opportunities that present themselves.

In the second category there are already examples like Trackwise, PCI-Pal and Sosandar that have raised money to move their businesses to the next stage and towards being self-supporting and able to grow. Others will need more help and to this end we are co-operating with the rest of the VCT industry to see whether any short-term changes to the rules over investment limits or perhaps maximum age could help us to support portfolio companies that might struggle otherwise.

Although there are some companies such as Tasty or Escape Hunt in the portfolio which will be set for a particularly difficult period given their direct consumer businesses, the portfolio is balanced with exposure to many different sectors some of which can benefit from events. Loop-up is one direct example and Ergomed, EKF Diagnostics, Diaceutics, Maxcyte and Fusion Antibodies are all operating in areas which will receive increased attention and funding in the future and others such as GB Group will benefit from the general move to do things remotely. The majority of investee companies are business rather than directly consumer facing, and many have recurring revenues.

Outlook and Future Prospects
The global spread of Coronavirus and measures thatgovernments around the world are implementing to save lives have made predictions of any kind virtually impossible in the short to medium term. Companies have put out detailed statements revealing their financial positions and stress testing for different scenarios and stock markets have seen a period of almost unprecedented information and also share price volatility. However, there is a determination from governments around the globe to help businesses to survive the short-term shock and to enable them to resume trading once the situation is less dangerous and lockdowns can be lifted.

The portfolio’s strength is that it is well diversified both in terms of sector exposure and in terms of individual company concentration. It now contains 88 holdings with investments across a range of sectors including healthcare and technology. There are a number of newer holdings that we were expecting to demonstrate progress over the coming twelve months, and this is now likely to prove more challenging. However, the balance of the portfolio towards profitable companies remains. The VCT currently has funds available for new investments which should allow us to take advantage of any dip in valuations resulting from current weak sentiment and enable us to support existing companies where we can. We remain selective when viewing new investment opportunities, and have so far made eight qualifying investments in the new financial year.

Octopus AIM Team

21 May 2020

Directors' Responsibility 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 Company’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’ Responsibility Statement pursuant to DTR4

Roger Smith (Chairman), Stephen Hazell-Smith, Joanne Parfrey Neal Ransome and Andrew Boteler, 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.

For and on behalf of the Board

Roger Smith

Chairman

21 May 2020

NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the Company's statutory accounts for the years ended 29 February 2020 or 28 February 2019 but is derived from those accounts. Statutory accounts for the year ended 28 February 2019 have been delivered to the Registrar of Companies and statutory accounts for the year ended 29 February 2020 will be delivered to the Registrar of Companies in due course. The Auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's reports can be found in the Company's full Annual Report and Accounts at www.octopusinvestments.com

Income Statement

  Year to 29 February 2020 Year to 28 February 2019  
 
  Revenue Capital Total Revenue Capital Total  
  £'000 £’000 £’000 £'000 £’000 £’000  
Gain/(loss) on disposal of fixed asset investments - 349 349 - (3,796) (3,796)  
Gain on disposal of current asset investments - 382 382 - - -  
Gain/(loss) on valuation of fixed asset investments - 505 505 - (7,701) (7,701)  
Gain on valuation of current asset investments - 1,507 1,507 - 53 53  
Investment Income 776 36 812 794 307 1,101  
Investment management fees (482) (1,445) (1,927) (545) (1,635) (2,180)  
Other expenses (636) - (636) (574) - (574)  
Profit/(loss) before tax (342) 1,334 992 (325) (12,772) (13,097)  
Tax - - - -      
Profit/(loss) after tax (342) 1,334 992 (325) (12,772) (13,097)  
Earnings per share – basic and diluted (0.3p) 1.1p 0.8p (0.3p) (11.2p) (11.5p)  
  • 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.

Balance Sheet

  As at 29 February 2020 As at 28 February 2019
     
  £’000 £’000 £’000 £’000
Fixed asset investments   81,699   81,671
Current assets:        
Investments 24,859   28,852  
Money Market Funds 1,324   1,314  
Debtors 78   71  
Cash at bank 24,367   11,611  
  50,628   41,848  
Creditors: amounts falling due within one year (17,217)   (1,015)  
Net current assets   33,411   40,833
Total assets less current liabilities   115,110   122,504
Called up equity share capital   1,234   1,213
Share premium   65,883   81,368
Capital redemption reserve   134   94
Special distributable reserve   43,630   36,592
Capital reserve realised   (26,719)   (28,999)
Capital reserve unrealised    31,371   32,317
Revenue reserve   (423)   (81)
Total equity shareholders’ funds   115,110   122,504
NAV per share – basic and diluted   93.3p   101.0p

The statements were approved by the Directors and authorised for issue on 21 May 2020 and are signed on their behalf by:

Roger Smith

Chairman

Company number: 03477519


Statement of changes in Equity

  Share capital
£’000
Share premium
£’000
Special distributable reserves*
£’000
Capital reserve – realised*
£’000
Capital reserve – unrealised
£’000
Capital redemption reserve
£’000
Revenue reserve*
£’000
Total
£’000
As at 1 March 2019 1,213 81,368 94 36,592 (28,999) 32,317 (81) 122,504
Management fee allocated as capital expenditure - - - - (1,445) - - (1,445)
Current year gains on disposal - - - - 731 - - 731
Current period gains on fair value of investments - - - - - 2,012 - 2,012
Capital investment income - - - - 36 - - 36
Loss after tax - - - - - - (342) (342)
Total comprehensive income for the year - - - - (678) 2,012 (342) 992
Contributions by and distributions
to owners:
               
Repurchase and cancellation of own shares (40) - 40 (3,829) - - - (3,829)
Issue of shares 61 6,454 - - - - - 6,515
Share issue costs - (295) - - - - - (295)
Dividends paid - - - (10,777) - - - (10,777)
Total contributions by and distributions to owners 21 6,159 40 (14,606) - - - (8,386)
Other movements:                
Cancellation of share premium - (21,644) - 21,644 - - - -
Prior years’ holding gains now realised - - - - 2,958 (2,958) - -
Total other movements - (21,644) - 21,644 2,958 (2,958) - -
Balance as at 29 February 2020 1,234 65,883 134 43,630 (26,719) 31,371 (423) 115,110


  Share capital
£’000
Share premium
£’000
Special distributable reserves*
£’000
Capital reserve – realised*
£’000
Capital reserve – unrealised
£’000
Capital redemption reserve
£’000
Revenue reserve*
£’000
Total
£’000
As at 1 March 2018 1,094 63,098 61 46,483 (29,277) 45,367 244 127,070
Management fee allocated as capital expenditure (1,635) (1,635)
Current year losses on disposal (3,796) (3,796)
Current period loss on fair value of investments (7,648) (7,648)
Capital investment income 307 307
Loss after tax (325) (325)
Total comprehensive income for the year (5,124) (7,648) (325) (13,097)
Contributions by and distributions to owners:                
Repurchase and cancellation of own shares (33) 33 (3,597) (3,597)
Issue of shares 152 19,392 19,544
Share issue costs (1,122) (1,122)
Dividends paid (6,294) (6,294)
Total contributions by and distributions to owners 119 18,270 33 (9,891) 8,531
Other Movements:                
Prior years’ holding gains now realised 5,402 (5,402)
Total other movements 5,402 (5,402)
Balance as at 28 February 2019 1,213 81,368 94 36,592 (28,999) 32,317 (81) 122,504

*Included in these reserves is an amount of £16,488,000 (2019: £7,512,000) which is considered distributable to shareholders.

Cash Flow Statement

  Year to 29 February
 2020
Year to 28 February
 2019
  £'000 £'000
Cash flows from operating activities    
   
Profit/(loss) before tax 992 (13,097)
Adjustments for:    
Increase in debtors (7) (19)
(Decrease)/increase in creditors (84) 124
(Gain)/loss on disposal of fixed asset investments (349) 3,796
Gain on disposal of current asset investments (382) -
(Gain)/loss on valuation of fixed asset investments (505) 7,701
Gain on valuation of current asset investments (1,507) (53)
Non-cash distributions - (307)
Cash from operations (1,842) (1,855)
Income taxes paid - -
Net cash generated from operating activities (1,842) (1,855)
     
Cash flows from investing activities    
Purchase of fixed asset investments (6,236) (10,581)
Proceeds from sale of fixed asset investments 7,062 8,967
Purchase of current asset investments (1,118) (3,840)
Proceeds from sale of current asset investments 7,000 -
Net cash flows from investing activities 6,708 (5,454)
     
Cash flows from financing activities    
Movement in applications account 16,286 (72)
Purchase of own shares (3,829) (3,597)
Share issues (net of costs £295,000) 4,460 17,438
Dividends paid (9,017) (5,310)
Net cash flows from financing activities 7,900 8,459
Increase in cash and cash equivalents 12,766 1,150
Opening cash and cash equivalents 12,925 11,775
     
Closing cash and cash equivalents 25,691 12,925
     
Cash and cash equivalents comprise    
Cash at bank 24,367 11,611
Money market funds 1,324 1,314
  25,691 12,925

Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.

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