Last checked at 
29 May 2009 13:09
Preliminary Announcement for
Oxford Technology 2 Venture Capital Trust plc for the year ended
28 February 2009
Chairman's Statement
Investment Portfolio
The Board of Oxford Technology 2 VCT (OT2) is pleased with the development of the portfolio as a whole. Ultimately, success for OT2, meaning a good return to OT2 shareholders, is likely to come about because one or more of the investees become stars, and therefore very valuable and not from the fact that every company delivers good returns.
In autumn 2008, Commerce Decisions was sold to Qinetiq, generating a return of £637,271 to OT2 on an investment of £200,000 enabling OT2 to pay out a dividend of 4.5p per ordinary share.
OT2 owns 11.2% of Inscentinel, which is based at Rothamsted Research and which is developing instruments for detecting trace vapours using the exquisitely sensitive olfactory sense of bees. Insentinel has made good progress on the engineering front during the last year. In particular the company now has a plastic injection moulded bee holder which also incorporates the electronics which detects the proboscis extension reflex, and memory to store results and which can communicate with the controlling PDA or computer. In summer 2009, Inscentinel will conduct the first field trial of its VASOR, a hand-held device which holds 6 cassettes of six bees each, and which will be capable of detecting five different explosives. The hope is that Inscentinel will then transition from an R&D company to a commercial company with a product/service to sell.
Since the first investment by OT2 in Insense in 2001, the company has come a long way. Its active wound healing dressings, Oxyzyme and Iodozyme, which promote wound healing by producing low level iodine and also oxygen at the wound surface, have now been approved for sale in Europe, but still not yet in the US. Sales in Europe are growing steadily, although more slowly than initially hoped. Sales exceeded £40,000 in a month for the first time in March 2009. Very heartening stories continue to come from patients, many of whom have had long-standing wounds for many years which completely healed in a few weeks after using Oxyzyme and/or Iodozyme. In one case a patient was about to have a leg amputated since his wounds, which occurred in an accident in 1982, were not responding to any treatment. Fortunately he was put on Insense dressings, and so saved his leg. Insense hopes to reach breakeven by the end of 2009. Insense is also developing a range of products for dermatology applications.
OT2 owns 24% of Orthogem whose artificial bone graft, Tripore, has been used in spinal surgery both in the Europe and the US since 2007. Clinical results have been good and sales have been growing, although more slowly than hoped.
OT2 owns 18% of OC Robotics. Since the initial investment in 2001, when the company consisted of the two founders working from home with an idea on paper, OC Robotics has made excellent progress. Today the company occupies a modern factory unit in Bristol where it manufactures snake arm robots for customers around the world, mainly in the US. It has never needed additional investment and has managed to fund its growth entirely from payments from customers, plus some grants in the early years. In the year to December 2007, it recorded a profit after tax of over £300k on sales of £1.1m. Sales grew to £1.4m in 2008 and profits exceeded £400k. In autumn 2008, OC Robotics received an order worth more than $2m, for the design and supply of a single snake arm robot to be used to solve a maintenance problem in a particular type of nuclear reactor. There are some 60 of this particular type of reactor in use worldwide. OC Robotics now employs 18 staff of whom 17 are engineers.
Plasma Antennas is now transitioning from an R&D company to a commercial company. In the last few months it has been negotiating the terms of its first contract to supply antennas in volume, rather than the ones and twos which it has supplied to date under R&D contracts.
OT2 owns 8.3% of Select Technology which is reaching an exciting stage in its development. Since 2005, it has been working closely with Ricoh, the world's leading manufacturer of modern photocopiers, known as multifunction products (MFPs), which scan, print, email and fax. All Ricoh's MFPs now contain Ricoh's ESA (Embedded Software Architecture) and Select, with Ricoh's support, has developed its own ESA-based software platform, known as m3i, which controls the MFP either through the MFP's own touchscreen (Chameleon) or remotely via a user's own device (MyUI). Once the basic m3i platform is installed, customers will be able subsequently to download a range of customised UIs created either by Select or third party developers. An example is the MyUI/Access Module, an accessible UI developed to allow compliance with disability legislation. Wheelchair users who are not able to see easily and use the MFP's own touchscreen MFP can now use their own PDA or Smartphone to control the copier; visually impaired users are provided with a large print UI with contrasting colours; blind users can control the MFP via voice commands. Select has also completed its first Chameleon UI, a simple scan-to-email solution. In addition, two third party developers are using the m3i platform to create enhanced versions of their own existing products for launch later in 2009. Sales in the UK began in early 2009, and have been encouraging, but the launch in Europe and the US through Ricoh, has been twice delayed, but should now happen in Q2 2009. These delays have been very frustrating, but the potential remains high.
All these companies have the potential to deliver very significant returns. Other companies have had problems and their value has been written down. In the light of lower valuations generally, some other valuations have also been reduced.
Net Assets per share at 28 February 2009 were 54p and including dividends of 10.5p paid to date, total return is 64.5p per share.
Fundraising
On 3 April 2009 OT2 completed a rights issue which raised £146,410 and has resulted in an additional 259,980 shares being allotted. This is a post balance sheet event and is not reflected in the Net Asset Value figures. We will now be able to offer some support to our investee companies in their additional fundraising rounds.
Results for the year
Realised profit on disposal of investments, interest on bank deposits and investee loans produced gross income of £474,000 (2008: £14,000) in the year.
Retained losses were £615,000 (2008: loss of £55,000) and earnings per share for the year were a loss of (9.7)p (2008: loss of 0.92p).
AGM
Shareholders should note that the AGM for Oxford Technology 2 VCT will be held on Friday 3rd July 2009, at the Magdalen Centre, Oxford Science Park, starting at 12.00 noon and will include presentations by some of the companies in which the Oxford Technology VCTs have invested. A formal Notice of AGM has been included at the back of these Accounts together with a Form of Proxy for those not attending.
John Jackson
Chairman
20 May 2009
Profit and Loss Account for the year ended 28 February 2009
|
| Year ended 28/02/09 | Year ended 29/02/08 | |
|
| £000 | £000 | |
| Gain/(loss) on disposal of investments held at fair value | 78 | - | |
| Unrealised (loss)/gain on fair value of investments | (664) | 82 | |
| Other income | 96 | 14 | |
| Investment management fees | (71) | (95) | |
| Other expenses | (54) | (56) | |
| ________ | _______ | ||
| (Loss)/profit on ordinary activities before tax | (615) | (55) | |
| Taxation on (loss)/profit on ordinary activities | - | - | |
|
| ====== | ====== | |
| (Loss)/profit on ordinary activities after tax | (615) | (55) | |
|
| ====== | ====== | |
| Earnings per share (basic and diluted) | (9.7)p | (0.92)p | |
| ====== | ====== | ||
Historic cost profits and losses note
|
| Year ended 28/02/09 | Year ended 29/02/08 |
|
| £000 | £000 |
| (Loss)/profit for the year: | (615) | (55) |
| Unrealised loss/(gain) on fair value of investments | 664 | (82) |
| Realisation of prior year's net gains | (78) | - |
| Historical cost loss before tax | (29) | (137) |
| Historical cost loss after tax | (29) | (137) |
Balance sheet at 28 February 2009
|
| 28 February 2009 Audited | 29 February 2008 Audited | ||
|
| £000 | £000 | £000 | £000 |
| Fixed assets |
|
|
|
|
| Investments at fair value |
| 3,179 |
| 4,137 |
| Current assets |
|
|
|
|
| Debtors & prepayments | 2 |
| 2 |
|
| Cash at bank | 333 |
| 80 |
|
|
| _____ |
| _____ |
|
|
| 335 |
| 82 |
|
| Creditors: amounts falling due within one year | (59) |
| (116) |
|
|
| _____ |
| _____ |
|
| Net current assets/(liabilities) |
| 276 |
| (34) |
|
|
| _____ |
| _____ |
| Net assets |
| 3,455 |
| 4,103 |
|
|
| ===== |
| ===== |
| Capital and reserves |
|
|
|
|
| Called up share capital |
| 637 |
| 600 |
| Share premium | 217 | - | ||
| Profit and loss account |
| 2,362 |
| 2,300 |
|
|
|
| ||
| Revaluation reserve |
| 239 | 1,203 | |
| Shareholders' funds |
| 3,455 |
| 4,103 |
|
|
| ===== |
| ===== |
| Net asset value per share |
| 54p |
| 68p |
|
|
| ===== |
| ===== |
Cash flow statement for the year ended 28 February 2009
|
| 2009 Audited | 2008 Audited |
|
| £000 | £000 |
| Net cash (outflow)/inflow from operating activities | (86) | (25) |
| Capital expenditure and financial investment |
|
|
| Purchase of investments | (206) | (13) |
| Disposal of investments | 578 | - |
|
| ______ | ______ |
| Net cash (outflow)/inflow from capital expenditure and financial investment | 372 | (13) |
| ______ | ______ | |
| Net cash flow before financing | 286 | (38) |
| Financing | ||
| Issue of Shares | 258 | - |
| Expenses paid in connection with share issue | (4) | - |
| ______ | ______ | |
| Net cash flow from financing | 254 | - |
| Dividends paid | (287) | - |
|
| ______ | ______ |
| (Decrease)/increase in cash | 253 | (38) |
|
| ====== | ===== |
Notes:
1. Basis of preparation
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of investments. The financial statements have been prepared in accordance with applicable accounting standards and with the Statement of Recommended Practice 'Financial statements of investment trust companies' issued in December 2005.
2. Earnings per Ordinary Share
The calculation of earnings per share for the period is based on the profit attributable to shareholders divided by the weighted average number of shares in issue during the period.
3. Valuation of Investments
Quoted investments are stated at the bid price. Unquoted investments are stated at fair value, where fair value is estimated after following the guidelines laid down by the International Private Equity and Venture Capital Guidelines. The Directors' policy is to initially state investments at cost and then to review the valuation every six months. The Directors' may then apply an appropriate methodology which, as far as possible, draws on external, objective market data such as where fair value is indicated by:
• a material arms length transaction by a third party in the shares of the company; or
• a suitable revenue or earnings multiple where the company is well established and generating maintainable profits. The multiple will be based on comparable listed companies but may be discounted to reflect a lack of marketability; or
• the net assets of the business.
Where such objective data is not available the Directors' may choose to maintain the value of the company as previously stated or to discount this where indicated by underperformance against plan.
The directors consider that this basis of valuation of unquoted investments is consistent with the International Private Equity and Venture Capital Guidelines.
4. General
The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The balance sheet at 28 February 2009 and the profit and loss account, cash flow statement and associated notes for the year then ended have been extracted from the company's 2008 statutory financial statements on which the auditors' opinion is unqualified and does not include any statement under section 237 of the Companies Act 1985.