Final Results
26/05/2023 16:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230526:nGNE6hzdNs&default-theme=true
Octopus Apollo VCT plc
Final Results
Octopus Apollo VCT plc today announces the final results for the year ended 31
January 2023.
Octopus Apollo VCT plc (‘Apollo’ or 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 unquoted companies. The Company is managed by
Octopus Investments Limited (‘Octopus’ or the ‘Investment Manager’).
Year to 31 January 20 2 3 Year to 31 January 2022
Net assets (£’000) 349,493 262,959
Profit after tax (£’000) 34,541 31,457
Net asset value (“NAV”) per share (p)* 53.2 50.2
Cumulative dividends paid since launch (p) 84.7 82.1
NAV plus cumulative dividends paid (p)* 137.9 132.3
Total return %* 11.2 13.6
Dividends per share paid in the year (p) 2.6 5.7
Proposed dividend (p)** 1.3 1.3
(*)Net asset value (NAV) per share is an alternative performance measure (APM)
calculated as net assets divided by total number of shares. NAV plus
cumulative dividends paid is an APM calculated by adding together NAV per
share and cumulative dividends paid since launch. Total Return is an APM
calculated as movement in NAV in the period plus dividends paid in the period,
divided by the NAV at the beginning of the period.
(**)The declared second interim dividend of 1.3p per Ordinary share for the
year ended 31 January 2023 was paid on 28 April 2023 to all Ordinary
shareholders on the register on 11 April 2023.
Chair’s Statement
Performance
I am pleased to present the annual results for Apollo for the year ended 31
January 2023. The net asset value (NAV) plus cumulative dividends per share at
31 January 2023 was 137.9p, an increase of 5.6p per share from 31 January
2022. The NAV per share increased during the year from 50.2p to 53.2p which
represents, after adding back the 2.6p of dividends paid in the year, a total
return for the year of 11.2% compared to 13.6% in the previous year.
I am delighted to say that Apollo has once again performed very well, and
despite these uncertain times, has delivered a very strong year. The
investment team’s disciplined approach to investment analysis, selection and
structuring played a major role in Apollo’s performance and we have seen
exciting growth in the value of several of our portfolio companies.
Further details of the year’s performance are highlighted in the Investment
Manager’s Review.
Fundraising
On 20 October 2022, we launched a new offer to raise up to £35 million, with
an over-allotment facility of up to £15 million. We were pleased to utilise
the over-allotment facility and the offer closed fully subscribed on 3
February 2023. This is a testament to the strong performance of Apollo over
the last few years, despite the macroeconomic headwinds it has faced. This
strong performance and position led the Board to announce, on 5 April 2023,
its intention to increase the offer from £50 million to £90 million, with
applications re-opening on 18 April 2023.
This fundraise will allow the Octopus Ventures team to continue making
investments on behalf of Apollo, helping to further diversify the portfolio
and create opportunities for future growth. We would like to take this
opportunity to welcome all new shareholders and thank all existing
shareholders for their continued support.
Investment Activity
In the year under review, Apollo invested £69.4 million, comprising £53.1
million into nine new investments and £16.3 million of follow-on capital into
existing portfolio companies to fund their growth plans, further details of
which can be found in the Investment Manager’s report.
Dividend and Dividend Policy
It is your Board’s policy to maintain a regular dividend flow where possible
to take advantage of the tax-free distributions a VCT can provide, and work
towards the targeted 5% annual dividend yield policy.
I am pleased to confirm that the Board declared a second interim dividend of
1.3p per share in respect of the year ended 31 January 2023. This is in
addition to the 1.3p per share interim dividend paid during the year and will
bring the total dividends declared to 2.6p per share for the year, a tax-free
yield of 5.2%. The dividend was paid on 28 April 2023 to shareholders on the
register at 11 April 2023.
Since inception, we have now paid 86.0p in tax-free dividends per share,
including the recently paid dividend.
Dividend Reinvestment Scheme (DRIS)
Apollo’s DRIS was introduced in November 2014 and to date 18.9% of
shareholders take advantage of it as it is an attractive scheme for investors
who would prefer to benefit from additional income tax relief on their
reinvested dividend. I hope that shareholders will find this scheme
beneficial.
During the year to 31 January 2023, 6,785,900 shares were issued under the
DRIS, equating to a reinvested amount of £3.4 million.
Share Buybacks
Apollo has continued to buy back and cancel shares as required. Subject to
shareholder approval at the forthcoming Annual General Meeting (AGM), this
facility will remain in place to provide liquidity to investors who may wish
to sell their shares, subject to Board discretion.
Dividends, whether paid in cash or reinvested under the DRIS, and share
buybacks are always at the discretion of the Board, are never guaranteed and
may be reviewed when necessary.
VCT Regulations Status
The Board has been advised that Apollo 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 which for Apollo, at 31
January 2023, was at 100%.
Annual General Meeting
The AGM will be held on 11 July 2023 at 10.00am. Full details of the business
to be conducted at the AGM will be given in the Notice of the Meeting included
in the Annual Report and Accounts.
Shareholders’ views are important, and the Board encourages shareholders to
vote on the resolutions by using the proxy form, or electronically at
www.investorcentre.co.uk/eproxy. The Board has carefully considered the
business to be approved at the AGM and recommends shareholders to vote in
favour of all the resolutions being proposed.
There will not be a formal presentation from the Investment Manager at the
AGM.
Shareholder Event
We will also be hosting a virtual shareholder event on 29 June 2023. This is
an opportunity for shareholders to receive an update from the Investment
Manager and put questions to the Chair and the Investment Manager. For details
on how to sign up see www.octopusinvestments.com/apollo-vct/
Outlook and Future Prospects
I am pleased to be able to announce an uplift in NAV over the last 12 months,
especially when set against the backdrop of the challenging global
macroeconomic conditions. The management teams of the portfolio companies have
displayed great resilience and strength when dealing with the increased
headwinds presented by central banks raising interest rates, the escalation of
the conflict in Ukraine, political uncertainty, high inflation rates and bank
instability. Most portfolio companies have been performing well and have been
more resilient to the current market volatility as they have recurring revenue
models and only a minority have been negatively impacted.
The Octopus Ventures team continue to actively monitor the portfolio companies
to be able to understand the full impacts of any challenges that may arise.
They typically take a seat on the Board of the companies so that they can lend
their expertise and introduce relevant contacts from their network. The
Octopus People and Talent team draw upon experience developed on the ground to
offer tailored advice and support to the portfolio’s management teams with
their recruitment and equip them with the tools they need to succeed and grow
as a business.
The investment team completed nine new investments and eight follow-on
investments during the year and expect to be able to continue with further new
investment activity in the upcoming year, with additional investment of £8.7
million completed since the year end and several exciting new investments in
the upcoming pipeline of opportunities.
VCTs have long provided a compelling opportunity for UK investors to provide
funding for businesses in a tax-efficient way, and we look forward to Apollo
continuing to do so in the coming year. We are also pleased that the sunset
clause in place for April 2025, regarding eligibility of VCT’s for tax
relief, has been extended and seems likely to be removed. I would like to
conclude by thanking both the Board and the Octopus team on behalf of all
shareholders for their hard work.
Murray Steele
Chair
Investment Manager’s Review
Personal Service
At Octopus our focus is on managing your investments and providing investors
with open communication. Our annual and interim updates are designed to keep
you informed about the progress of your investment.
Octopus was established in 2000 and has a strong commitment to both smaller
companies and to VCTs. Octopus also acts as Investment Manager to four other
listed investment companies, with over £1.8 billion of funds under management
in VCTs.
Investment Strategy
Most companies in the portfolio operate in sectors where there is a strong
opportunity for growth. In general, we invest in technology companies in the
software-as-a-service (‘SaaS’) space that have recurring or repeating
revenues from a diverse base of customers. We also seek to invest in companies
that will provide an opportunity for the Company to realise its investment
typically within three to seven years.
Performance
The Company made a total return per share of 11.2% in the year to 31 January
2023, which I am especially pleased with given the challenging economic
environment over the last 12 months. The NAV per share increased from 50.2p to
53.2p. In addition, 2.6p per share of dividends were paid in the period,
representing a dividend yield of 5.2% and bringing cumulative dividends paid
as at 31 January 2023 to 84.7p and the total return (NAV plus cumulative
dividends) to 137.9p per share.
Through another year of significant market uncertainties and volatility,
especially in the technology sector, the Company continued to perform well.
This is the third consecutive year of double-digit returns, demonstrating a
very good level of resilience and building on the significantly improved
performance of the fund since the change in the Company’s investment
strategy in 2017-18.
Investment from the Company provides three pillars of growth for portfolio
companies – expansion of sales and marketing functions; incremental research
and development spend; and geographic expansion. These were the common themes
running through the portfolio companies in the period, with the resulting
company growth being the key driver of Apollo’s performance.
As seen through the Top 10 Investments- in the year, the performance during
the year was largely attributable to strong performance in the Technology
portfolio that has been constructed in recent years and which now forms the
significant majority of the portfolio. Performance is discussed further in the
Portfolio Review below.
Portfolio Review
As at 31 January 2023 the Company’s investment portfolio comprised of 45
companies with a total valuation of £306.9 million. This represents 87.8% of
the net assets of the fund.
During the year, the value of the investment portfolio increased by £49.9
million, including assets invested into or exited in the year. The increase is
due to new investments made as well as positive valuation movements across
several investments in the portfolio including Fable Data Limited, Triumph
Holdings Limited, N2JB Limited (trading as Natterbox), Ubisecure Holdings
Limited and Sova Assessment Limited. These increases were slightly offset by a
few smaller negative valuation adjustments during the year, being the
Company’s investments in Trafi Limited, Origami Energy Limited and
CurrencyFair Limited.
As part of liquidity management, £27.6 million was invested in two money
market funds (MMFs) in December 2022. This investment, in combination with the
previously held investment in the Sequoia Economic Infrastructure Fund (SEQI)
and the BlackRock MMF, took the total liquid investments as at 31 January 2023
to £40.4 million, at year-end valuations.
The Company’s investment portfolio is set out in full in the Annual Report
and Accounts. It continues to hold appropriate investments to meet VCT
requirements.
Investment Activity
During the year, the Company disposed of one investment, made two
part-disposals and one holding was liquidated for total sale proceeds of £3.5
million.
The Company made the following new investments during the year, totalling
£53.1 million:
* Adway £5.7 million – Adway is an HR tech social recruiting platform for
large enterprise customers. Adway’s platform helps automate at scale the
sourcing of talent for job vacancies and employer branding via a range of
social media channels;
* Delio £5.5 million – Based in Wales, Delio is a SaaS platform which
enables wealth managers, banks and family offices to offer private market
investment opportunities to their retail and institutional clients;
* Edge 10 £2.5 million – Edge 10 is a SaaS platform which collects,
aggregates and analyses athlete performance and medical data to enable leagues
to safeguard players and teams to maximise performance, reduce injuries and
identify talent;
* Fable Data £6.0 million – Fable Data provides anonymised, pan-European
consumer transaction data and analysis to institutional investors, businesses,
governments and academics;
* Fergus £3.8 million – Fergus is an end-to-end job management platform for
tradespeople such as plumbers and electricians, allowing them to run their
business more efficiently and profitably;
* Intigriti £9.6 million – Intigriti is an ethical hacking and bug bounty
SaaS platform. It connects enterprise-scale customers to a community of
ethical hackers for the purpose of ongoing security and vulnerability testing
of their software and systems;
* Lodgify £9.5 million – Lodgify provides a SaaS platform for vacation
rental hosts and property managers to manage their business and process their
bookings;
* Peak Data £2.5 million – PeakData’s platform provides actionable data
to the world’s leading pharmaceutical companies; and
* Wazoku £8.0 million – Wazoku is an innovation management platform that
enables its customers to better innovate at scale.
In addition to the new investments above, the Company invested £16.3 million
in follow-on capital to eight existing portfolio companies to continue their
growth plans, resulting in total investment of £69.4 million for the
financial year.
Since the year end, the Company has made five follow-on investments of £8.7
million. It also disposed of one investment, The Safeguarding Company Limited,
for initial cash proceeds of £10.6 million, with additional disposal proceeds
to follow.
Outlook and Future Prospects
It has been a challenging 12 months for the technology sector, with the
impacts of the global economic issues intensifying and rising interest rates
weighing on asset values. Against that backdrop, I am extremely pleased to
report the increase in the NAV as the Company continues to thrive. Alongside
this good performance, we have seen our investment deployment rate increase,
with £13.7 million more deployed in the year when compared to 2021-22. The
nature of the current portfolio and the characteristics of the
technology-focused businesses that the Company invests in means that most
assets have been somewhat insulated from the full impact of the challenging
macroeconomic conditions. They generally have recurring revenues and are
therefore well positioned to be more resilient. The ongoing need for exciting,
high-growth companies to raise funding for growth provides ample opportunity
to make successful future investments in line with the existing now proven
strategy.
As mentioned in the Chair’s Statement, we were delighted with the support
we’ve received from the Company’s investors, with the latest fundraise
closing fully subscribed, which resulted in the offer being increased. These
funds will allow the Company to continue to support the existing portfolio in
their growth plans and invest in new opportunities which have great potential
to become successful and deliver good returns to shareholders.
We were pleased that the Company benefitted from one profitable disposal in
the period, with Lexis Nexis Risk Solutions, a leading provider of legal and
regulatory intelligence, acquiring BehavioSec, a pioneer in the behavioural
biometrics industry in May 2022. This returned £2.8 million to the Company.
However, we have seen a decline in profitable realisations in the period when
compared to the previous 12 months. This is to be expected given the market
volatility, but we strongly expect to see a return to more exit opportunities
over the next year as conditions improve, with good initial evidence provided
by our successful exit of The Safeguarding Company Limited in February 2023.
We remain optimistic and confident about the Company’s future investment
prospects and its current diverse portfolio. We think this breadth of scope
will provide the Company with the opportunities it needs for continued
success.
Richard Court
Octopus Investments Limited
Investment Portfolio
Top 10 Investments Sub Sector Investment cost as at 31 January 2023 £’000 Total movement in fair value since investment £’000 Fair value as at 31 January 2023 £’000 Movement in fair value in year to 31 January 2023 £’000 % equity held by Apollo VCT Income received in year to 31 January 2023 £’000
N2JB Limited (trading as Natterbox) Telecommunications 17,490 16,587 34,077 4,458 8.5% 150
Sova Assessment Limited HR and human capital 10,500 12,366 22,866 3,292 31.9% 83
Ubisecure Holdings Limited Cybersecurity 5,575 12,972 18,547 3,828 31.2% 166
Mention Me Limited Sales and marketing 15,000 110 15,110 110 19.4% n/a
Fable Data Limited Financial Services 6,000 9,000 15,000 9,000 6.4% n/a
Triumph Holidngs Limited Life sciences 3,800 10,355 14,155 7,266 52.0% 132
Ryte GMBH Sales and marketing 8,359 4,608 12,967 2,890 23.7% n/a
The Safeguarding Company Limited Education 4,951 6,753 11,704 2,003 20.0% 149
Turtl Surf & Immerse Limited Sales and marketing 10,000 1,518 11,518 1,096 13.6% n/a
Fuse Universal Limited Education 8,000 3,437 11,437 1,318 0.0% 100
Other* 99,449 40,100 139,549 14,660 820
Total investments 189,124 117,806 306,930 49,921
Current asset investments 44,330
Cash at bank 14,251
Debtors less creditors (16,018)
Net assets 349,493
* Other comprises the remaining 35 investments whose valuation is outside the
top 10: Intigriti N.V, Hasgrove Limited, Pollen Technology Group UK, Codebay
Solutions Limited, Tendable Limited, Wazoku Limited, Countrywide Healthcare
Services Limited, Fiscaltec Group Limited, Delio Limited, Value Blue B.V,
Homesearch Limited, Adway AB, Zapnito Limited, Fergus Software Limited,
Synchtank Limited, Ergomed plc, Dyscova Limited, Edge 10 UK Limited, Peak Data
AG, Artesian Solutions Limited, Superior Heat Limited, Rotolight Group
Limited, EKF Diagnostics plc, Vertu Motors plc, Secret Escapes Limited, Ecrebo
Limited, Luther Pendragon Limited, CurrencyFair Limited, Renalytix plc,
Origami Energy Limited, Verici Dx plc, Trellus Health plc, Segura Systems
Limited, Trafi Limited and Nektan plc.
Viability Statement
In accordance with provision 36 of the AIC Code of Corporate Governance, the
Directors have assessed the prospects of the Company over a period of five
years, consistent with the expected investment holding period of a VCT
investor. 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 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 risks which may
adversely impact its business model, future performance, solvency or
liquidity, and focused on the major factors which affect the economic,
regulatory and political environment. 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 carried out robust stress testing of cash flows which included;
assessing the resilience of portfolio companies, including the requirement for
any future financial support; and the ability to pay dividends and buybacks.
The Board has additionally considered the ability of the Company to comply
with the ongoing conditions to make sure it maintains its VCT qualifying
status under its current investment policy.
Emerging and Principal Risks, Risk Management and Regulatory Environment
The Board carries out a regular 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 Apollo’s investments is into unquoted, small and medium-sized VCT qualifying companies which, by their nature, entail a higher level of risk and may have lower cash reserves than investments in larger quoted companies. Poor performance across these investments may impact Apollo’s ability to raise new funds from investors. Octopus has significant experience and a strong track record of investing in unquoted companies, and appropriate due diligence is undertaken on every new investment. A member of the Octopus Ventures team is typically appointed to the board of a portfolio
company, and regular board reports are prepared by the portfolio company management and examined by the Investment Manager. This arrangement allows Apollo to play a prominent role in a portfolio company’s ongoing development and strategy. Although
investment strategy is focused on B2B software, the overall risk in the portfolio is mitigated by diversifying investment across a wide spread of holdings in terms of the underlying subsector served by the portfolio companies, and their financing stage,
age, industry sector and business models. The Board reviews the investment portfolio with the Investment Manager on a regular basis. The Investment Manager is incentivised to make sure Apollo performs well, via a Performance Incentive Fee (charged
annually) for exceeding certain performance hurdles.
VCT qualifying status risk : Apollo 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 Apollo 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 making an investment, the Investment Manager seeks assurance from Apollo’s VCT status adviser that the investment will meet the legislative requirements for VCT investments. On an ongoing basis, the Investment Manager monitors Apollo’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 Apollo’s compliance with VCT regulations on a bi
-annual basis and reports its results to the Board.
Operational – reliance on third parties: 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 advisors. 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 Apollo’s internal controls). These include controls that are designed to make sure that
Apollo’s assets are safeguarded and that proper accounting records are maintained, as well any regulatory reporting. 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 lack of suitable controls 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 it on relevant information security arrangements. Significant and relevant information security breaches are
escalated to the Board when they occur.
Economic : Events such as an economic recession, movement in interest rates, inflation, political instability and rising living costs could adversely affect some smaller companies’ valuations, as they may be more vulnerable to changes in trading conditions or the sectors in which they operate. This could result in a reduction in the value of Apollo’s assets. Apollo invests in a portfolio of companies serving markets across a diverse range of sectors, which helps to mitigate against the impact of performance in any one sector. Apollo also maintains adequate liquidity to make sure that it can continue to provide
follow-on investment to those portfolio companies that 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.
Legislative: A change to the VCT regulations could adversely impact Apollo by restricting the companies Apollo can invest in under its current strategy. Similarly, changes to VCT tax reliefs for investors could make VCTs less attractive and impact Apollo’s ability to raise further funds. Failure to adhere to other relevant legislation and regulation could result in reputational damage and/or fines. We are also pleased that the sunset clause in place for April 2025, regarding eligibility of VCTs for tax relief, has been extended and seems likely to be removed. 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 Apollo. Individuals receive ongoing training and external experts are engaged where required.
Liquidity: Apollo invests into smaller unquoted companies, which are inherently illiquid as there is no readily available market for these shares. 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. Apollo’s overall liquidity levels are monitored on a quarterly basis by the Board, with close monitoring of
available cash resources. Apollo maintains sufficient cash and readily realisable securities, including MMFs and OEICs, which can be accessed at short notice. At 31 January 2023, 91% of current asset investments were held in MMFs, realisable within one
business day, and 9% in OEICs, realisable within four business days.
Valuation : While investments within the portfolio are valued in accordance with International Private Equity and Venture Capital (IPEV) valuation guidelines, for smaller companies establishing a fair value can be difficult due to the lack of readily available market data for similar shares, resulting in limited number of external reference points. Valuations of 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 Octopus Ventures and with relevant knowledge of unquoted company valuations. The Board reviews valuations after they have been agreed by the Octopus Valuations Committee.
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 management and the
Board are currently monitoring:
• adverse changes in global macroeconomic environment;
• rising cost of living;
• geopolitical tensions; and
• climate change.
Directors’ Responsibilities Statement
The Directors are responsible for preparing the Strategic Report, the
Directors’ Report, the Directors’ Remuneration Report and the Financial
Statements in accordance with applicable law and regulations. They are also
responsible for ensuring that the Annual Report and Accounts include
information required by the Listing Rules of the Financial Conduct Authority.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have elected to prepare the
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable laws)
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 and profit or loss of 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 Directors’ Report and Directors’
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 make sure that the financial statements and the Directors’
Remuneration Report 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.
In so far as each of the Directors is aware:
* there is no relevant audit information of which the Company’s auditor is
unaware; and
* the Directors have taken all steps that they ought to have taken to make
themselves aware of any relevant audit information and to establish that the
auditor is aware of that information.
The Directors are responsible for preparing the annual report in accordance
with applicable law and regulations. Having taken advice from the Audit and
Risk Committee, the Directors consider the annual report and the financial
statements, taken as a whole, provide the information necessary to assess the
Company’s position, performance, business model and strategy and is fair,
balanced and understandable.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
The Directors confirm that, to the best of their knowledge:
* the financial statements, prepared in accordance with United Kingdom
Generally Accepted Accounting Practice, including FRS 102, give a true and
fair view of the assets, liabilities, financial position and profit or loss of
the Company; and
* the Annual Report and Accounts (including the Strategic Report), give a fair
review of the development and performance of the business and the position of
the Company, together with a description of the principal risks and
uncertainties that it faces.
On behalf of the Board
Murray Steele
Chair
Income Statement
Year ended 31 January 20 2 3 Year ended 31 January 2022
Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000
Realised gain on disposal of fixed asset investments - 525 525 - 4,439 4,439
Change in fair value of fixed asset investments - 4 9 , 92 1 4 9 , 92 1 - 40,581 40,581
Change in fair value of current asset investments - ( 800 ) ( 800 ) - (228) (228)
Investment income 2,2 57 11 2, 268 2,260 85 2,345
Investment management fees (1, 437 ) (1 3,512 ) (1 4,949 ) (1,178) (12,331) (13,509)
Other expenses (2, 431 ) - (2, 431 ) (2,171) - (2,171)
Foreign currency translation 7 - 7
(Loss)/profit before tax (1, 6 0 4 ) 3 6 , 14 5 3 4 ,5 41 (1,089) 32,546 31,457
Tax - - - - - -
(Loss)/profit after tax (1, 6 0 4 ) 3 6 , 145 34,541 (1,089) 32,546 31,457
(Loss)/earnings per share – basic and diluted ( 0. 3 )p 6 . 3 p 6 . 0 p (0.2)p 7.4p 7.2p
* The ‘Total’ column of this statement is the profit and loss account of
the Company; the revenue return and capital return columns have been prepared
under guidance published by the Association of Investment Companies
* All revenue and capital items in the above statement derive from continuing
operations.
* The Company has only one class of business and derives its income from
investments made in shares and securities and from bank and money market funds
The Company has no other comprehensive income for the period.
The accompanying notes are an integral part of the Financial Statements.
Balance Sheet
As at 31 January 20 2 3 As at 31 January 2022
£’000 £’000 £’000 £’000
Fixed asset investments 306,930 190,671
Current assets:
Investments 3,970 21,429
Money market funds 40,360 -
Debtors 4,866 3,889
Cash at bank 14 , 251 58,332
63,447 83,650
Creditors: amounts falling due within one year ( 20 , 884 ) (11,362)
Net current assets 42,563 72,288
Net assets 349,493 262,959
Share capital 657 52,365
Share premium 78,440 81,600
Special distributable reserve 174,061 58,918
Capital redemption reserve 159 8,441
Capital reserve realised (20,136) (5,197)
Capital reserve unrealised 119,032 68,079
Revenue reserve ( 2,720 ) (1,247)
Total shareholders' funds 349,493 262,959
Net asset value per share – basic and diluted 5 3 .2p 50.2p
The statements were approved by the Directors and authorised for issue on 26
May 2023 and are signed on their behalf by:
Murray Steele
Chair
Company number: 05840377
The accompanying notes are an integral part of the Financial Statements.
Statement of Changes in Equity
Share Capital £’000 Share Premium £’000 Special distributable reserves* £’000 Capital redemption reserve £’000 Capital reserve realised* £’000 Capital reserve unrealised £’000 Revenue reserve* £’000 Total £’000
As at 1 February 202 2 52,365 81,600 58,918 8,441 (5,197) 68,079 (1,247) 262,959
Total comprehensive income for the year - - - - (12,976) 49,121 (1,604) 34,541
Total c ontributions by and distributions to owners:
Repurchase and cancellation of own shares (17) - (8,220) 17 - - - (8,220)
Issue of shares 151 78,876 - - - - - 79,027
Share issue cost - (4,491) - - - - - (4,491)
Dividends paid - - (14,323) - - - - (14,323)
Total contributions by and distributions to owners: 134 74,385 (22,543) 17 - - - 51,993
Other movements:
Prior year fixed asset losses now realised - - - - (1,963) 1,963 - -
Cancellation of Share Premium - (77,545) 77,545 - - - - -
Cancellation of Capital Redemption Reserve - - 8,299 (8,299) - - - -
Share capital nominal value reduction (51,842) - 51,842 - - - - -
Transfer between reserves - - - - - (131) 131 -
Total other movements (51,842) (77,545) 137,686 (8,299) (1,963) 1,832 131 -
Balance as at 31 January 202 3 657 78,440 174,061 159 (20,136) 119,032 (2,720) 349,493
Share Capital £’000 Share Premium £’000 Special distributable reserves* £’000 Capital redemption reserve £’000 Capital reserve realised* £’000 Capital reserve unrealised £’000 Revenue reserve* £’000 Total £’000
As at 1 February 202 1 34,206 45,141 52,397 6,315 (9,046) 39,382 (158) 168,237
Total comprehensive income for the year - - - - (7,807) 40,353 (1,089) 31,457
Contributions by and distributions to owners:
Repurchase and cancellation of own shares (2,126) - (10,254) 2,126 - - - (10,254)
Issue of shares 20,285 85,825 - - - - - 106,110
Share issue cost - (4,225) - - - - - (4,225)
Dividends paid - - (28,366) - - - - (28,366)
Total contributions by and distributions to owners: 18,159 81,600 (38,620) 2,126 - - - 63,265
Other movements:
Prior year fixed asset gains now realised - - - - 11,656 (11,656) - -
Cancellation of share premium - (45,141) 45,141 - - - - -
Total other movements - (45,141) 45,141 - 11,656 (11,656) - -
Balance as at 31 January 2021 52,365 81,600 58,918 8,441 (5,197) 68,079 (1,247) 262,959
The accompanying notes are an integral part of the Financial statements.
* Included in these reserves is an amount of £151,204,000 (2022:
£52,474,000) which is considered distributable to shareholders per the
Companies Act.
Cash Flow Statement
Year to 31 January 20 2 3 £’000 Year to 31 January 2022 £’000
Cash flows from operating activities
Profit after tax 34,541 31,457
Adjustments for:
Increase in debtors (977) (1,554)
Increase in creditors 776 4,641
Gain on disposal of fixed assets (525) (4,439)
Gain on valuation of fixed asset investments (49,921) (40,581)
Loss on valuation of current asset investments 800 228
In-specie dividends ( 11 ) (85)
Net cash utilised in operating activities ( 1 5,317 ) (10,333)
Cash flows from investing activities
Purchase of fixed asset investments (69,393) (55,673)
Proceeds on sale of fixed asset investments 3,591 53,939
Purchase of current asset investments – (5,000)
Transfer of current asset investments* 16,659 -
Net cash utilised in investing activities (49,143 ) (6,734)
Cash flows from financing activities
Movement in applications account 8,746 (2,546)
Purchase of own shares (8,220) (10,254)
Proceeds from share issues 75,662 99,691
Cost of share issues (4,491) (4,225)
Dividends paid (net of DRIS) (10,958) (21,947)
Net cash generated from financing activities 60,739 60,719
Increase/(Decrease) in cash and cash equivalents (3,721) 43,652
Opening cash and cash equivalents 58,332 14,680
Closing cash and cash equivalents 54,611 58,332
The accompanying notes are an integral part of the Financial Statements.
* During the year Octopus Portfolio Manager (OPM) began the process of being
closed down. The only investment remaining is in a Blackrock MMF. The
classification of this asset was therefore transferred from an OEIC to a MMF
within the accounts and is therefore classified as a cash equivalent.
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 unquoted 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 2014 and updated in April 2021
with consequential amendments)’.
The principal accounting policies have remained unchanged since those set out
in the Company’s 2022 Annual Report and Accounts.
2. Investment income
Accounting policy
Fixed returns on non-equity shares and debt securities are recognised on a
time apportionment basis (including time amortisation of any premium or
discount to redemption), so as to reflect the effective interest rate,
provided it is considered probable that payment will be received in due
course. Income from fixed-interest securities and deposit interest is
accounted for on an effective interest rate method. Investment income includes
interest earned on bank balances and includes income tax withheld at
source. Dividend income is shown net of any related tax credit.
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 are recognised provided it is probable that
payment will be received in due course. The nature of dividends received is
assessed to establish whether they are revenue or income dividends. During the
year the Company received shares in Verici Dx plc as a result of an in-specie
dividend. These have been treated as capital income.
Disclosure
31 January 31 January
202 3 2022
£’000 £’000
Loan note interest receivable 1,600 1,972
Dividends receivable Other income In-specie dividend 354 303 11 288 - 85
2,268 2,345
3. Investment management fees
31 January 202 3 31 January 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment management fee 1, 437 4,311 5,748 1,178 3,534 4,712
Investment performance fee - 9,201 9,201 - 8,797 8,797
1, 437 13,512 14,949 1,178 12,331 13,509
For the purpose of the revenue and capital columns in the Income Statement,
the management fee has been allocated 25% to revenue and 75% to capital, in
line with the Board’s expected long-term split of returns in the form of
income and capital gains respectively from the Company’s investment
portfolio. The investment performance fee, explained below, is allocated 100%
to capital as it is deemed that capital appreciation on investments has
primarily driven the total return of the Company above the required hurdle
rate at which the performance fee is payable. The management fee,
administration and accountancy fees are calculated based on the NAV which is
then multiplied by the number of shares in issue, calculated on a daily basis.
Octopus provide investment management, accounting and administration services
and company secretarial services to the Company under a management agreement
which 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.
The Company has established a performance incentive scheme whereby the
Investment Manager is entitled to an annual performance related incentive fee
in the event that certain performance criteria are met. As at 31 January 2023
£9,201,000 was due to the Investment Manager by way of annual performance fee
(2022: £8,797,000).
4. Other expenses
Accounting Policy
All expenses are accounted for on an accruals basis. Expenses are charged
wholly to revenue, apart from management fees charged 75% to capital and 25%
to revenue, performance fees charged wholly to capital and transaction costs.
Transaction costs incurred when purchasing or selling assets are written off
to the Income Statement in the period that they occur.
Disclosure
31 January 31 January
202 3 2022
£’000 £’000
Ongoing trail commission 767 690
Accounting and administration services 862 662
Legal fees 33 28
Other administration expenses 434 531
Directors’ fees 135 98
Registrars’ fees 127 114
Audit fees 73 48
2, 431 2,171
The ongoing charges ratio of the Company for the year to 31 January 2023 was
2.5% (2022: 2.7%). Total annual running costs are capped at 3.3% of average
net assets (2022 cap: 3.3% of average net assets). This figure excludes any
extraordinary items, costs related to mergers, adviser charges, impairment of
interest and performance fees.
VAT is included within other administration expenses. No non-audit services
were provided by the Company’s auditor.
5. Tax
Accounting Policy
Current tax is recognised for the amount of income tax payable in respect of
the taxable profit/(loss) for the current or past reporting periods using the
current UK corporation tax 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 in respect of all timing differences at the
reporting date. Timing differences are differences between taxable profits and
total comprehensive income as stated in the Financial Statements that arise
from the inclusion of income and expenses in tax assessments in periods
different from those in which they are recognised in Financial Statements.
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.
Disclosure
31 January 202 3 31 January 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
(Loss)/profit before tax (1, 604 ) 3 6 , 145 3 4 ,5 41 (1,089) 32,546 31,457
Tax at 19% (2021: 19%) (305) 6,867 6,562 (207) 6,184 5,977
Effects of:
Non-taxable dividend income (67) (2) (69) (55) (16) (71)
Non-taxable capital gains on valuations and disposals - (9,432) (9,432) - (8,511) (8,511)
Expenses not deductible for tax purposes - 7 7 - 12 12
Excess management expenses on which deferred tax not recognised 372 2,560 2,932 262 2,331 2,593
Total tax charge - - - - - -
Approved VCTs are exempt from tax on chargeable 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. In March 2021, the UK Government announced that
from 1 April 2023, the main rate of Corporation Tax will be increased to 25%.
Consequently, deferred tax has been calculated at the year end using a tax
rate of 25%. As at 31 January 2023, there is an unrecognised deferred tax
asset of £7,310,000 (2022: £6,622,000) in respect of surplus management
expenses, based on a prospective tax rate of 25% (2022: 25%). This deferred
tax asset could in future be used against taxable profits. Provided the
Company continues to maintain its current tax status, 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. Interim
dividends to equity shareholders are declared by the Directors.
Disclosure
31 January 31 January
202 3 2022
£’000 £’000
Dividends paid on ordinary shares
Final dividend– 1.3p paid 31 May 2022 (2022: 1.3p) 6,771 5,725
Interim dividend– 1.3p paid 22 November 2022 (2022: 1.3p) 7,552 6,689
Special dividend– N/A (2022: 3.1p) - 15,952
14,323 28,366
During the year £3,365,000 (2022: £6,419,000) of dividends were reinvested under DRIS.
31 January 31 January
202 3 2022
£’000 £’000
Dividends paid and proposed in respect of the year – Ordinary shares
Interim dividend – 1.3p paid 22 November 2022 (2022: 1.3p) 7,552 6,689
Special dividend – N/A (2022: 3.1p) – 15,952
Second interim dividend declared – 1.3p paid [28 April] 2023 (2022: 1.3p) 8,739 6,771
16,291 29,412
The second interim dividend declared of 1.3p per share for the year ended 31 January 2023 was paid on 28 April 2023 to shareholders on the register on 11 April 2023.
7. Earnings per share
31 January 202 3 31 January 2022
Revenue Capital Total Revenue Capital Total
(Loss)/profit attributable to ordinary shareholders (£’000) (1, 604 ) 36,145 34,541 (1,089) 32,546 31,457
Earnings per ordinary share (p) ( 0. 3 ) p 6 . 3 p 6 . 0 p (0.2)p 7.4p 7.2p
The earnings per share is based on 572,765,083 (2022: 438,445,830) shares,
being the weighted average number of shares in issue during the year.
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
31 January 31 January
202 3 2022
Ordinary shares Ordinary shares
Net assets (£) 349,493,000 262,959,000
Shares in issue 657,239,253 523,651,962
Net asset value per share (p) 5 3 .2 50.2
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
Several members of the Octopus investment team hold non-executive
directorships as part of their monitoring roles in the Company’s portfolio
companies, but they have no controlling interests in those companies. The
Investment Manager receives transaction fees and directors’ fees from these
portfolio companies. During the year ended 31 January 2023, directors’ fees
of £686,000 attributable to the investments of the Company were received by
the Investment Manager (2022: £601,000).
As at 31 January 2023, Octopus Investments Nominees Limited (OINL) held
173,900 shares (2022: 9,260) in the Company as beneficial owner, having
purchased these from shareholders to protect their interests after delays or
errors with shareholder instructions and other similar administrative issues.
Throughout the period to 31 January 2023 OINL purchased 384,179 shares (2022:
9,743) at a cost of £183,363 (2022: £4,638) and sold 219,539 shares (2022:
483) for proceeds of £103,040 (2022: £256). 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.
10. 2023 financial information
The figures and financial information for the year ended 31 January 2023 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 31 January 2023 have been audited but have not yet
been delivered to the Registrar of Companies. The Auditors’ report on the
2023 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. 2022 financial information
The figures and financial information for the period ended 31 January 2022 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. 05840377
LEI: 213800Y3XEIQ18DP3O53
14. Directors
Murray Steele (Chair), Christopher Powles, Alex Hambro and Claire Finn.
15. Secretary and registered office
Octopus Company Secretarial Services Limited
6(th) Floor, 33 Holborn, London EC1N 2HT