Half-Yearly Results
13/10/2023 07:00
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Octopus Apollo VCT plc
Half-Yearly Results
Octopus Apollo VCT plc announces its unaudited half-yearly results for the six
months ended 31 July 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’).
Financial Summary
Six months to 31 July 2023 Six months to 31 July 2022 Year to 31 January 2023
Net assets (£’000s) 385,519 300,856 349,493
Profit after tax (£’000s) 9,059 15,021 34,541
Net asset value per share (NAV) (p) 53.1 51.5 53.2
Cumulative dividends paid since launch (p) 86.0 83.4 84.7
NAV plus cumulative dividends paid (p) 139.1 134.9 137.9
Total return %* 2.3 5.2 11.2
Dividends per share paid in period (p) 1.3 1.3 2.6
Dividend per share declared in the period (p) ** 1.4 1.3 1.3
(*)Total return is calculated as movement in NAV + dividends paid in the
period divided by the NAV at the beginning of the period.
(**)The interim dividend of 1.4p per Ordinary share for the period to 31 July
2023 will be paid on 14 December 2023 to all Ordinary shareholders on the
register at 24 November 2023.
Interim Management Report
Chair’s statement
I am pleased to present the half-yearly report for Apollo for the six months
ended 31 July 2023. The net asset value (NAV) plus cumulative dividends per
share as at 31 July 2023 was 139.1p, an increase of 1.2p per share from 31
January 2023. The NAV Total Return was 2.3% for the six months. In keeping
with the regular dividend policy, the Board has declared an interim dividend
of 1.4p per share which will be paid to shareholders on 14 December 2023.
In the six months to 31 July 2023 Apollo has had another successful period,
showing good value creation driven by growth in much of the investment
portfolio. This is particularly pleasing against the ongoing backdrop of the
difficult global macroeconomic environment and the readjustment of valuation
multiples we have been seeing both in unquoted and publicly traded technology
stocks. The underlying portfolio companies have continued to show resilience
and robust performance which has led to the 2.3% NAV Total Return.
New and follow-on investments and divestment activity in the period is
detailed in the Investment Manager’s review.
On 3 February 2023, the Board announced that its offer for subscription, which
opened in October of the prior year, was closed having successfully raised
£50 million. The performance of Apollo and investor demand led the Board to
announce on 5 April 2023 its intention to re-open and increase the size of
this offer by a further £40 million. This offer successfully closed on 18
September 2023. This will allow the investment team to continue making
investments on behalf of Apollo, helping to further diversify the portfolio
and create opportunities for future growth. I would like to take this
opportunity to welcome all new shareholders and thank all existing
shareholders for their continued support.
Following the Board evaluation undertaken earlier this year, and given the
ongoing growth of Apollo, the Board has initiated a search for an additional
Non-Executive Director. The Board have recently undertaken a review of
governance arrangements and have established two additional committees. The
Management Engagement Committee, which will be chaired by Claire Finn, and a
Nomination & Remuneration Committee, which I will chair. The Management
Engagement Committee will assist the Board in evaluating the performance of
the Portfolio Manager and other third-party service providers engaged by the
Company. The Nomination & Remuneration Committee considers the selection and
appointment of Directors to the Board and its committees, along with Board
composition and succession planning. Furthermore, I am pleased to advise that
Claire Finn is now the Company’s Senior Independent Director.
Transactions with the Investment Manager
Details of amounts paid to the Investment Manager are disclosed in note 7 to
the half-yearly report.
Share buybacks
Apollo has continued to buy back shares in line with our policy. In the six
months to 31 July 2023, the Company bought back 7,709,237 Ordinary shares for
total consideration of £3.9 million.
Dividend and dividend policy
It is the Board’s policy to maintain a regular dividend flow, where
possible, in order to take advantage of the tax-free distributions a VCT is
able to provide, and work towards the targeted 5% annual dividend yield
policy.
The Board has declared an interim dividend of 1.4p per Ordinary share in
respect of the period ended 31 July 2023. The dividend will be payable on 14
December 2023 to Ordinary shareholders on the register at 24 November 2023.
Dividend Reinvestment Scheme (DRIS)
The Apollo DRIS is an attractive scheme for investors who prefer to benefit
from additional income tax relief on their reinvested dividend. During the
period to 31 July 2023, 4,038,321 shares were issued under the DRIS, equating
to a reinvested amount of £2.1 million.
VCT qualifying status
Shoosmiths LLP provides the Board and Investment Manager with advice
concerning ongoing compliance with His Majesty’s Revenue & Customs (HMRC)
rules and regulations concerning VCTs. The Board has been advised that Apollo
is complying with the conditions set by HMRC for maintaining approval as a
VCT. A key requirement is to maintain at least an 80% qualifying investment
level. As at 31 July 2023, 100% of the portfolio, as measured by HMRC rules,
was invested in VCT qualifying investments.
Principal risks and uncertainties
The principal risks and uncertainties are described in detail within the
strategic report in Apollo’s annual report for the year ended 31 January
2023. These are also set out in note 6 to the half-yearly report.
Murray Steele
Chair
Investment Manager’s review
Performance
In the six months to 31 July 2023, the NAV Total Return was 2.3%. This
performance is attributable to positive fair value movements across most of
the unquoted investments in the portfolio but in particular, the continued
strong contribution from technology-focused investments, which now make up 94%
of the portfolio.
The value of the portfolio has increased by £15.2 million, excluding
additions. The largest contributors were Codeplay Solutions Limited (trading
as Lodgify - £4.7 million valuation increase), Triumph Holdings Limited
(£4.1 million valuation increase) and Ubisecure Limited (£2.5 million
valuation increase), supported by positive contributions from other
investments across the unquoted portfolio.
Portfolio activity
During the period £3.9 million was invested into one new investment:
• Zipline Cloud Pty Ltd (trading as Pendula) – a two-way customer
communication platform that helps organisations automate high impact customer
engagement to improve customer retention, satisfaction and drive additional
revenue.
During the period £10.5 million was invested into six follow-on investments,
the largest of which were:
• Synchtank £2.5 million – a cloud-based SaaS solution for managing
digital entertainment assets, rights, metadata, and accounting of royalty
payments; and
• Value Blue B.V. £2.2 million – a Dutch company providing an IT
architecture management solution so customers can plan and execute digital
transformation.
Since the reporting date, the Company has invested £6.5 million in a new
investment and £1.5 million in two follow-on investments.
In March, we were pleased to exit the Company’s holding in The Safeguarding
Company (TSC), a business which combined the best technology and expertise to
protect children and vulnerable adults. It was acquired by Tes Global, a
provider of online educational services and software. The Company first
invested in TSC in August 2019 and during the investment period, TSC almost
doubled its headcount and expanded its product functionality and international
presence. The exit offered the Company a 2.5x total return.
Summary and future prospects
We are delighted to report the continued uplift in the Total Return of the
Company, which is a testament to the investment strategy and investment
team’s experience in sourcing, selecting and structuring deals. The
portfolio companies have shown their resilience in a market where many others
have struggled to grow and succeed. We have found that as many of the
portfolio companies have recurring revenue models, they are more insulated
from the macroeconomic headwinds and market uncertainties many companies have
faced over the last 18 months. We will continue to closely monitor the
portfolio to ensure we can offer the necessary support as the companies look
to grow their revenue base, increase their market share, and attract new
talent.
The return offered to the Company with the acquisition of TSC by Tes Global
was well received, especially when set against the more challenging exit
environment. Opportunities to exit are less frequent as large market
incumbents are not as acquisitive in more turbulent, uncertain conditions and
some are focussing on cost reductions.
We are pleased with the support we have received from Apollo investors, and
the resulting success of the fundraise. The investment team will continue to
source new investment opportunities which align with the Company’s mandate,
and we look forward to growing the portfolio. We would like to take this
opportunity to thank existing shareholders and welcome new shareholders.
Richard Court
Partner and Apollo Lead Fund Manager
Investment portfolio
Top ten investments
Sub sector Investment cost as at 31 July 2023 £’000 Total movement in fair value since investment £’000 Fair value as at 31 July 2023 £’000 Movement in fair value in period £’000 % equity held by Apollo
Fixed asset investments
N2JB Limited (trading as Natterbox) Telecommunications 17,490 18,770 36,260 2,183 8.5%
Sova Assessment Limited HR and human capital 10,500 12,248 22,748 (118) 31.9%
Ubisecure Holdings Limited Cybersecurity 5,575 15,427 21,002 2,455 33.3%
Triumph Holdings Limited Life sciences 3,800 14,436 18,236 4,081 52.0%
Fable Data Limited Financial services 6,000 9,000 15,000 - 6.2%
Mention Me Limited Sales and marketing 15,000 - 15,000 (110) 19.4%
Codeplay Solutions Limited (trading as Lodgify) Travel 9,541 5,231 14,772 4,651 11.9%
Hasgrove Limited Community 308 12,313 12,621 1,898 5.4%
Fuse Universal Limited Education 8,000 4,157 12,157 721 0.0%
Turtl Surf & Immerse Limited Sales and marketing 10,000 2,104 12,104 585 13.6%
Other 110,054 31,901 141,955 (1,191)
Total investments 196,268 125,587 321,855 15,155
Current asset investments 60,281
Cash at bank 6,082
Debtors less creditors (2,699)
Net assets 385,519
Directors’ responsibilities statement
We confirm that to the best of our knowledge:
* the half-yearly financial statements have been prepared in accordance with
the Financial Reporting Standard 104 ‘Interim Financial Reporting’ issued
by the Financial Reporting Council;
* the half-yearly financial statements give a true and fair view of the
assets, liabilities, financial position, and profit or loss of the Company;
and
* the half-yearly report includes a fair review of the information required by
the Financial Conduct Authority’s Disclosure Guidance and Transparency
Rules, being: * we have disclosed an indication of the important events that
have occurred during the first six months of the financial year and their
impact on the condensed set of financial statements;
* we have disclosed a description of the principal risks and uncertainties for
the remaining six months of the year; and
* we have disclosed a description of related party transactions that have
taken place in the first six months of the current financial year, that may
have materially affected the financial position or performance of the Company
during that period and any changes in the related party transactions described
in the last annual report that could do so.
On behalf of the Board
Murray Steele
Chair
Income statement
Unaudited Unaudited Audited
Six months to 31 July 2023 Six months to 31 July 2022 Year to 31 January 2023
Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000
Realised gain on disposal of fixed asset investments – 98 98 – 406 406 – 525 525
Gain in fair value of fixed asset investments – 15,155 15,155 _ 21,984 21,984 _ 49,921 49,921
(Loss) in fair value of current asset investments – (205) (205) – (628) (628) – (800) (800)
Investment income 1,932 – 1,932 954 11 965 2,257 11 2,268
Investment management fees (see note 7) (877) (4,954) (5,831) (660) (5,834) (6,494) (1,437) (13,512) (14,949)
Other expenses (2,091) – (2,091) (1,212) – (1,212) (2,431) – (2,431)
Foreign currency translation 1 – 1 – – – 7 – 7
(Loss)/profit before tax (1,035) 10,094 9,059 (918) 15,939 15,021 (1,604) 36,145 34,541
Tax – – – – – – – – –
(Loss)/profit after tax (1,035) 10,094 9,059 (918) 15,939 15,021 (1,604) 36,145 34,541
Earnings per share – basic and diluted (0.2)p 1.5p 1.3p (0.2)p 3.0p 2.8p (0.3)p 6.3p 6.0p
• The ‘Total’ column of this statement is the profit and
loss account of the Company; the supplementary revenue return and capital
return columns have been prepared under guidance published by the Association
of Investment Companies.
• All revenue and capital items in the above statement derive
from continuing operations.
• The Company has no recognised gains or losses other than
those disclosed in the income statement.
• The Company has no other comprehensive income for the
period.
• The accompanying notes are an integral part of the
half-yearly report.
Balance sheet
Unaudited As at 31 July 2023 Unaudited As at 31 July 2022 Audited As at 31 January 2023
£’000 £’000 £’000 £’000 £’000 £’000
Fixed asset investments 321,855 238,170 306,930
Current assets:
Investments 3,766 20,800 3,970
Money market funds 56,515 – 40,360
Debtors 5,110 4,497 4,866
Cash at bank 6,082 43,210 14,251
71,473 68,507 63,447
Creditors: amounts falling due within one year (7,809) (5,821) (20,884)
Net current assets 63,664 62,686 42,563
Net assets 385,519 300,856 349,493
Share capital 725 584 657
Share premium 117,977 38,711 78,440
Special distributable reserve 161,415 184,752 174,061
Capital redemption reserve 167 153 159
Capital reserve realised (17,618) (9,094) (20,136)
Capital reserve unrealised 126,608 87,915 119,032
Revenue reserve (3,755) (2,165) (2,720)
Total equity shareholders’ funds 385,519 300,856 349,493
Net asset value per share 53.1p 51.5p 53.2p
The statements were approved by the Directors and authorised for issue on 12
October 2023 and are signed on their behalf by:
Murray Steele
Chair
Company Number: 05840377
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 2023 657 78,440 174,061 159 (20,136) 119,032 (2,720) 349,493
Total comprehensive income for the period – – – – (4,856) 14,950 (1,035) 9,059
Contributions by and distributions to owners:
Repurchase and cancellation of own shares (8) – (3,907) 8 – – – (3,907)
Issue of shares 76 41,858 – – – – – 41,934
Share issue cost – (2,321) – – – – – (2,321)
Dividends paid – – (8,739) – – – – (8,739)
Total contributions by and distributions to owners 68 39,537 (12,646) 8 – – – 26,967
Other movements:
Prior period fixed asset gains now realised – – – – 7,374 (7,374) – –
Total other movements – – – – 7,374 (7,374) – –
As at 31 July 2023 725 117,977 161,415 167 (17,618) 126,608 (3,755) 385,519
*Included in these reserves is an amount of £140,042,000 (2022:
£173,493,000) which is considered distributable to shareholders per the
Companies Act.
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 2022 52,365 81,600 58,918 8,441 (5,197) 68,079 (1,247) 262,959
Total comprehensive income for the period – – – – (5,417) 21,356 (918) 15,021
Contributions by and distributions to owners:
Repurchase and cancellation of own shares (11) – (5,081) 11 – – – (5,081)
Issue of shares 72 36,741 – – – – – 36,813
Share issue cost – (2,085) – – – – – (2,085)
Dividends paid – – (6,771) – – – – (6,771)
Total contributions by and distributions to owners 61 34,656 (11,852) 11 – – – 22,876
Other movements:
Prior period fixed asset gains now realised – – – – 1,520 (1,520) – –
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 – – – – –
Total other movements (51,842) (77,545) 137,686 (8,299) 1,520 (1,520) – –
As at 31 July 2022 584 38,711 184,752 153 (9,094) 87,915 (2,165) 300,856
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 2022 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
Contributions 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 –
As at 31 January 2023 657 78,440 174,061 159 (20,136) 119,032 (2,720) 349,493
Cash flow statement
Unaudited Six months to 31 July 2023 £’000 Unaudited Six months to 31 July 2022 £’000 Audited Year to 31 January 2023 £’000
Cash flows from operating activities
Profit after tax 9,059 15,021 34,541
Adjustments for:
Increase in debtors (244) (609) (977)
(Decrease)/increase in creditors (6,869) (5,028) 776
Gain on disposal of fixed assets (98) (406) (525)
Gain on revaluation of fixed asset investments (15,155) (21,984) (49,921)
Loss on revaluation of current asset investment 205 628 800
In-specie dividends – (11) (11)
Net cash flows used in operations (13,102) (12,389) (15,317)
Cash flows from investing activities
Purchase of fixed asset investments (14,417) (27,870) (69,393)
Transfer of current asset investments – – 16,659
Proceeds from sale of fixed asset investments 14,744 2,775 3,591
Net cash flows from/(used in) investing activities 327 (25,095) (49,143)
Cash flows from financing activities
Movement in applications account (6,206) (514) 8,746
Purchase of own shares (3,907) (5,081) (8,220)
Proceeds from share issues 39,838 35,241 75,662
Cost of share issues (2,321) (2,085) (4,491)
Dividends paid (net of DRIS) (6,643) (5,199) (10,958)
Net cash flows from financing activities 20,761 22,362 60,739
Increase/(decrease) in cash and cash equivalents 7,986 (15,122) (3,721)
Opening cash and cash equivalents 54,611 58,332 58,332
Closing cash and cash equivalents 62,597 43,210 54,611
Notes to the financial statements
1. Basis of preparation
The unaudited half-yearly report which covers the six months to 31 July 2023
has been prepared in accordance with the Financial Reporting Council’s (FRC)
Financial Reporting Standard 104 ‘Interim Financial Reporting’ (March
2018) and the Statement of Recommended Practice for Investment Companies,
re-issued by the Association of Investment Companies in July 2022.
The Directors consider it appropriate to adopt the going concern basis of
accounting. The Directors have not identified any material uncertainties to
the Company’s ability to continue to adopt the going concern basis over a
period of at least 12 months from the date of approval of the financial
statements. In reaching this conclusion the Directors have taken into account
the potential impact on the economy including inflation, the possibility of a
recession and the war in Ukraine.
The principal accounting policies have remained unchanged from those set out
in the Company’s 2023 Annual Report and Accounts.
2. Publication of non-statutory accounts
The unaudited half-yearly report for the six months ended 31 July 2023 does
not constitute Statutory Accounts within the meaning of s.415 of the Companies
Act 2006. The comparative figures for the year ended 31 January 2023 have been
extracted from the audited financial statements for that year, which have been
delivered to the Registrar of Companies. The independent auditor’s report on
those financial statements, in accordance with chapter 3 of part 16 of the
Companies Act 2006, was unqualified. This half-yearly report has not been
reviewed by the Company’s auditor.
3. Earnings per share
The earnings per share is based on 675,679,749 shares, being the weighted
average number of shares in issue during the period (31 January 2023:
572,765,083; 31 July 2022: 537,701,683).
There are no potentially dilutive capital instruments in issue and, therefore,
no diluted earnings per share figures are relevant. The basic and diluted
earnings per share are identical.
4. Net asset value per share
31 July 2023 31 July 2022 31 January 2023
Net assets (£) 385,519,000 300,856,000 349,493,000
Shares in Issue 725,536,421 584,144,114 657,239,253
Net asset value per share (p) 53.1 51.5 53.2
5. Dividends
The interim dividend of 1.4p per share will be paid on 14 December 2023 to
shareholders on the register on 24 November 2023.
6. Principal risks and uncertainties
The principal risks and uncertainties faced by the Company are described in
detail within the strategic report in the Company’s Annual Report and
Accounts for the year ended 31 January 2023.
The principal risks include investment performance risk, VCT qualifying status
risk, operational risk, information security risk, economic risk, legislative
risk, liquidity risk and valuation risk. The Board has also considered
emerging and increasing risks, including adverse changes in global
macroeconomic environment, rising cost of living, geopolitical tensions and
climate change, which the Board seeks to mitigate by setting policy and
reviewing performance. The Company’s principal risks and uncertainties have
not changed materially since the date of that report.
7. Transactions with Investment Manager
Octopus acts as the Investment Manager of the Company. Under the management
agreement, the Investment Manager receives a fee, payable quarterly in
arrears, based on 2% of the NAV calculated daily from 31 January for the
investment management services.
The Company has incurred management fees of £3,510,000 during the period to
31 July 2023 (31 July 2022: £2,639,000; 31 January 2023: £5,748,000). During
the period the Company has also accrued performance fees of £2,322,000 (31
July 2022: £3,855,000; 31 January 2023: £9,201,000).
The Investment Manager also provides accounting and administration services to
the Company, payable quarterly in arrears, for a fee of 0.3% of the NAV
calculated daily. In addition, the Investment Manager also provides company
secretarial services for a fee of £20,000 per annum.
8. Related party transactions
In the period, Octopus Investments Nominees Limited (OINL) purchased Apollo
shares from shareholders to correct administrative issues, on the
understanding that shares will be sold back to the Company in subsequent share
buybacks at the prevailing market price. As at 31 July 2023, OINL held 315
shares (31 July 2022: 381; 31 January 2023: 173,900) in the Company as
beneficial owner. Throughout the period to 31 July 2023 OINL purchased 315
shares (31 July 2022: 202,657; 31 January 2023: 189,525) at a cost of £163
(31 July 2022: £96,678; 31 January 2023: £90,589) and sold 173,900 shares
(31 July 2022: 211,536; 31 January 2023: 16,006) for proceeds of £87,993 (31
July 2022: £99,223; 31 January 2023: £7,721). 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.
9. Post balance sheet events
The Company invested a total of £6.5 million in a new investment and £1.5
million in two follow-on investments. On 25 September 2023 the Company
cancelled its share premium amount of £117,979,000.
10. Half Yearly Report
The unaudited half-yearly report for the six months ended 31 July 2022 will
shortly be available to view on the Company’s website
https://www.octopusinvestments.com
A copy of the half-yearly report will be submitted to the National Storage
Mechanism and will shortly be available for inspection
at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
For further enquiries, please contact:
Rachel Peat
Octopus Company Secretarial Services Limited
Tel: +44 (0)80 0316 2067
LEI: 213800Y3XEIQ18DP3O53