Final Results
25/04/2023 07:00
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OCTOPUS TITAN VCT PLC
Annual report and financial statements for the year ended 31 December 2022
Octopus Titan VCT plc (‘Titan’ and ‘the Company’) announces the final
results for the year to 31 December 2022 as below.
Titan’s mission is to invest in the people, ideas and industries
that will change the world.
Octopus Titan VCT plc has earned a reputation for backing pioneering
entrepreneurs. It invests in companies that are using technology to shape the
future.
Highlights
202 2 2021
Net assets (£’000) £ 1,051,760 £1,373,041
(Loss)/profit after tax (£’000) £ (319,215) £216,557
NAV per share 76 . 9 p 105.7p
NAV + cumulative dividends 173.9 p 197.7p
Total return (p) (1) (23.8) p 19.7p
Total return % (2) (22.5) % 20.3%
Dividends paid in the year 5 .0p 11.0p
Dividend yield % (3) 4.7 % 11.3%
Dividend declared 3.0p 3.0p
1. Total return is an alternative performance measure, calculated as movement
in NAV per share in the period plus dividends paid in the period.
2. Total return % is an alternative performance measure, calculated as total
return/opening NAV.
3. Dividend yield is an alternative performance measure, calculated as
dividends paid/opening NAV.
Chair’s statement
I am pleased to present the annual results for Titan for the year ended 31
December 2022.
Highlights
* Titan’s latest fundraise: £237 million
* Total return over five years: 11%
* Dividends paid in 2022: 5p
The net asset value (NAV) per share at 31 December 2022 was 76.9p which,
adjusting for dividends paid, represents a net decrease of 23.8p per share
from 31 December 2021 or a total return of (22.5)%. The Total Value (NAV plus
cumulative dividends paid per share since launch) at the end of the period was
173.9p (31 December 2021: 197.7p). This decline is, of course, disappointing
but reflects the difficult global macro environment we have faced in the last
year and follows a record year in 2021 in terms of both exit proceeds and
total return. Despite the recent decrease in NAV, total return over five years
is 11% and the tax-free annual compound return for the original shareholders
since Titan’s launch in October 2007 is 4.2%.
In the 12 months to 31 December 2022, we utilised £355 million of our cash
resources, comprising £157 million in new and follow-on investments, £50
million in dividends (net of the Dividend Reinvestment Scheme), £41 million
in share buybacks, £43 million in annual investment management fees and other
running costs, and a £64 million performance fee payable in respect of the
year ended 31 December 2021. Together, this utilised 93% of our cash and cash
equivalents at 31 December 2021. The cash and corporate bond balance of £179
million at 31 December 2022 represented 17% of net assets at that date,
compared to 28% at 31 December 2021.
The relatively higher cash position as at 31 December 2021, was due to the
significant disposal proceeds received from profitable exits in 2021 and was
accelerated by the 2021 fundraise which closed having raised more than £200
million in November 2021, compared to typical closing dates of March or April.
Performance incentive fees
As the 2022 total return has been negative, and net assets have declined since
31 December 2021, no performance fee is payable. To remind you, the
performance fee is calculated as 20% on net gains above the High Water Mark,
the highest total return as at previous year ends, which is currently set as
197.7p as at 31 December 2021.
Dividends
Following careful consideration, I am pleased to confirm that on 16 March 2023
the Board declared a second interim dividend of 3p per share in respect of the
year ended 31 December 2022. This will be paid on 24 May 2023 to shareholders
on the register as at 5 May 2023, resulting in full-year dividends of 5p. This
represents a tax-free dividend yield of 4.7% on the NAV at 31 December 2021,
equivalent to 7% for a higher rate tax payer. As shareholders will know, our
ambition is to pay an annual dividend of 5p per share, supplemented by special
dividends when appropriate.
If you are one of the 26% of shareholders who take advantage of the Dividend
Reinvestment Scheme (DRIS), your dividend will be receivable in Titan shares.
This is an excellent way for those of you who prefer the capital value of your
investment to grow to achieve your investment objectives.
Since inception, we have now paid 97p in tax-free dividends per share,
excluding the recently declared dividend.
Fundraise and buybacks
On 10 November 2022, we launched a new offer to raise up to £175 million,
with an over-allotment facility of up to £75 million. On 6 March 2023, we
were pleased to announce, following strong investor demand, that the
over-allotment facility would be used, increasing the maximum amount that
could be raised under the Offer to £250 million. The Offer was closed to new
applicants on 5 April 2023 having raised in total £237 million. I would like
to take this opportunity to welcome all new shareholders and thank all
existing shareholders for their continued support.
During the period, Titan repurchased 45 million shares (representing 3.0% of
the net asset value as at 31 December 2021). The Board has continued to buy
back shares from shareholders at no greater than a 5% discount to NAV per
share. Whilst the Board will seek authority to continue to be able to buy back
up to 14.99% of Titan’s shares, the Directors intend that this authority
will only be used for a maximum of 5% of the share capital annually.
Board of Directors
Matt Cooper, having originally been appointed to the Board of Octopus Titan 1
VCT in October 2007, and then continuing as a Director after the merger of the
various Titan VCTs in 2014, has decided to retire from the Board and will not
be seeking re-election at the forthcoming Annual General Meeting (AGM). It has
been a pleasure to work with Matt, and I would like to take this opportunity
to thank him on behalf of the Board and the shareholders for his substantial
contribution over the years and help in guiding Titan through its different
phases of growth. A new Non-Executive Director will be appointed at the
completion of a structured recruitment process which is already in flight. All
the other Directors have indicated their willingness to remain on the Board,
and Anthony Rockley and Jane O’Riordan will be seeking re-election at the
AGM.
AGM and shareholder event
The AGM will take place on 14 June 2023 from 12.00 noon and will be held at
One Moorgate Place, London, EC2R 6EA. Full details of the business to be
conducted at the AGM are given in the Notice of the AGM.
Shareholders’ views are important, and the Board encourages shareholders to
vote on the resolutions within the Notice of AGM 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, as the Board will be
doing.
In addition to the AGM, this year, we are also pleased to offer shareholders
the opportunity to attend an online shareholder webinar on 7 June at 12.00
noon, to make sure we can respond to any questions you may have for either the
Portfolio Manager or Titan Board prior to the proxy forms needing to be
completed. At this event, Malcolm Ferguson (lead fund manager for Titan) and I
will present. For details on how to sign up please see octopustitanvct.com.
Alternatively, shareholders are also invited to send any questions they may
have via email to TitanAGM@octopusinvestments.com.
Outlook
The impact of the economic downturn is being felt globally. The escalation of
the conflict in Ukraine, central banks raising interest rates, the
cost-of‑living crisis deepening, political uncertainty and high inflation
rates have wide-ranging impacts, and early-stage venture investments and VCTs
are not immune to these turbulent trends. The Association of Investment
Companies (AIC) conducted research across the VCT market and found that, after
13 consecutive years of positive returns, the VCTs analysed delivered a loss
in 2022. The decline in Titan’s NAV is, of course, disappointing. Our
accounting policy is to value Titan’s unquoted companies in line with the
International Private Equity and Venture Capital Guidelines, which require an
assessment of the fair value of each investment at 31 December 2022. In some
cases, valuations have been adjusted downwards to reflect both the tougher
conditions and lower market comparables, as this influences what an acquirer
might deem a fair price to pay for a business in the current climate.
In other cases, a decreased valuation will reflect a portfolio company’s
specific performance, and we believe that, in the short term, we may
unfortunately see more companies fail – they are operating under more
difficult circumstances, targets set at the point of initial investment may be
more difficult to achieve, and it may become more challenging for companies to
raise funds. More can be read about the cash runway of the portfolio companies
in the Portfolio Manager’s Review.
However, despite this difficult short-term outlook, our long‑term view of
early-stage venture capital remains positive. The Board is reassured by the
breadth and depth of Titan’s portfolio as it spans seven investment themes
(Fintech, Health, Deep tech, Consumer, Business-to-business (B2B) software,
Bio and Climate) across different stages of development. This diversity means
that Titan is well placed to navigate the current situation. Some portfolio
companies should be more resilient to the current market volatility, such as
those
with recurring revenue models. Some will also thrive, as many tech-enabled
companies will look to take advantage of the increased willingness to adopt
new technologies to navigate the changing landscape. Great companies will
continue to be established, funded and grow in uncertain times.
I am pleased to report that in the 12-month period, Titan completed four
profitable disposals (three full exits and one partial), including Glofox
being acquired by ABC Fitness Solutions, representing a 3x return on Titan’s
initial investment, and Digital Shadows being sold to ReliaQuest for $160
million. Collectively, the four companies received investment of £22 million
from the Company and the combined realised consideration totalled £48 million
(in cash, shares and/or deferred amounts). More can be read about these
disposals in the Portfolio Manager’s Review.
Titan also invested £157 million in new and follow-on opportunities in the
year to 31 December 2022, which brings the total number of companies in the
portfolio to 128 at 31 December 2022. The diversity and volume of exciting new
investments, and the upcoming pipeline of opportunities, is a testament to the
work the investment team continues to put into sourcing, securing and working
with such businesses successfully.
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 Titan
continuing to do so in the coming year. I would like to conclude by thanking
both the Board and the Octopus team on behalf of all shareholders for their
hard work.
Tom Leader
Chair
Portfolio Manager’s review
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.
Titan Total Value growth from inception:
The Total Value has seen a significant increase since the end of Titan’s
first year (31 October 2008), as shown on the graph — from 89.9p to 173.9p
at 31 December 2022. This represents an increase of 93% in value since
Titan’s first full year, including dividends paid since inception of 97p.
Since Titan launched, a total of over £428 million has been distributed back
to shareholders in the form of tax-free dividends. This includes dividends
reinvested as part of the DRIS.
Focus on performance
The NAV of 76.9p per share at 31 December 2022 represents a decrease in NAV of
23.8p per share versus a NAV of 105.7p per share as at 31 December 2021 (when
adjusted for dividends).
The performance over the five years to 31 December 2022 is shown below:
Year ended Year ended Period ended Year ended Year ended
31 October 31 October 31 December 31 December 31 December
2018 2019 (1) 2020 2021 202 2
NAV, p 93.1 95.2 97.0 105.7 76.9
Cumulative dividends paid, p 71.0 76.0 81.0 92.0 9 7 .0
Total Value, p 164.1 171.2 178.0 197.7 1 73 . 9
Total return 1.8% 7.6% 7.1% 20.3% (22.5) %
Dividend yield 5.2% 5.4% 5.3% 11.3% 4.7 %
Equivalent dividend yield for a higher rate tax payer 7.7% 8.0% 7.8% 16.8% 7.0 %
(1 )Note, the period to December 2019 was 14 months.
In total, 67 companies saw a collective decrease in valuation of £352
million. The businesses that contributed most significantly to this were
Cazoo, ManyPets and Chronext. Cazoo listed on the New York Stock Exchange in
August 2021 and its share price has declined since the start of 2022. That
being said, from a trading perspective, Cazoo has performed well, delivering
revenues of £1.25 billion in 2022 (representing a 91% year-on-year growth).
Chronext has been affected by a more challenging fundraising market for
companies with business-to-consumer business models. ManyPets, Titan’s
single largest investment, has seen its value drop in the period despite
strong underlying performance, with this decline being driven by a softening
of the valuation multiples of comparable companies, which has been reflected
in the holding value of the company. Octopus Ventures will continue to work
with these companies to help them realise their ambitions. In some cases, the
support offered could include further funding, to make sure a business has the
capital it needs to execute on its strategy.
Despite the reduction in Titan’s NAV, 2022 saw the profitable disposal (in
full or in part) of four companies (Amplience, BehavioSec, Digital Shadows and
Glofox), as well as the increase in valuation of certain companies.
Collectively, 40 portfolio companies drove an increase in valuation of £68
million. Please refer to the exit table in the Notes to the financial
statements.
The loss on Titan’s cash and cash equivalent investments was £12.6 million
in the year to 31 December 2022 (2021: loss of £1.5 million). The Board’s
objective for these investments is to generate sufficient returns through the
cycle to cover costs, at limited risk to capital, however the holdings were
negatively impacted by the rise in interest rates driving a lower market value
on the corporate bond portfolio in particular.
Disposals
In 2022, three full profitable disposals completed in the period (BehavioSec,
Digital Shadows and Glofox), with one partial profitable realisation
(Amplience). In total, these disposals will return £48 million to Titan in
cash, shares and/or deferred amounts, with £44 million of this having been
received in 2022. More information on these exits is offered below:
* in February 2022, as part of a $100 million fundraise with an equity
investment from Farview Partners and growth financing from Sixth Street, Titan
sold a proportion of its shareholding in Amplience;
* in May 2022, LexisNexis Risk Solutions, a leading provider of legal and
regulatory intelligence, acquired BehavioSec, a pioneer in the behavioural
biometrics industry;
* in July 2022, ReliaQuest, a force multiplier of security operations,
acquired Digital Shadows, a company which delivers threat intelligence for
security teams; and
* in August 2022, ABC Fitness Solutions, a leading technology and related
services provider for the fitness industry, acquired Glofox, a fitness
management platform servicing the boutique gym and studio sector.
There have also been four disposals made at a partial loss (Fluidly was
acquired by OakNorth, Trouva was sold to Made.com, Jolt was purchased by
Global University Systems and part of Titan’s listed holding in Eve Sleep
was sold on the day it was placed into administration). Unfortunately, Whirli
and WeFarm were disposed of at a full loss as they were placed into
administration having been unsuccessful in securing further funding and having
explored and exhausted all available options. In aggregate, these losses
generated negligible proceeds (totalling £0.8 million) compared to an
investment cost of £26.4 million, meaning a realised loss of £25.6 million.
The underperformance of a portfolio company is always disappointing for
Octopus and shareholders alike, but it’s a key characteristic of a venture
capital portfolio, and we believe the successful disposals will continue to
significantly outweigh the losses over the medium to long term.
Year ended 31 October 2018 Period (1)ended 31 December 2019 Year ended 31 December 2020 Year ended 31 December 2021 Year ended 31 December 2022 Total
Dividends (£'000) 24,178 33,187 46,037 101,976 49,596 254,974
Disposal proceeds (£'000) 22,367 26,334 23,915 221,504 62,213 356,333
1. Note, the period to December 2019 was 14 months.
2. Note, this table includes cash and retention proceeds received within the
period.
New and follow-on investments
Titan completed follow-on investments into 33 companies and made 31 new
investments. Together, these totalled £157 million (made up of £52 million
invested into the existing portfolio and £105 million into new companies).
This compares with 31 new investments and 24 follow-on investments in 2021,
together totalling £143 million. The total value of the portfolio as at 31
December 2022 is £837 million.
Below are some examples of new investments made across our seven areas of
focus during the year. For a full list, please refer to the Appendix:
Fintech
* Cobee is a fully digital solution that simplifies employee benefits
management. Using the app and Cobee Visa card, employees have access to a
range of benefits; and
* Sidekick offers an alternative investment platform that gives retail
investors access to actively managed portfolios.
Deep tech
* Touchlab has developed an electronic skin that can provide robots with the
sense of touch; and
* Unlikely AI is developing an Artificial Intelligence (AI) platform capable
of providing intelligence in a manner similar to the brain.
Health
* Vira is a digital health company focused on relief for the central pain
points of menopause; and
* Little Journey has created a digital support platform that prepares, informs
and provides support for a child’s healthcare procedures and clinical
trials.
Consumer
* Onin is a consumer app fusing calendar and communications under a single
interface; and
* Partly has built a global platform and protocol for vehicle parts.
B2B software
* Velaris is an operating system for modern customer success teams; and
* Contingent offers a real-time, supply chain visibility platform applicable
across industries.
Bio
* Biofidelity has developed technology that enables rapid, precise genomic
profiling and stratification of cancer able to be performed on existing
instruments; and
* Infinitopes has built an antigen discovery platform to develop cancer
vaccines that provide better treatment outcomes.
Climate
* Foodsteps offers a platform that makes it quick and affordable to calculate
environmental impacts across large and complex food
operations; and
* Kita is a carbon credit insurance company.
Q&A
How do we think about exiting our positions?
In a venture capital portfolio, a relatively small number of investments
generate a significant proportion of fund performance. As a result, we have a
natural tension between ensuring we facilitate the best performing companies
to reach their potential (including being prepared
to give them sufficient time to achieve this), and maintaining good portfolio
management discipline to make sure realised proceeds materially contribute
towards financing the Company’s ongoing running costs and meeting its
dividends targets.
Private markets are by definition illiquid, and as a result, the opportunities
to sell all or some of our holding in a particular company are intermittent.
We find there are opportunities for partial realisations as part of later
stage funding rounds, however most realisations will be part of a full exit
process, usually to a strategic buyer or private equity firm. We work closely
with each portfolio company to understand and optimise its cash runway, with
the goal of them maintaining flexibility over exit timing with the best
interests of its shareholders in mind.
Our portfolio is large and diverse, and although we aim to take a systematic
approach to supporting our portfolio, we know there is no definitive formula
for success, especially when working across very different industries and
stages. Often wider macroeconomic conditions can influence exits as much as
factors within a company’s control. We also recognise it is not always the
right time to exit a position and instead continue to support the company,
being alert to opportunities as they arise, and helping to proactively create
these opportunities where we can through our network.
When do we start to think about exits?
We seek to invest in pioneering entrepreneurs who are looking to change an
industry for the better. Not only is that an ambitious objective, but it is
also one which often requires patience. As such, we understand that for our
best performing companies, we may be shareholders for ten years or more.
Despite that, understanding who the likely acquirers are from the outset and
throughout the holding period can help inform important strategic decisions
which contribute to value creation for shareholders.
As the saying goes, “companies are bought, not sold”. In practice, this
means that the most impactful exits we have completed are from companies which
have been successful in changing their industry, either by becoming the new
dominant player or by filling a strategic gap in an incumbent’s offering.
Many of the most successful companies are built with the intention of
remaining independent, but believe it is healthy to maintain relationships
with key potential acquirers. They are often commercial partners before
becoming acquirers, and as such this activity can be highly productive.
We know not all companies will be as successful as we hope at the time of the
initial investment. We therefore seek to realise investments in companies
which are underperforming and unlikely to generate a meaningful return. It can
also help to find a “soft landing” for the company’s employees where the
alternative may be placing the business into administration. Although
generally not meaningful to investor returns, our behaviour in these scenarios
is important to cement our reputation as a founder‑friendly investor who
entrepreneurs seek to partner with on subsequent projects.
How do we work with portfolio company boards?
We believe that it is important to be an active and supportive investor, so we
typically appoint a non-executive director or observer to the board of our
portfolio companies. This allows us to offer ongoing support at the top level
of the business, be involved in key decisions and allows the opportunity for
us to share any expertise and insights that we may have.
Even very experienced founders may only sell a business once or twice in their
career, whereas as investors, we may be involved in five to ten exits each
year. We therefore look to support our portfolio companies by sharing the
learnings and experience gathered across our team, all with the objective of
obtaining the best outcome for our investors and shareholders in the company
overall.
Who are typically buyers for our portfolio companies?
There are a variety of exit options for our portfolio companies. For the
largest and most successful companies, these may look to list on a public
stock exchange. There have only been a few of these in Titan’s history so
far.
More common are sales to strategic acquirers and private equity firms. Titan
VCT is proud to have sold companies to many of the largest
global companies, including Microsoft, Google, Amazon, Nestlé and Unilever.
Finally, we can partially realise our shareholdings in later-stage funding
rounds, where existing shareholders can sell a proportion of their
shareholding to accommodate new later-stage investors to the round.
Though, as already stated, not all exits result in a profitable outcome.
Valuations
The table below illustrates the split of valuation methodology (shown as a
percentage of portfolio value and number of companies). ‘External price’
includes valuations based on funding rounds that typically completed in the
last 12 months to the period end or shortly after the period end, and exits of
companies where terms have been issued with an acquirer. ‘External price’
also includes quoted holdings, which are held at their quoted price as at the
valuation date. ‘Multiples’ is predominantly used for valuations that are
based on a multiple of revenues for portfolio companies. Where there is
uncertainty around the potential outcomes available to a company, a
probability weighted ‘Scenario analysis’ is considered. For further
information please see Note 16, which only concerns the unquoted holdings in
the portfolio.
Valuation methodology By value By number of companies
Multiples 40.9% 23.2%
External price 54.4% 51.2%
Scenario analysis 4.7% 19.4%
Write off - 6.2%
Top 20
Here, we set out the cost and valuation of the top 20 holdings of the overall
portfolio. These 20 account for over 58% of the value of Titan’s portfolio.
Changes since last year
In 2021, we reported details of the top ten holdings as this made up c.50% of
Titan’s total portfolio value. This has now been increased to report on the
top 20 to show 58% of total portfolio value.
Portfolio: Investment cost: Total valuation including cost:
1 ManyPets 9,778 102,729
2 Amplience 13,634 38,786
3 Permutive 18,994 38,510
4 Quit Genius 12,890 33,581
5 Skin+Me 11,500 32,933
6 Orbex 10,298 25,174
7 Big Health 12,855 22,220
8 vHive 8,020 19,766
9 Token 12,608 18,366
10 Sofar 11,496 17,383
11 Elliptic 7,224 15,940
12 Iovox 7,206 14,518
13 Ometria 11,510 13,668
14 Legl 7,325 13,393
15 Elvie 6,417 13,338
16 Katkin 5,475 12,698
17 Vitesse 7,128 12,257
18 Tatum 4,190 11,992
19 Uniplaces 9,491 10,486
20 Oribiotech 9,102 10,451
All values in £’000.
Portfolio case studies
Permutive
www.permutive.com
Permutive is a privacy-compliant advertising technology company that helps
publishers and advertisers to strengthen and action their valuable data for
targeting, all while keeping it safe.
* The partner of choice for privacy‑compliance, targeting more than 70% of
the UK’s top publishers
* Customers include: The Times, The Economist, BuzzFeed, Condé Nast
Its Audience Platform uses on-device technology to access and process data
quickly, accurately and anonymously. This enables a privacy-safe way of
learning about consumers’ behaviours online, without compromising data
security or identifying them.
For many companies, General Data Protection Regulation (GDPR) made handling
consumer information complicated and opened up regulatory risk. Many existing
platforms were unable to adapt to the new rules, creating a gap in the market.
The platform uses a form of edge computing, keeping user data safe, and
minimising latency which allows for immediate insights and targeting.
Octopus investment dates:
Initial investment: May 2015
Latest investment: October 2021
Orbex
www.orbex.space
Orbex is a UK-based private, low-cost rocket company, serving the needs of the
small satellite industry.
* £40.4 million raised in Series C funding round in October 2022
* May 2022: Orbex Prime rocket unveiled – the first full-stack rocket to be
revealed in Europe
It has developed one of the world’s most advanced, low carbon, high
performance microlauncher rockets, with the aim of launching the first
vertical rocket from UK soil and creating the first European commercial launch
vehicle business.
The company is the first to use bio-propane as a fuel, which allows the rocket
to reduce carbon emissions significantly compared to other similarly sized
rockets. A study by the University of Exeter showed that a single launch of
the Orbex Prime rocket will produce 96% lower carbon emissions than comparable
space launch systems using fossil fuels. The use of biofuel has been made
possible by Orbex’s innovative approaches to design.
Octopus investment dates:
Initial investment: December 2020
Latest investment: October 2022
Skin+Me
www.skinandme.com
Skin+Me offers direct-to-consumer, prescription‑strength personalised skin
care treatments. Skin+Me combines medical expertise and technology to offer
personalised treatment plans on a subscription basis.
The global personalised skincare market was valued at $17.2 billion last year
and is expected to hit $38.9 billion in 2030(1)
4.5/5 stars on Trustpilot (from over 6,000 reviews) as of 1 April 2023
(1) Global personalised skincare market worth $38.9 billion by 2030,
InsightAce Analytic report, January 2022.
Through an online consultation, customers are prescribed a bespoke treatment
plan and presented with a fully customised skincare routine, without requiring
a trip to the dermatologist.
The momentum behind this growth is largely driven by consumers dismissing the
one‑size‑fits‑all approach. There is also an increased awareness of
sustainability amongst consumers, whereby Skin+Me strive to challenge industry
standards. By using recyclable packaging and offering personalised solutions
that are made-to-order, it means none goes to waste.
Octopus investment dates:
Initial investment: September 2019
Latest investment: December 2022
Tatum
www.tatum.com
Tatum is simplifying complex blockchain operations for app developers.
* >100,000 customers, adding over 7,000 new ones per month
* $592 billion: value of the global blockchain technology market in 2021
Blockchain is the underlying technology that enables the existence of
cryptoassets (such as Bitcoin and Ethereum) and non-fungible tokens (NFTs).
All blockchains operate differently, using different mechanisms, coding
languages and privacy measures, making it particularly challenging to build
across multiple blockchains. Tatum’s blockchain development platform allows
developers to connect various blockchains and blockchain services through a
single integration. It simplifies operational processes, reduces product
development time for applications by up to 90% and bridges the skills gap that
exists because of the relative lack of blockchain developers in the market.
Octopus investment dates:
Initial investment: November 2021
Latest investment: August 2022
ManyPets
www.manypets.com
ManyPets was founded in 2012 to provide a transparent and digital-first
insurance experience, and in 2017 it launched its own dog and cat insurance
policies.
* >600,000 pets covered globally
* Covering 85% of the pet insurance market in the US
It has become one of the fastest-growing insurance businesses in Europe by
listening to pet owners and solving their insurance pain points. It was the
first company to create a product for pets with pre-existing conditions and
partner with a video vet service. Its tech allows it to automate payments for
a significant proportion of claims and fine tune pricing to ensure a
sustainable loss ratio. In 2019, it launched in Sweden and then in 2021
expanded into the US. It has moved further into the pet health space by
acquiring a pet medication subscription business.
Octopus investment dates:
Initial investment: October 2016
Latest investment: April 2021
Vitesse
www.vitessepsp.com
Vitesse is a market-leading settlement and liquidity management platform to
hold funds and deliver international payments globally, using domestic,
in-country processing.
* >£8 billion settled globally to over 100 countries and payment types
* >70% completed transactions for the London insurance market
With a focus on serving the global insurance market, the company already
includes some of the world’s largest insurers as customers. In 2022, the
company announced a strategic deal with Lloyd’s of London to improve capital
efficiency across the insurance marketplace and to improve the speed of claims
payment. In the same year, Vitesse won the best international payments,
remittance or use of FX award at Pay360 Awards.
Octopus investment dates:
Initial investment: June 2020
Latest investment: January 2022
Top 10 investments in detail(1)
1
ManyPets
www.manypets.com
An award-winning insurtech company with a specific focus on providing better
pet insurance for everyone.
Initial investment date: October 2016
Investment cost: £9 .9m
(2021: £9.9m)
Valuation: £1 02.7m
(2021: £146.9m)
Last submitted accounts: 31 March 202 2
Turnover: £ 42.4m
(2021: £29.8m)
Loss before tax: £( 31.9 ) m
(2021: £(22.3)m)
Net assets: £ 12.6m
(2021: £38.1m)
Valuation methodology Revenue multiple
2
Amplience
www.amplience.com
Amplience is a leading headless content management system, which powers
retailers’ digital channels.
Initial investment date: December 2010
Investment cost: £ 13.6m
(2021: £13.6m)
Valuation: £ 38.7m
(2021: £46.6m)
Last submitted accounts: 3 0 June 202 2
Turnover: £ 13.4m
(2021: £11.7m)
Loss before tax: £( 7.8 ) m
(2021: £(2.0)m)
Net assets: £ (12.1)m
(2021: £(6.8)m)
Valuation methodology Last round
3
Permutive
www.permutive.com
Permutive’s publisher data platform gives its customers an in-the-moment
view of everyone on their site.
Initial investment date: May 2015
Investment cost: £ 18.9m
(2021: £18.9m)
Valuation: £ 38.5m
(2021: £49.5m)
Last submitted accounts (2): Not available
Turnover: Not available
Loss before tax: Not available
Net assets: Not available
Valuation methodology Revenue multiple
4
Quit Genius
www.quitgenius.com
A digital health solution for managing substance use disorders.
Initial investment date: January 2020
Investment cost: £ 12.8m
(2021: £12.8m)
Valuation: £ 33.5m
(2021: £29.8m)
Last submitted accounts (2): Not available
Turnover: Not available
Loss before tax: Not available
Net assets: Not available
Valuation methodology Last round
5
Skin+Me
www.skinandme.com
Skin+Me offers direct-to-consumer, personalised skincare.
Initial investment date: September 2019
Investment cost: £ 11.5m
(2021: £4.0m)
Valuation: £ 32.9m
(2021: £17.5m)
Last submitted accounts: 3 1 August 202 1
Turnover: Not available
Loss before tax: £( 5.5 ) m
(2021: £(2.3)m)
Net assets: £ (0.3)m
(2021: £(5.8)m)
Valuation methodology Last round
6
Orbex
www.orbex.space
Orbex designs and constructs small, orbital rockets to service the growing
small satellite launch market.
Initial investment date: December 2020
Investment cost: £ 10.2m
(2021: £4.5m)
Valuation: £ 25.1m
(2021: £10.3m)
Last submitted accounts: 3 1 December 202 1
Consolidated turnover: $0.6m
(2021: $0.9m)
Consolidated loss before tax: $ ( 5.9 ) m
(2021: $(0.8)m)
Consolidated net assets: $12.3 m
(2021: $16.9m)
Valuation methodology Last round
7
Big Health
www.bighealth.com
A digital medicine company delivering cognitive behavioural therapy to
sufferers of mental health problems.
Initial investment date: June 2016
Investment cost: £ 12.8m
(2021: £12.8m)
Valuation: £ 22.2m
(2021: £26.4m)
Last submitted accounts: 3 1 December 202 1
Consolidated turnover: $20.3m
(2021: $13.4m)
Consolidated loss before tax: $ ( 12.9 ) m
(2021: $(13.5)m)
Consolidated net assets: $79.6m
(2021: $23.9m)
Valuation methodology Revenue multiple
8
vHive Tech Ltd
www.vhive.ai
vHive enables businesses to deploy autonomous drone hives to digitise their
field assets and operations.
Initial investment date: May 2019
Investment cost: £ 8.0m
(2021: £3.9m)
Valuation: £ 19.7m
(2021: £13.7m)
Last submitted accounts: 3 1 December 202 1
Consolidated turnover: $2.4m
(2021: $0.8m)
Consolidated loss before tax: $ ( 3.0 ) m
(2021: $(2.8)m)
Consolidated net assets: $2.3m
(2021: $4.5m)
Valuation methodology Last round
9
Token
www.token.io
A leading Open Banking solution, focused on payments.
Initial investment date: March 2017
Investment cost: £ 12.6m
(2021: £8.4m)
Valuation: £ 18.3m
(2021: £11.1m)
Last submitted group accounts: 3 1 December 202 1
Turnover: Not available
Loss before tax: Not available
Net assets: £0.5m
(2021: £0.4m)
Valuation methodology Revenue multiple
10
Sofar Sounds Limited
www.sofarsounds.com
Sofar Sounds organises small, intimate music performances in unique spaces
across the globe.
Initial investment date: January 2015
Investment cost: £ 11.4 m
(2021: £11.4m)
Valuation: £ 1 7 . 3 m
(2021: £15.3m)
Last submitted group accounts: 3 1 December 202 1
Consolidated turnover: $ 5.8 m
(2021: $2.8m)
Consolidated loss before tax: $ ( 11.8 ) m
(2021: $(12.2)m)
Consolidated net assets: $ 5.8 m
(2021: $6.2m)
Valuation methodology Last round
1. These are numbers per latest public filings. Latest figures have not been
disclosed.
2. Information not publicly available and commercially sensitive.
Outlook
Having enjoyed consistent growth since inception, with especially strong
performance over the three years to 31 December 2021, the decline in Titan’s
NAV is of course disappointing. The headwinds we have encountered over the
past 12 months have been particularly strong and we have seen many existing
issues intensify. Valuations of the portfolio companies are reflective of this
environment. Titan’s unquoted portfolio companies are valued in accordance
with the IPEV valuation guidelines. This means we value the portfolio at fair
value, which is the price we expect people would be willing to buy or sell an
asset for, assuming they had all the information we have available; are
knowledgeable parties with no pre‑existing relationship; and that the
transaction is carried out under the normal course of business. On top of
this, several of Titan’s portfolio companies have been affected by the
challenges the economic backdrop has created, with costs increasing and
consumer confidence and spending declining. As a result, valuations have been
reappraised in line with all these factors.
Despite this decline in performance, we are reassured by the continued
fundraising success of our portfolio companies as well as the resilience,
ambition and drive displayed by extraordinary management teams behind them.
The pie chart shows the percentage split across Titan’s NAV of the cash
runway available to its portfolio companies. Almost 40% of the portfolio is
not expected to require further funding, and almost 85% has cash runway of at
least 12 months – this should ensure that the portfolio is well capitalised
to navigate the challenging fundraising environment. The strong deployment
rate over the past 12 months, with 31 new investments completing, shows us
that exciting and novel businesses are still founded in turbulent times. These
investments have been made into early-stage, tech-enabled businesses with
high-growth potential. These types of companies should thrive in challenging
periods as barriers to adopting new technologies lessen, there is a greater
acceptance of change and as talent availability improves.
As well as these new investments, we can see that many of Titan’s existing
portfolio companies are maturing, growing their customer base, winning new
contracts, hiring new talent, and developing their technologies. So, although
we are currently in a more challenging exit environment, when conditions
improve in the future, we believe there should be opportunities for companies
to take the next steps on their growth journey. Successful exits enable Titan
to realise the growth a portfolio company has achieved over its investment
lifespan. Please see above where we answer some questions surrounding our exit
process.
To be able to support portfolio companies in their ambition to change the
world, we believe we should be an active investor, offering more than just
financial support. You will have read about our in-house Talent team and how
they lend their expertise and knowledge to support our companies. We work to
equip the management teams with the platforms and tools they need to succeed.
It is typical for a member of the Octopus Ventures team to join the Board of a
portfolio company to provide ongoing support. We believe that the management
team are the key determining factor for a company’s success, and this
support is an investment in the future, designed to bolster resilience so that
our portfolio companies can weather periods of disruption, and to help them
develop the culture and capabilities they need to drive ongoing success. And
it sets Octopus Ventures apart, offering us a competitive advantage in winning
the best investment opportunities and proving our value beyond just
investment.
The past 12 months have been a period of immense change on a global scale, and
Titan has understandably been affected by this. Looking ahead, we are
confident that many portfolio companies have the potential to build upon their
successes to date. We back businesses from a wide range of sectors, at
different investment stages, and we think this breadth of scope will provide
Titan with the opportunities it needs to succeed in the future and return to
its previous growth trajectory.
Months of cash runway available to Titan’s portfolio companies % portfolio NAV
<6 months 3%
6-12 months 14%
12-18 months 18%
>18 months 27%
No funding requirement 38%
Risks and risk management
The Board assesses the risks faced by Titan and, as a board, reviews the
mitigating controls and actions, and monitors the effectiveness of these
controls and actions.
Emerging and principal risks, and risk management
Emerging risks
The Board has considered emerging risks. The Board seeks to mitigate emerging
risks and those noted below by setting policy, regular review of performance
and monitoring progress and compliance. In the mitigation and management of
these risks, the Board applies the principles detailed in the Financial
Reporting Council’s Guidance on Risk Management, Internal Control and
Related Financial and Business Reporting.
The following are some of the potential emerging risks management and the
Board are currently monitoring:
* adverse changes in global macroeconomic environment;
* high market valuation;
* geo-political instability; and
* climate change.
Principal risks
Risk Mitigation Change
Investment performance:
The focus of Titan’s investments is into unquoted, small and medium‑sized VCT qualifying companies which, by their nature, entail a higher level of risk and shorter cash runway than investments in larger quoted companies. Octopus has significant experience and a strong track record of investing in early-stage unquoted companies, and appropriate due diligence is undertaken on every new Increased due to the difficult macro environment and challenging trading conditions for some portfolio companies.
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’s management and examined by the Manager. This arrangement, in conjunction with its portfolio talent team’s active involvement, allows Titan to play a prominent
role in a portfolio company’s ongoing development and strategy. This includes the impact of Covid-19, and the current situation in Ukraine, on portfolio companies. The
overall risk in the portfolio is mitigated by maintaining a wide spread of holdings in terms of financing stage, age, industry sector and business models. The Board
reviews the investment portfolio with the Portfolio Manager on a regular basis. The Portfolio Manager is incentivised to make sure Titan performs well, via a performance
incentive fee (charged annually) for exceeding certain performance hurdles.
Risk Mitigation Change
VCT qualifying status:
Titan is required at all times to observe the conditions for the maintenance of approved VCT status. The loss of such approval could lead to Titan and its investors losing access to the various tax benefits associated with VCT status and investment. Octopus tracks Titan’s qualifying status regularly throughout the year, and reviews this at key points including investment, realisation. This status is reported to the Given the level of independent verification, a systemic issue which would result in the loss of VCT status is considered less likely and therefore a decreased risk.
Board at each Board meeting. The Board has also engaged external independent advisers to undertake an independent VCT status monitoring role.
Risk Mitigation Change
Loss of key people:
The loss of key investment staff by the Portfolio Manager could lead to poor fund management and/or performance due to lack of continuity or understanding of Titan. The Portfolio Manager has a broad team experienced in and focused on early-stage investing. This mitigates the risk of any one individual with the required skill set and An increase in risk exposure reflects a reduction in performance fees potentially increasing attrition.
knowledge of venture capital investing, and the portfolio specifically, leaving. Key investment staff are also incentivised via the performance incentive fee.
Risk Mitigation Change
Operational:
The Board is reliant on the Portfolio Manager to manage investments effectively, and manage the services of a number of third parties, in particular the registrar, depositary and tax advisers. A failure of the systems or controls at Octopus or third-party providers could lead to an inability to provide accurate reporting and accounting and to ensure adherence to VCT rules. The Board reviews the system of internal controls, both financial and non-financial, operated by Octopus (to the extent the latter are relevant to Titan’s internal No overall change in risk exposure on balance.
controls). These include controls designed to make sure that Titan’s assets are safeguarded and that proper accounting records are maintained.
Risk Mitigation Change
Information security:
A loss of key data could result in a data breach and fines. The Board is reliant on Octopus 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. Octopus has a dedicated information security team No overall change on balance, although cyber threat remains a significant risk area faced by all service providers.
and a third party is engaged to provide continual protection in this area. A security framework is in place to help prevent malicious events.
Risk Mitigation Change
Economic:
Events such as an economic recession and movement in interest rates 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 Titan’s assets. Titan invests in a diverse portfolio of companies, across a range of sectors, which helps to mitigate against the impact on any one sector. Titan also maintains adequate Continued uncertainty in an environment that includes high inflation, high interest rates and other economic factors.
liquidity to make sure it can continue to provide follow‑on investment to those portfolio companies which require it and which is supported by the individual investment
case.
Risk Mitigation Change
Legislative:
A change to the VCT regulations could adversely impact Titan by restricting the companies Titan can invest in under its current strategy. Similarly, changes to VCT tax reliefs for investors could make VCTs less attractive and impact Titan’s ability to raise further funds. The Portfolio Manager engages with HMT and industry bodies to demonstrate the positive benefits of VCTs in terms of growing early-stage companies, creating jobs and Reduced slightly, reflecting a sentiment that the sunset clause is likely to be removed, although political uncertainty remains.
increasing tax revenue, and to help shape any change to VCT legislation. The changes to VCT regulations in 2018 largely benefitted Titan as there were increased annual
and lifetime investment limits introduced for Knowledge Intensive companies (i.e. those that have a high proportion of Research and Development or innovation spend), and
many of the companies in which Titan invests qualify as such companies.
Risk Mitigation Change
Liquidity:
The risk that Titan’s available cash will not be sufficient to meet its financial obligations. Titan 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. Titan’s liquidity risk is managed on a continuing basis by Octopus in accordance with policies and procedures agreed by the Board. Titan’s overall liquidity risks are Increased to reflect the potential knock-on effects of economic uncertainty, including impacts on fundraising and the risk of disposal failures.
monitored on a quarterly basis by the Board, with frequent budgeting and close monitoring of available cash resources. Titan maintains sufficient investments in cash and
readily realisable securities to meet its financial obligations. At 31 December 2022, these investments were valued at £162,945,000 (2021: £198,373,000), which represents
15% (2021: 14%) of the net assets of Titan.
Risk Mitigation Change
Valuation:
The portfolio investments are valued in accordance with International Private Equity and Venture Capital (IPEV) valuation guidelines. This means companies are valued at fair value. As the portfolio comprises smaller unquoted companies, establishing fair value can be difficult due to the lack of a readily available market for the shares of such companies and the potentially 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 it operates in. An increase in valuation risk reflects greater economic uncertainty within valuation modelling.
These valuations are then subject to review and approval by Octopus’ Valuation Committee, comprised of staff who are independent of Octopus Ventures with relevant
knowledge of unquoted company valuations, as well as Titan’s Board of Directors.
Risk Mitigation Change
Foreign currency exposure:
Investments held and revenues generated in other currencies may not generate the expected level of returns due to changes in foreign exchange rates. Octopus and the Board regularly review the exposure to foreign currency movement to make sure the level of risk is appropriately managed. Investments are primarily made Reduced exposure due to the realisation of investments held in foreign currencies during the year.
in GBP, EUR and USD so exposure is limited to a small number of currencies. On realisation of investments held in foreign currencies, cash is translated to GBP shortly
after receiving the proceeds to limit the amount of time exposed to foreign currency fluctuations.
Viability statement
In accordance with the FRC UK Corporate Governance Code published in 2018 and
provision 36 of the AIC Code of Corporate Governance, the Directors have
assessed the prospects of Titan over a period of five years, consistent with
the expected investment hold
period of a VCT investor. A fundraising was launched on 10 November 2022 and
closed on 5 April 2023, raising £237 million. 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 Titan’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 Titan and its current position, including 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 Titan’s
reliance on, and close working relationship with, the Portfolio Manager. The
principal risks faced by Titan and the procedures in place to monitor and
mitigate them are set out above.
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 Titan to comply with the
ongoing conditions to make sure it maintains its VCT qualifying status under
its current investment policy.
Based on this assessment the Board confirms that it has a reasonable
expectation that Titan will be able to continue in operation and meet its
liabilities as they fall due over the five-year period to 31 December 2027.
The Board is mindful of the ongoing risks and will continue to make sure that
appropriate safeguards are in place, in addition to monitoring the cash flow
forecasts to ensure Titan has sufficient liquidity.
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 financial statements
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 (GAAP), including Financial Reporting Standard 102 –
‘The Financial Reporting Standard Applicable in the United Kingdom and
Republic of Ireland’ (FRS 102), (United Kingdom accounting standards and
applicable law). 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, 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 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.
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 and financial
statements in accordance with applicable law and regulations. Having taken
advice from the Audit Committee, the Directors are of the opinion that this
report as a whole provides the necessary information to assess the Company’s
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 financial statements (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
Tom Leader
Chair
Income statement
Year to 31 December 202 2 Year to 31 December 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Gain on disposal of fixed asset investments — 66 66 — 76,520 76,520
Gain on valuation of fixed asset investments — (284,465) (284,465) — 232,864 232,864
(Loss)/gain on valuation of current asset investments — (1 2,682 ) (1 2 , 682 ) — (1,475) (1,475)
Investment income 864 — 864 500 — 500
Investment management fee (1, 125 ) ( 21 , 383 ) (2 2 , 508 ) (1,033) (19,635) (20,668)
Performance fee — — — — (63,943) (63,943)
Other expenses (7, 060 ) — (7, 060 ) (7,295) — (7,295)
Foreign exchange translation — 6,570 6,570 — 54 54
(Loss)/profit before tax (7, 321 ) (311,894) (319,215) (7,828) 224,385 216,557
Tax — — — — — —
(Loss)/profit after tax (7, 321 ) (311,894) (319,215) (7,828) 224,385 216,557
(Loss)/earnings per share – basic and diluted (0. 6 )p ( 2 4 .0 ) p (24.6) p (0.7)p 20.0p 19.3p
* The ‘Total’ column of this statement is the profit and loss account of
Titan; 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.
* Titan has only one class of business and derives its income from investments
made in shares and securities and from bank and money market funds.
Titan has no other comprehensive income for the period.
The accompanying notes form an integral part of the financial statements.
Balance sheet
As at 31 December 202 2 As at 31 December 2021
£’000 £’000 £’000 £’000
Fixed asset investments 827,449 1,005,353
Current assets:
Money market funds 58,701 88,126
Corporate bonds 104,244 110,247
Applications cash (1) 2 3,299 2,630
Cash at bank 16,120 182,514
Debtors 43,374 53,443
249,738 436,960
Current liabilities ( 25,427 ) (69,272)
Net current assets 224,311 367,688
Net assets 1,051,760 1,373,041
Share capital 1,368 129,850
Share premium 92,896 201,163
Capital redemption reserve 27 9,759
Special distributable reserve 887,288 642,873
Capital reserve realised ( 53,430 ) (14,122)
Capital reserve unrealised 160,634 439,790
Revenue reserve ( 37,023 ) (36,272)
Total equity shareholders’ funds 1, 051,760 1,373,041
NAV per share 7 6.9 p 105.7p
1. Funds raised from investors since Titan opened for new investment which
have not been allotted as at year end.
The accompanying notes form an integral part of the financial statements.
The statements were approved by the Directors and authorised for issue on 24
April 2023 and are signed on their behalf by:
Tom Leader
Chair
Company Number 06397765
Statement of changes in equity
Capital Special Capital Capital
Share Share redemption distributable reserve reserve Revenue
capital premium reserve reserve (1) realised (1) unrealised reserve (1) Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
As at 1 January 202 1 107,502 564,308 6,377 150,007 (66,167) 309,706 (28,498) 1,043,235
Comprehensive income for the year:
Management fees allocated as capital expenditure — — — — (19,635) — — (19,635)
Current year gain on disposal of fixed asset investments — — — — 76,520 — — 76,520
Gain on fair value of fixed asset investments — — — — — 232,864 — 232,864
Loss on fair value of current asset investments — — — — — (1,475) — (1,475)
Loss after tax — — — — — — (7,828) (7,828)
Foreign exchange translation — — — — — — 54 54
Performance fee — — — — (63,943) — — (63,943)
Total comprehensive income for the year — — — — (7,058) 231,389 (7, 774 ) 216,5 57
Contributions by and distributions to owners:
Share issue (includes DRIS) 25,730 264,963 — — — — — 290,693
Share issue costs — (6,956) — — — — — (6,956)
Repurchase of own shares (3,382) — 3,382 (34,519) — — — (34,519)
Dividends paid (includes DRIS) — — — (93,767) (42,202) — — (135,969)
Total contributions by and distributions to owners 22,348 258,007 3,382 (128,286) (42,2 0 2) — — 113,249
Other movements:
Share premium cancellation — (621,152) — 621,152 — — — —
Prior year fixed asset gains now realised — — — — 101,305 (101,305) — —
Total other movements — (621,152) — 621,152 101,305 (101,305) — —
Balance as at 31 December 2021 129,850 201,163 9,759 642,873 (14,122) 439,790 (36,272) 1,373,041
1. Reserves are available for distribution, subject to the restrictions.
The accompanying notes form an integral part of the financial statements.
Capital Special Capital Capital
Share Share redemption distributable reserve reserve Revenue
capital premium reserve reserve (1) realised (1) unrealised reserve (1) Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
As at 1 January 202 2 129,850 201,163 9,759 642,873 (14,122) 439,790 (36,272) 1,373,041
Comprehensive income for the year:
Management fees allocated as capital expenditure — — — — (21,383) — — (21,383)
Current year gain on disposal of fixed asset investments — — — — 66 — — 66
Loss on fair value of fixed asset investments — — — — — (284,465) — (284,465)
Loss on fair value of current asset investments — — — — — (12,682) — (12,682)
Loss after tax — — — — — — (7,321) (7,321)
Foreign exchange translation — — — — — — 6,570 6,570
Total comprehensive income for the year — — — — (21,317) (297,147) (751) (319,215)
Contributions by and distributions to owners :
Share issue (includes DRIS) 1,299 106,307 — — — — — 107,606
Share issue costs — (2,260) — — — — — (2,260)
Repurchase of own shares (1,864) — 1,864 (41,192) — — — (41,192)
Dividends paid (includes DRIS) — — — (66,220) — — — (66,220)
Total contributions by and distributions to owners (565) 104,047 1,864 (107,412) — — — (2,066)
Other movements:
Share premium cancellation — (212,314) (11,596) 223,910 — — — —
Reduction in the nominal value of share capital (127,917) — — 127,917 — — — —
Prior year fixed asset gains now realised — — — — 9,575 (9,575) — —
Transfer between reserves — — — — (27,566) 27,566 — —
Total other movements (127,917) (212,314) (11,596) 351,827 (17,991) 17,991 — —
Balance as at 31 December 202 2 1,368 92,896 27 887,288 (53,430) 160,634 (37,023) 1,051,760
1. Reserves are available for distribution, subject to the restrictions.
The accompanying notes form an integral part of the financial statements.
Cash flow statement
Year to 31 December Year to 31 December
202 2 2021
£’000 £’000
Reconciliation of profit to cash flows from operating activities
(Loss)/profit before tax (319,215) 216,557
Increase in debtors ( 5,666 ) (28)
(Decrease)/increase in creditors (64,514) 46,600
Loss on valuation of current assets 12,682 1,475
Gain on disposal of fixed asset investments ( 66) (76,520)
Loss/(gain) on valuation of fixed asset investments 284,465 (232,864)
Outflow from operating activities ( 92,314 ) (44,780)
Cash flows from investing activities
Purchase of current asset investments ( 6,679 ) (21,840)
Purchase of fixed asset investments (1 56,973 ) (142,831)
Sale of fixed asset investments 62,213 220,324
(Outflow)/ Inflow from investing activities (101,439) 55,653
Cash flows from financing activities
Movement in applications account 20,669 (983)
Dividends paid (net of DRIS) ( 49,596 ) (101,976)
Purchase of own shares ( 41,192 ) (34,519)
Share issues 90,982 256,700
Share issue costs ( 2,260 ) (6,956)
Inflow from financing activities 1 8,603 112,266
(Decrease)/ Increase in cash and cash equivalents (175,150) 123,139
Opening cash and cash equivalents 273,270 150,131
Closing cash and cash equivalents 98,120 273,270
Cash and cash equivalents comprise
Cash at bank 16,120 182,514
Applications cash 2 3,299 2,630
Money market funds 58,701 88,126
Closing cash and cash equivalents 98,120 273,270
The accompanying notes form an integral part of the financial statements.
Notes to the financial statements
1. Principal accounting policies
Titan is a Public Limited Company (plc) incorporated in England and Wales and
its registered office is at 6th Floor, 33 Holborn, London EC1N 2HT.
Titan has been approved as a Venture Capital Trust by HMRC under Section 259
of the Income Taxes Act 2007. The shares of Titan were first admitted to the
Official List of the UK Listing Authority and trading on the London Stock
Exchange on 28 December 2007 and can be found under the TIDM code OTV2. Titan
is premium listed.
The principal activity of Titan is to invest in a diversified portfolio of UK
smaller companies in order to generate capital growth over the long term as
well as an attractive tax-free dividend stream.
The financial statements are presented in sterling (£) to the nearest
£’000. The functional currency is also sterling (£).
Basis of preparation
The financial statements have been prepared on a going concern basis 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 (July 2022)’.
Subsidiaries
Zenith Holding Company is a wholly-owned subsidiary of Titan, but owing to the
exemption permitted under FRS 102 to not have to consolidate investment
companies held as part of an investment portfolio (Section 9 of FRS 102,
paragraphs 9.9(b) and 9.9B), Titan has not consolidated the assets and
liabilities of Zenith Holding Company. Zenith Holding Company made a profit of
£10,513 during the period (2021: (11,158,934)) and its aggregate capital and
reserves during the period amounted to £11,372,628 (2021: 11,383,141).
2. Investment income
Accounting policy
Investment income includes interest earned on money market funds. Dividend
income is shown net of any related tax credit.
Dividends receivable are brought into account when Titan’s right to receive
payment is established and there is no reasonable doubt that payment will be
received. Fixed returns on debt and money market funds are recognised so as to
reflect the effective interest rate, provided there is no reasonable doubt
that payment will be received in due course.
Disclosure
Year to Year to
31 December 31 December
202 2 2021
£’000 £’000
Money market funds 577 3
Loan note interest receivable 287 497
Total income 864 500
3. Investment management fees
Accounting policy
For the purposes of the revenue and capital columns in the Income Statement,
the management fee has been allocated 5% to revenue and 95% to capital, in
line with the Board’s expected long-term return in the form of income and
capital gains respectively from Titan’s investment portfolio.
Disclosure
Year to 31 December 202 2 Year to 31 December 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment
management fee 1, 125 21,383 22,508 1,033 19,635 20,668
Performance fee — — — — 63,943 63,943
Total 1, 125 21,383 22,508 1,033 83,578 84,611
The performance fee has been wholly attributed to capital.
The Portfolio Manager provides investment management services through
agreements with Octopus AIF Management Limited and Titan. It also provides
non-investment services to Titan under a non-investment services agreement. No
compensation is payable if the agreement is terminated by either party, if the
required notice period is given. The fee payable, should insufficient notice
be given, will be equal to the fee that would have been paid should continuous
service be provided, or the required notice period was given. The basis upon
which the management fee is calculated is disclosed within the Annual Report
and financial statements.
4. Other expenses
Accounting policy
Other expenses are accounted for on an accruals basis and are charged wholly
to revenue.
The transaction costs incurred when purchasing or selling assets are written
off to the Income statement in the period that they occur.
Year to Year to
31 December 31 December
202 2 2021
£’000 £’000
Ongoing adviser charges and trail commission 3, 085 3,202
Accounting and administration services 1, 893 1,723
Impairment of accrued loan note interest receivable 373 572
Listing fees 236 447
Depositary fees 336 278
Registrar’s fees 1 49 188
Directors’ remuneration (1) 1 90 179
D&O insurance 1 17 143
Audit fees 1 44 104
Other fees 537 459
Total 7, 060 7,295
1. Includes employers’ NI.
Total ongoing charges are capped at 2.5% of net assets. For the year to 31
December 2022 the ongoing charges were 2.2% of net assets (2021: 2.0%). This
is calculated by summing the expenses incurred in the period (excluding
ongoing IFA charges and non‑recurring expenses) divided by the average NAV
throughout the period.
5. Tax on ordinary activities
Accounting policy
Corporation tax payable is applied to profits chargeable to corporation tax,
if any, at the current rate. The tax effect of different items of income/gain
and expenditure/loss is allocated between capital and revenue return on the
‘marginal’ basis as recommended in the SORP.
Deferred tax is recognised in respect of all timing differences at the
reporting date. Timing differences are differences between taxable profits and
total 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.
Disclosure
The corporation tax charge for the period was £nil (2021: £nil).
Year to Year to
31 December 31 December
202 2 2021
£’000 £’000
(Loss)/Profit on ordinary activities before tax (319,215) 216,557
Current tax at 19% (2021: 19%) (60,568) 41,146
Effects of:
Non‑taxable income — (11)
Non‑taxable capital loss/(gains) 5 6,368 (58,503)
Non‑deductible expenses 64 47
Zenith Holding Company distribution (1) — 4,750
Excess management expenses on which deferred tax not recognised 5,450 16,540
Tax rate differences (2) ( 1,314 ) (3,969)
Total current tax charge — —
1. In 2021, £25 million was distributed from Zenith Holding Company to Titan
following the sale of Calastone, which is taxable income for Titan.
2. Tax rate difference due to tax charge for the year being calculated at 19%
and excess management expenses on which deferred tax is not recognised being
calculated at 25%.
Unrelieved tax losses of £186,669,000 (2021: £164,870,000) are estimated to
be carried forward at 31 December 2022 (subject to completion of Titan’s tax
return) and are available for offset against future taxable income, subject to
agreement with HMRC. Titan has not recognised the deferred tax asset of
£46,667,000 (2021: £41,218,000) in respect of these tax losses because there
is insufficient forecast taxable income in excess of deductible expenses to
utilise these losses carried forward. There is no expiry period on these
deductible expenses under the UK HMRC legislation.
Approved VCTs are exempt from tax on capital gains. As the Directors intend
for Titan to continue to maintain its approval as a VCT through its affairs,
no current deferred tax has been recognised in respect of any capital gains or
losses arising on the revaluation or disposal of investment.
6. Dividends
Accounting policy
Dividends payable are recognised as distributions in the financial statements
when Titan’s liability to make the payment has been established. This
liability is established on the record date, the date on which those
shareholders on the share register are entitled to the dividend.
Disclosure
Year to Year to
31 December 31 December
202 2 2021
£’000 £’000
Dividends paid in the year
Previous year’s second interim dividend – 3.0p (2021: 3.0p) 3 8,700 33,629
Current period’s interim dividend – 2.0p (2021: 8.0p) 27,520 102,340
66,220 135,969
Dividends in respect of the year
Interim dividend paid – 2.0p (2021: 8.0p) 27,520 102,340
Second interim dividend – 3.0p (2021: 3.0p) 41,038 38,955
68,558 141,295
The figures above include dividends elected to be reinvested through the DRIS.
The second interim dividend of 3.0p for the period ending 31 December 2022
will be paid on 24 May 2023 to shareholders on the register on 5 May 2023.
7. Earnings per share
Year to 31 December 202 2 Year to 31 December 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
(Loss)/profit attributable to Ordinary shareholders (£’000) (7, 321 ) (311,894) (319,215) (7,828) 224,385 216,557
(Loss)/profit per Ordinary share (p) (0. 6 )p ( 2 4 .0 ) p (24.6) p (0.7)p 20.0p 19.3p
The total earnings per share is based on 1,297,081,006 (2021: 1,122,053,322)
Ordinary shares, being the weighted average number of Ordinary shares in issue
during the period.
There are no potentially dilutive capital instruments in issue and so no
diluted return per share figures are relevant. The basic and diluted earnings
per share are therefore identical.
8. Net Asset Value per share
31 December 31 December
202 2 2021
Net assets (£) 1, 051,760,000 1,373,040,000
Ordinary shares in issue 1, 367,949,929 1,298,498,396
NAV per share (p) 76.9 105.7
9. Related party transactions
Titan owns Zenith Holding Company Limited, which owns a share in Zenith LP, a
fund managed by Octopus.
In the year, Octopus Investments Nominees Limited (OINL) has purchased Titan
shares from shareholders to correct administrative issues, on the
understanding that shares will be sold back to Titan in subsequent share
buybacks. As at 31 December 2022, no Titan shares were held by OINL (2021:
7,637 shares) as beneficial owner. Throughout the period to 31 December 2022,
OINL purchased 729,365 shares (2021: 24,359 shares) at a cost of £678,000
(2021: £27,000) and sold 737,002 shares (2021: 16,816 shares) for proceeds of
£672,000 (2021: £18,000). This is classed as a related party transaction as
Octopus, the Portfolio 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.
Several members of the Octopus investment team hold non-executive
directorships as part of their monitoring roles in Titan’s portfolio
companies, but they have no controlling interests in those companies.
Matt Cooper, a Non-Executive Director of Titan, was the Chair of Octopus
Capital Limited until his resignation on 14 September 2022. Matt Cooper owned
shares in Octopus Group Holdings Ltd during the year, which have been fully
disposed of as at year end. The Directors received the following dividends
from Titan:
Year to Year to
31 December 31 December
202 2 2021
£ £
Tom Leader (Chair since 14 June 2022) 1,640 2,148
John Hustler (Chair until 14 June 2022) 5,569 11,983
Matt Cooper 117,661 207,754
Jane O’Riordan 6,530 11,347
Mark Hawkesworth (resigned on 7 June 2021) 1 ,061 10,659
Lord Rockley 2,145 1,427
Gaenor Bagley 7 40 713
10. 2022 financial information
The figures and financial information for the year ended 31 December 2022 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 December 2022 have been audited but have not yet
been delivered to the Registrar of Companies. The Auditors’ report on the
2022 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. 2021 financial information
The figures and financial information for the period ended 31 December 2021
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
early May and will be available on the Company’s website,
octopustitanvct.com. The Notice of Annual General Meeting is contained within
the Annual Report.
13. General information
Registered in England & Wales. Company No. 06397765
LEI: 213800A671KGG6PVYW75
14. Directors
Tom Leader (Chair), Jane O’Riordan, Matt Cooper, Lord Rockley and Gaenor
Bagley.
15. Secretary and registered office
Octopus Company Secretarial Services Limited
6(th) Floor, 33 Holborn, London EC1N 2HT