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Octopus Apollo VCT PLC  -  OAP3   

Octopus Apollo VCT plc : Half-year Report

Released 17:12 28-Sep-2017

Octopus Apollo VCT plc : Half-year Report

Octopus Apollo VCT Plc  

 

Half-Yearly Results

28 September 2017

Octopus Apollo VCT plc, managed by Octopus Investments Limited, today announces the unaudited half-yearly results for the six months ended 31 July 2017.

These results were approved by the Board of Directors on 28 September 2017.

You may, in due course, view the Half-Yearly report in full at www.octopusinvestments.com. All other statutory information can also be found there.

Financial Headlines

  Six months to
31 July 2017
Six months to
31 July 2016
Year to
31 January 2017
Net assets (£'000s) 155,341 152,139 141,799
Return on ordinary activities after tax (£'000s) 1,799 1,309 5,172
Net asset value ('NAV')* 62.2p 83.0p 63.2p
Cumulative dividends paid since launch (p per share)* 55.7p 32.5p 54.0p
Total return* 117.9p 115.5p 117.2p
Ordinary dividend declared in respect of period 1.6p 2.5p 1.7p
Special dividend declared - 16.5p -

*Comparative figures are for the Ordinary Share class only. 

The interim dividend will be paid on 15 December 2017 to Shareholders on the register on 24 November 2017, and will be eligible for the Dividend Reinvestment Scheme (DRIS).

Chairman's Statement

I am pleased to present the half-yearly report of Octopus Apollo VCT for the six months ended 31 July 2017.

The NAV total return including the 1.7p dividend paid in the period, increased by 1.1% during the six months although the NAV decreased by 1.0p per share.  In keeping with the regular dividend policy, your Board has declared an interim dividend of 1.6p which will be paid to shareholders in December.

During the period the portfolio performed broadly in line with expectations with a small number of exceptions and there were five exits as explained in further detail below. 

There were follow-on funding rounds into seven existing investments and the team currently has a strong pipeline of new investment opportunities so I remain cautiously optimistic about the outlook, despite the political and economic uncertainty resulting from Brexit negotiations.

Murray Steele

Chairman       

28 September 2017

Interim Management Report

Overview

We are approaching the investment environment with caution at present given the political and economic uncertainty relating to Europe.  The portfolio is not materially exposed to Europe so the most obvious risk appears to be that a UK recession could result.  However the investments are generally structured with a higher component of lending than equity which provides an element of downside protection.

Performance

In the six months under review the NAV Total Return, after adding back the 1.7p of dividends paid in the period, has increased 1.1% although the Net Asset Value has decreased 1.6% to 62.2p per share, compared to 63.2p per share at 31 January 2017.  This generally positive performance is attributable to a number of successful exits which will be discussed later in this statement, as well as a continuation of the strong interest yield from loans made to portfolio companies. 

Portfolio Activity

The most significant drivers of change in value are the disposals described in more detail below.  Within the remaining portfolio the most positive developments were in Eve Sleep, valued up by £0.6 million during the period, based on the share price at the point of listing on the Alternative Investment Market in April, and Swoon Editions (up £0.5 million) as it continues to grow faster than forecasted.  Unfortunately the investment in Spiralite was written down to zero (from £1.4 million) as a result of entering administration in July.  The rest of the portfolio continues to perform broadly in line with expectations.

During the six months to 31 July 2017, the Company made the following disposals:

  Initial Cost
(£)
Sale Proceeds
(£)
Gain/(Loss) on Sale (£)
Clifford Thames Group Limited 13,318,000 24,014,000 10,696,000
Aquaso Limited 3,500,000 3,907,000 407,000
The  History Press 754,000 857,000 103,000
Haravar Limited 5,000,000 4,987,000 (13,000)
Galvara Limited 5,000,000 4,987,000 (13,000)
  27,572,000 38,752,000 11,180,000

Clifford Thames was acquired by OEConnection LLC in June 2017, a US company specialising in automotive technology for vehicle manufacturers.  This generated a strong return to Apollo of 1.8x cash invested over the three year period since Lloyds Development Capital acquired the company in August 2014 and Apollo reinvested £14.4 million.  The return includes the interest income on the loan and the uplift in value of the shares. 

In May 2017 Aquaso was sold to Eddyfi Technologies, a Canadian oil and gas technology business.  Aquaso is the holding company of Technical Software Consultants ("TSC"), an oil and gas technology, services and manufacturing business.  Apollo originally invested £3 million in 2012 and provided a further £0.5 million in January 2016 when the market conditions were extremely challenging.  The sale provided a return of 1.4x total cash invested, including interest income earned on the loan.  There was also an earn-out which successfully concluded after 31 July, taking total returns to 1.5x.

The disposals of Galvara and Haravar related to acquisition vehicles which had been established to acquire or develop a VCT qualifying trade, but for which the opportunities being pursued did not materialise.  The boards of those companies consequently elected to liquidate them and return funds to Apollo.  The History Press was acquired as part of the Eclipse portfolio and has now been sold.

Following the sale of SCM World to Gartner Inc in June 2016, an earn out was successfully achieved resulting in a further £0.3 million of proceeds in March 2017. 

During the period £1.3 million was invested to provide follow-on funding rounds to seven existing portfolio companies.  The largest of these was £0.7 million invested in Oxifree, an oil and gas services business acquired as part of the Eclipse portfolio.

Transactions with Manager

Details of amounts paid to the Manager are disclosed in note 7 to the Financial Statements.

Share Buybacks

Your Company has continued to buy back shares. In the six months to July 2017, the Company bought back 1,263,370 shares for total consideration of £754,000.

Share Issues and Fundraising

An Offer for Subscription was launched in November 2016 to raise up to £20 million, and closed fully subscribed in March 2017, eight months ahead of schedule. After expenses, £16 million pounds was raised under the offer in the period under review. In total, the offer raised £20.5 million net of expenses.

Dividend and Dividend Policy

It is your 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.

Your Board has declared an interim dividend of 1.6p per share in respect of the period ended 31 July 2017. The dividend will be payable on 15 December 2017 to shareholders on the register at 24 November 2017.

VCT Qualifying Status

PricewaterhouseCoopers LLP provides the Board and Investment Manager with advice concerning ongoing compliance with Her Majesty's Revenue & Customs ('HMRC') rules and regulations concerning VCTs. The Board has been advised that the Company is in compliance with the conditions set by HMRC for maintaining approval as a VCT.

A key requirement is to ensure that at least 70% of the assets of the fund are in VCT qualifying investments. As at 31 July 2017, 78% of the portfolio, as measured by HMRC rules, was invested in VCT qualifying investments.

Principal Risks and Uncertainties

The principal risks and uncertainties are set out in note 6 to the half yearly report and accounts.

Summary and Future Prospects

The political and economic environments remain uncertain as a result of exit negotiations with the European Union.  However the portfolio has generally continued to perform well and the focus on investing a substantial part of the capital in the form of loans further reduces volatility. The recent weakening of the British Pound has not had a significant impact on the businesses we have backed as they are generally UK based and do not have large unhedged foreign currency exposures.  As such, the returns to shareholders have shown low volatility year on year, which is testament to the prudent investment approach adopted by the Investment Manager. The investment team has an active pipeline of new investment opportunities and we believe we can continue to find suitable VCT qualifying investments.

Octopus Investments Limited
28 September 2017

Investment Portfolio

  Sector Investment cost as at 31 July 2017 (£'000) Movement in fair value to
31 July 2017 (£'000)
Fair value as at
31 July 2017 (£'000)
Movement in fair value in period
(£'000)
% equity held by Apollo VCT % equity held by all funds managed by Octopus
Fixed asset investments              
Vista Retail Support Limited Business Services 6,758 2,639 9,397 (160) 12.0 12.0
Healthcare and Services Technology Limited Healthcare & Education 7,186 328 7,514 (403) 10.0 10.0
Anglo European Group Limited Manufacturing & Engineering 5,000 (168) 4,832 40 26.7 26.7
Coupra Limited Business Services 5,000 (189) 4,811 (494) 9.8 9.8
Dyscova Limited Healthcare & Education 4,700 - 4,700 - 67.7 67.7
Countrywide Healthcare Services Limited Healthcare & Education 2,675 952 3,627 193 20.7 20.7
Kabardin Limited Energy 2,450 - 2,450 - 49.0 49.0
Red Poll Power Limited Energy 2,450 - 2,450 - 49.0 49.0
Valloire Power Limited Energy 2,450 - 2,450 - 49.0 49.0
Tanganyika Heat Limited Energy 4,108 (1,858) 2,250 (24) 50.0 50.0
Other* Various 36,319 (2,414) 33,905 (426)    
Total fixed asset investments   79,096 (710) 78,386 (1,274)    
               
Current asset investments              
Octopus Portfolio Manager - Cash   32,000 4 32,004 4    
Octopus Portfolio Manager - Cash Plus   19,000 112 19,112 112    
Octopus Portfolio Manager - Defensive Capital Growth   19,000 74 19,074 74    
Total current asset investments   70,000 190 70,190 190    
Total fixed and current asset investments       148,576      
Cash at bank       6,067      
Debtors less creditors       698      
Total net assets       155,341      

*Comprises 43 other investments: Acquire Your Business Limited, Angelico Solar Limited, Artesian Solutions Limited, Augean plc, Barrecore Limited, Behaviometrics AB, Bramante Solar Limited, British Country Inns plc, Canaletto Solar Limited, Cello Group plc, CurrencyFair Limited, Ecrebo Limited, EKF Diagnostics plc, Ergomed plc, Eve Sleep Limited, Hasgrove Limited, Leonardo Solar Limited, Luther Pendragon Limited,  Mi-Pay Group plc, MIRACL Limited, Modigliano Solar Limited, Nektan plc, Origami Energy Limited, Oxifree UK Limited, Pirlo Solar Limited, Plastics Capital plc, PTB Films, Quickfire, Quickfire2, Secret Escapes Limited, Segura Systems Limited, Sourceable Limited, Superior Heat Limited, Tailsco Limited, Tanfield Group Limited, Time Out Group plc, Tintoretto Solar Limited, Tiziano Solar Limited, Trafi Limited, Vertu Motors plc,  Winnipeg Heat (Caspian), Yu Group plc, Zynstra Limited.

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 report includes a fair review of the information required by the Financial Conduct Authority's Disclosure and Transparency Rules, being:

·    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;

·    a description of the principal risks and uncertainties for the remaining six months of the year; and

·    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
Chairman
28 September 2017

Income Statement

  Unaudited Unaudited Audited  
  Six months to 31 July 2017 Six months to 31 July 2016 Year to 31 January 2017  
  Revenue
£'000
Capital
£'000
Total
£'000
Revenue
£'000
Capital
£'000
Total
£'000
Revenue
£'000
Capital
£'000
Total
£'000
Gain on disposal of fixed asset investments - 3,701 3,701 - 987 987 - 2,658 2,658
Change in fair value of fixed asset investments - (1,274) (1,274) - 367 367 - 4,525 4,525
Change in fair value of current asset investments - 190 190 - - - - - -
Investment income 2,061 - 2,061 2,188 - 2,188 4,128 - 4,128
Investment management fees (341) (1,406) (1,747) (308) (1,097) (1,405) (647) (2,844) (3,491)
Other expenses (1,136) - (1,136) (758) - (758) (2,654) - (2,654)
FX translation - 4 4 - - - - 6 6
Return on ordinary activities before tax 584 1,215 1,799 1,122 257 1,379 827 4,345 5,172
Taxation on return on ordinary activities - - - (70) - (70) - - -
Return on ordinary activities after tax 584 1,215 1,799 1,052 257 1,309 827 4,345 5,172
Earnings per share - basic and diluted 0.2p 0.5p 0.7p 0.6p 0.2p 0.8p 0.5p 2.5p 3.0p

Balance Sheet

  Unaudited
As at 31 July 2017
Unaudited
As at 31 July 2016
Audited
As at 31 January 2017
  £'000 £'000 £'000 £'000 £'000 £'000
Fixed asset investments   78,386   115,435   112,884
Current assets:            
Investments 70,190   -   -  
Debtors 2,245   5,248   4,077  
Cash at bank 6,067   35,632   29,229  
  78,502   40,880   33,306  
Creditors: amounts falling due within one year (1,547)   (4,176)   (4,391)  
Net current assets   76,955   36,704   28,915
Net assets   155,341   152,139   141,799
             
Share capital   25,138   16,745   22,603
Share premium   48,308   1,438   34,231
Special distributable reserve   71,149   128,328   76,144
Capital redemption reserve   2,958   2,672   2,832
Capital reserve realised   7,714   (1,087)   (1,537)
Capital reserve unrealised   (520)   2,988   7,520
Revenue reserve   584   1,055   -
Translation reserve   10   -   6
Total equity shareholders' funds   155,341   152,139   141,799
Net Asset Value per share   62.2p   83.0p   63.2p

The statements were approved by the Directors and authorised for issue on 28 September 2017 and are signed on their behalf by:

Murray Steele
Chairman
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
Translation reserve
£'000
Total
£'000
Six months to 31 July 2017                
As at 1 February 2017 22,603 34,231 76,144 2,832 (1,537) 7,520 - 6 141,799
Comprehensive income for the period:                  
Management fee allocated as capital expenditure - - - - (1,406) - - - (1,406)
Current period gains on disposal - - - - 3,701 - - - 3,701
Current period gains on fair value of investments - - - - - (1,084) - - (1,084)
Current period currency gains - - - - - - - 4 4
Profit on ordinary activities after tax - - - - - - 584   584
Total comprehensive income for the period - - - - 2,295 (1,084) 584 4 1,799
Contributions by and distributions to owners:                  
Repurchase and cancellation of own shares (126) - (754) 126 - - - - (754)
Issue of shares 2,661 14,077 - - - - - - 16,738
Dividends paid - - (4,241) - - - - - (4,241)
Total contributions by and distributions to owners 2,535 14,077 (4,995) 126 - - - - 11,743
Other movements:                  
Prior period holding gains/losses now realised - - - - 6,956 (6,956) - - -
Total other movements - - - - 6,956 (6,956) - - -
As at 31 July 2017 25,138 48,308 71,149 2,958 7,714 (520) 584 10 155,341
                 
Six months to 31 July 2016                
As at 1 February 2016 13,896 48,893 60,748 2,557 (1,866) 3,510 3 - 127,741
Comprehensive income for the period:                  
Management fee allocated as capital expenditure - - - - (1,097) - - - (1,097)
Current period gains on disposal - - - - 987 - - - 987
Current period gains on fair value of investments - - - - - 367 - - 367
Profit on ordinary activities after tax - - - - - - 1,052 - 1,052
Total comprehensive income for the period - - - - (110) 367 1,052 - 1,309
Contributions by and distributions to owners:                  
Repurchase and cancellation of own shares (115) - (901) 115 - - - - (901)
Issue of shares 2,964 21,026 - - - - - - 23,990
Total contributions by and distributions to owners 2,849 21,026 (901) 115 - - - - 23,089
Other movements:                  
Prior period holding gains/losses now realised - - - - 889 (889) - - -
Cancellation of share premium - (68,481) 68,481 - - - - - -
Total other movements - (68,481) 68,481 - 889 (889) - - -
As at 31 July 2016 16,745 1,438 128,328 2,672 (1,087) 2,988 1,055 - 152,139
                   
Year to 31 January 2017                
As at 1 February 2016  13,896 48,893 60,748 2,557 (1,866) 3,510  3 - 127,741
Comprehensive income for the year:                  
Management fee allocated as capital expenditure - - - - (2,844) - - - (2,844)
Current year gains on disposal - - - - 2,658 - - - 2,658
Current year gains on fair value of investments - - - - - 4,525 - - 4,525
Current year currency gains - - - - - - - 6 6
Profit on ordinary activities after tax - - - - - -  827 - 827
Total comprehensive income for the year - - - - (186) 4,525 827 6 5,172
Contributions by and distributions to owners:                  
Repurchase and cancellation of own shares (275) -   (1,955) 275 - - - - (1,955)
Issue of shares 5,446 35,706 - - - - - - 41,152
Dividends paid - - (36,711) - - - (830) - (37,541)
Total contributions by and distributions to owners 5,171 35,706 (38,666) 275 - - (830) - 1,656
Other movements:                  
Prior year holding gains/losses now realised - - - - 515 (515) - - -
Cancellation of Share Premium - (50,788) 50,788 - - - - - -
Cancellation of Deferred Shares  - C shares (349) - 349 - - - - - -
Deferred shares created - D shares 156 - (156) - - - - - -
Shares issued on D share conversion 385 - (385) - - - - - -
Dividends paid on D share conversion - - (14,418) - - - - - 14,418
Acquisition of D share class (191) (17,693) 17,884 - - - - - -
Acquisition of Octopus Eclipse VCT plc 3,535 18,113 - - - - - - 21,648
Total other movements 3,536 (50,368) 54,062 - 515 (515) - - 7,230
As at 31 January 2017  22,603 34,231 76,144 2,832 (1,537) 7,520 - 6 141,799

Cash Flow Statement

  Unaudited
Six months to
31 July 2017

£'000
 

Unaudited
Six months to
31 July 2016
£'000
Audited
Year to
31 January 2017
£'000
Cash flows from operating activities:      
Return on ordinary activities after tax 1,799    1,309 5,172
Adjustments for:      
Decrease in debtors 1,832 57  1,228
Decrease in creditors (2,844)  (291) (76)
Debtors obtained from transaction  -  -   848
Creditors obtained from transaction  -  -  (157)
Gain on disposal of fixed assets (3,701)  (987)  (2,658)
Loss/(Gain) on valuation of fixed asset investments 1,274  (367)  (4,525)
Gain on valuation of current asset investments (190)  -  -
Cash from operations  (1,830)  (209)  (168)
       
Cash flows from investing activities:      
Cash acquired from transaction  -  -   622
Purchase of fixed asset investments (1,348)  (9,000)   (9,269)
Purchase of current asset investments (72,000)  -  -
Sale of fixed asset investments 38,273  11,547 40,531
Sale of current asset investments 2,000  -  -
Dividend paid to exiting D shareholders - - (14,418)
Net cash flows from investing activities (33,075)  2,547 17,466
       
Cash flows from financing activities:      
Purchase of own shares (754)  (901)  (1,955)
Share issues 16,738  23,990 41,152
Dividends Paid (4,241)  -   (37,541)
Net cash flows from financing activities 11,743  23,089   (1,656)
(Decrease)/Increase in cash and cash equivalents (23,162)  25,357   18,954
Opening cash and cash equivalents 29,229  10,275  10,275
Closing cash and cash equivalents 6,067  35,632 29,229
       
Cash and cash equivalents comprise:      
Cash at Bank 6,067  35,632  29,229

Notes to the Half-Yearly Report

1.  Basis of preparation

     The unaudited half-yearly results which cover the six months to 31 July 2017 have been prepared in accordance with the Financial Reporting Council's (FRC) Financial Reporting Standard 104 Interim Financial Reporting (March 2015) and the Statement of Recommended Practice for Investment Companies, re-issued by the Association of Investment Companies in January 2017.

2.  Publication of non-statutory accounts

     The unaudited half-yearly results for the six months ended 31 July 2017 do not constitute Statutory Accounts within the meaning of s.415 of the Companies Act 2006. The comparative figures for the year ended 31 January 2017 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 243,295,650 shares, being the weighted average number of shares in issue during the period (31 January 2017: 169,230,581; 31 July 2016: 172,098,191 including Ordinary Shares and D Ordinary Shares).

     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 therefore identical.

4.  Net asset value per share

  31 July 2017 31 July 2016 31 January 2017
Net Assets (£) 155,341,000 134,526,000 141,799,000
Shares in Issue 249,818,756 162,042,257 224,470,119
Net Asset Value per share (p) 62.2 83.0 63.2

5.  Dividends

     A final dividend, for the year ended 31 January 2017, of 1.7p per share was paid on 28 July 2017 to shareholders on the register on 30 June 2017.

     The interim dividend of 1.6p per share for the six months ending 31 July 2017 will be paid on 15 December 2017, to those shareholders on the register on 24 November 2017.

6. Principal Risks and Uncertainties

     The Company's assets consist of equity and fixed-rate interest investments, cash and liquid resources. Its principal risks are therefore market risk, credit risk and liquidity risk. Other risks faced by the Company include economic, loss of approval as a VCT, investment and strategic, regulatory, reputational, operational and financial risks. These risks, and the way in which they are managed, are described in more detail in the Company's Annual Report and Accounts for the year ended 31 January 2017. The Company's principal risks and uncertainties have not changed materially since the date
of that report.

7. Related Party Transactions

     Octopus acts as the investment manager of the Company. Under the management agreement, Octopus receives a fee of 2.0 per cent per annum of the net assets of the Company for the investment management services.

     The Company has incurred management fees of £1,494,000 during the period to 31 July 2017 (31 July 2016: £1,232,000; 31 January 2017: £2,588,000).

     A performance fee of £253,000 has been incurred during the period to 31 July 2017 (31 July 2016: £173,000; 31 January 2017: £903,000).

     Octopus also provides administration and company secretarial services to the Company. Octopus receives a fee of 0.3 per cent per annum of net assets of the Company for administration services and £20,000 per annum for company secretarial services.

     The Company has invested £70 million into Octopus managed funds, being the Octopus Portfolio Manager funds. To ensure the Company is not double charged management fees on these products, the Company receives a reduction in the management fee as a percentage of the value of these investments.

8. Post balance sheet events

     Since 31 July 2017 the Company has issued the following shares:

Date Number of Shares Issued Price per share (p)
8 August 2017 53,415 61.5

9. Other Information

     A version of this statement will be made available to all shareholders. Copies are also available from the registered office of the Company at 33 Holborn, London, EC1N 2HT, and will also be available to view on the Investment Manager's website at www.octopusinvestments.com.




This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Octopus Apollo VCT plc via Globenewswire


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Octopus Apollo VCT plc : Half-year Report - RNS