Octopus Titan VCT plc : Final Results
Octopus Titan VCT plc (formerly Octopus Titan VCT 2 plc)
Annual Report & Accounts for the year ended 31 October 2015
Final Results
3 February 2016
Octopus Titan VCT plc ('Titan' or 'Company'), managed by Octopus Investments Limited, today announces the final results for the year to 31 October 2015.
These results were approved by the Board of Directors on 3 February 2016.
You may shortly view the Annual Report in full at www.octopusinvestments.com. All other statutory information will also be found there.
Titan is a venture capital trust ('VCT') which aims to provide shareholders with attractive tax-free dividends and long-term capital growth by investing in a diverse portfolio of predominately unquoted companies.
Financial Summary
| As at 31 October 2015 | As at 31 October 2014 | |
| Net assets (£'000s) | 228,461 | 32,876 |
| Profit after tax (£'000s) | 15,196 | 3,734 |
| Net asset value per share ('NAV') | 102.7p | 101.4 |
| Cumulative dividends paid since launch | 52.0p | 47.5p |
| NAV plus cumulative dividends paid ('Total Value') | 154.7p | 148.9 |
| Total Return* | 5.8p | 11.2p |
| Total Return %** | 5.7% | 11.8% |
| Dividends paid in the year | 4.5p | 5.0p |
| Final dividend proposed | 2.0p | 2.5p |
* Calculated as the change in NAV in the period plus dividends paid in the period
** Calculated as total return / opening NAV
Key Dates
Special dividend payment date* 29 April 2016
Final dividend payment date 29 April 2016
Annual General Meeting 18 March 2016 (11.30 a.m. at 33 Holborn, London EC1N 2HT)
Half-yearly results to 30 April 2016 published June 2016
Annual results to 31 October 2016 announced January 2017
Annual Report and financial statements published February 2017
* This was announced on 3 February 2016 and is subject to the successful completion of the realisation of a portfolio investment prior to 14 April 2016, as discussed further in the Chairman's Statement.
The table below shows the NAV per share and lists the dividends that have been paid since the launch of the Company:
NAV AND DIVIDENDS
| Period Ended | NAV | Dividends paid in period | NAV + cumulative dividends (Total Value) | |
| 30 April 2008 | 95.00p | - | 95.00p | |
| 31 October 2008 | 89.90p | - | 89.90p | |
| 30 April 2009 | 91.50p | 0.50p | 92.00p | |
| 31 October 2009 | 96.10p | 0.50p | 97.10p | |
| 30 April 2010 | 92.00p | 0.50p | 93.50p | |
| 31 October 2010 | 94.90p | 0.50p | 96.90p | |
| 30 April 2011 | 92.10p | 0.75p | 94.85p | |
| 31 October 2011 | 91.50p | 0.75p | 95.00p | |
| 30 April 2012 | 92.80p | 1.00p | 97.30p | |
| 31 October 2012 | 121.90p | 1.50p | 127.90p | |
| 30 April 2013 | 88.70p | 34.00p | 128.70p | |
| 31 October 2013 | 95.20p | 2.50p | 137.70p | |
| 30 April 2014 | 92.20p | 2.50p | 137.20p | |
| 31 October 2014 | 101.40p | 2.50p | 148.90p | |
| 30 April 2015 | 97.70p | 2.50p | 147.70p | |
| 31 October 2015 | 102.70p | 2.00p | 154.70p | |
A final dividend of 2.0p per share will be paid on 29 April 2016 to shareholders on the register on 15 April 2016.
This takes the total dividends paid in respect of the year to 31 October 2015 to 4.0p per share.
A special dividend of 5.0p per share will also be paid on 29 April 2016 to shareholders on the register on 15 April 2016, subject to the successful completion of the sale of a portfolio investment company as discussed further in the Chairman's Statement.
Chairman's Statement
I am pleased to present the annual results for Octopus Titan VCT plc (formerly Octopus Titan VCT 2 plc) for the year ended 31 October 2015.
These accounts relate principally to the period following the merger with our sister companies (Octopus Titan VCT plcs 1, 3, 4 and 5) on 27 November 2014 when we changed our name to Octopus Titan VCT plc (the 'Company' or 'Titan'). The comparative figures therefore only relate to the Company prior to the merger and are not a true comparison to the period under review.
Following the merger Titan had assets of almost £170 million and became the largest VCT by some margin. Since then we have had a successful fund raising in 2014/15 raising a total of £54.7 million and are now seeking to raise a further £50 million with an over allotment facility of £30 million. To date we have raised £35 million under this offer and our unaudited net asset value today is over £260 million.
I would particularly like to mention that Titan won the 2015 'Best Venture Capital Trust Award' at the What Investment Trust awards and Investment Week's 'VCT of the year 2015'. These are prestigious awards and recognise the notable success of our Investment Managers for which I would like to thank them on Shareholders' behalf.
Performance
The Net Asset Value ('NAV') per share at 31 October 2015 was 102.7p (2014: 101.4p) representing a total return for the year of 5.8p per share, being an underlying increase in NAV of 8.3p per share less costs associated with the merger of 0.6p per share and the effect of the fundraise, equivalent to 1.9p per share. The 8.3p uplift equates to the underlying performance which we consider is more indicative of the sustainable medium to longer term performance of the Company.
We are delighted with this total return % of 5.7% which represents a continuing strong performance and results in a Total Return for the Company of 59.7p since our original fund raising completed in 2008.
| Pence per ordinary share | |
| NAV at 31 October 2014 | 101.4 |
| Valuation uplift | 8.3* |
| Merger costs | (0.6) |
| Effect of 2015 fundraise | (1.9) |
| NAV at 31 October 2015 before dividends | 107.2 |
| Interim dividend paid on 21 November 2014 | (2.5) |
| Interim dividend paid on 24 July 2015 | (2.0) |
| NAV at 31 October 2015 | 102.7 |
*This corresponds to an underlying net assets increase of £15.4 million (2014: £3.7 million)
Investment Portfolio
The investments acquired from Titans 1, 3, 4 & 5 as a result of the merger in the year totalled £126.0 million. In addition to this, the Company made eight new investments and 21 follow-on investments (including follow-ons from companies acquired as a result of the merger) in the year which totalled £35.1 million, taking the number of portfolio companies to 50 as at 31 October 2015 (excluding the three companies which are in liquidation but including the underlying companies invested into by Zenith LP, the partnership into which Titan's largest investment Zenith Holding Company is invested and which is discussed further below). I believe that this investment profile firmly demonstrates the strong pipeline of deals generated by our Managers and supports our philosophy of continuing to support investee companies as they achieve milestones.
This, combined with an overall uplift in valuation of £23.2 million and one loan repayment of £0.2m, took the total portfolio value to £211.6 million at 31 October 2015.
The investment portfolio has also continued to mature and has had another strong year of performance. Shareholders will recall that Titan 1-3's holdings in Calastone, Nature Delivered (Graze), Secret Escapes and Zoopla Property Group were transferred into a separate fund, with the Company continuing to hold an interest in them via its holding in Zenith Holding Company Limited ("Zenith"). Titan continues to hold a direct holding in Secret Escapes through an investment in Titan 4. This transaction allowed us to realise value in these investments for further investment in new and existing portfolio companies at earlier stages of development as well as ensuring that we did not breach VCT qualifying conditions in relation to these holdings. Our holding in Zenith has continued to show a strong uplift in value in the year, driven by gains in Calastone, Secret Escapes and Zoopla. In addition to the success shown by Zenith, we are also delighted with the performances of the Company's holdings in Touchtype (trading name Swiftkey), Vision Direct and Uniplaces, all of which have shown significant uplifts in value in the year.
Unfortunately, given the nature of funding small companies, there are a few investments that have fallen short of expectations and where we have taken valuation write downs in the year, with our investment in Shopa unfortunately placed into Liquidation in October 2015. Our Investment Manager is working hard alongside the companies that are underperforming to assist them to realise their potential or limit investment losses.
Further information can be seen in the Investment Manager's review including the pie charts showing that we have a well diversified portfolio.
Performance Incentive fees
In line with the principles approved by shareholders at the time of the merger, your Board has now agreed to the specific details of the performance incentive fee payable to Octopus. The performance fee in respect of the shares relating to Titan 5 is detailed in Note 19 in the full accounts and the performance fee on the remainder of the fund is 20% on all gains above a total value of 148.9p, subject to a High Water Mark
Dividend and Dividend Policy
It remains your Board's policy to strive to maintain a regular dividend, whilst retaining the appropriate level of liquidity in the Company. Following the merger, the Company is targeting regular tax-free annual dividends of at least 4.0p per share, increasing to 5.0p per share by the year ended 31 October 2017. As shareholders will be aware, the Company has paid one interim dividend of 2.0p in respect of the 2015 financial interim period (on 24 July 2015) in addition to one interim dividend of 2.5p in respect of the 2014 financial interim period (on 21 November 2014) taking the total dividends paid in the year to 4.5p per share (2014: 5.0p per share). A final dividend of 2.0p is proposed in respect of the second half of the 2015 financial year, payable on 29 April 2016 to those shareholders on the share register on 15 April 2016.
Additionally, I am delighted to announce a special dividend of 5.0p will be paid on 29 April 2016 to those shareholders on the share register on 15 April 2016, conditional upon the successful completion of the realisation of Swiftkey prior to 14 April 2016 (the ex-dividend date). Swiftkey is the company behind the app for faster, easier typing on mobile phones and tablets that is now being used on more than 300 million devices worldwide, and the exit highlights the important role Titan (and VCTs more broadly) plays in developing the next generation of disruptive technologies and UK business. Based on the provisional figures at the date of exchange, the sale of Swiftkey will generate a significant gain on the original investment which will allow for re-investment into established companies as well as funding for new early stage businesses, and this dividend represents the Board's continued commitment to pay special dividends as a result of profits gained from the sale of portfolio investments.
Fundraise and Buybacks
The Company successfully raised £54.7 million (£52.6 million net of costs) during the year. The majority of the funds raised are being used to make new investments and to support existing portfolio companies, where the Investment Manager sees the opportunity for further growth.
The Board announced a further opportunity to invest in the Company to raise up to £50 million (with a facility to raise a further £30 million) on 8 September 2015. On 16 December 2015, £30.5 million (£29.8 million net of costs) was allotted. I would like to thank all shareholders who have supported the fund raising and welcome new shareholders. Your Board is quietly confident that we will achieve at least our fund-raising target, thus providing significant funds to invest in the strong pipeline of new and follow on investments which our Investment Manager is seeing.
During the period, the Company repurchased 6.2 million shares. Further details can be found in Note 14 of the full accounts. The Board continues to buy back shares from shareholders at no greater than a 5% discount to NAV. The Board will continue to monitor the volume of shares bought back and at present intends to maintain the existing limit of the share capital that it buys back and cancels each year at 5%, noting that all requests for buybacks from Shareholders have been satisfied by all of the Titans historically. This policy will continue to operate at the Board's discretion. However, it is the Board's intention that shareholders should be able to sell their shares back to the Company, in the absence of an active secondary market, since we believe that this share buy-back policy enhances the Company's attractiveness as an investment for both existing and new shareholders.
VCT Qualifying Status
PricewaterhouseCoopers LLP provides both the Board and the Investment Manager with advice concerning ongoing compliance with HMRC rules and regulations concerning VCTs. The Board has been advised that the Company is in compliance with the conditions laid down by HMRC for maintaining approval as a VCT.
A key requirement is for 70% of the portfolio to remain continually invested in qualifying investments. As at 31 October 2015, over 85% of the Company (as measured by HMRC rules) was invested in VCT qualifying investments across a variety of industries.
The Finance Bill was published on 15 July, following the second 2015 Budget, which included a number of proposed changes to the VCT rules designed to bring the legislation into line with the EU State Aid Risk Finance Guidelines which were revised in 2014. The changes came into effect after Royal Assent in November.
All investments made since the 2014 merger would qualify under the new VCT qualification rules. This reflects the fact that Titan's investment mandate as an early stage investor is fully aligned with the objectives of the UK Government and the EU to encourage investment where it's needed most, into dynamic, smaller companies with the potential for high growth.
Annual General Meeting ("AGM")
The Company's Annual General Meeting will take place on 18 March 2016 at 11.30 a.m. and will be held at the offices of Octopus Investments Limited, 33 Holborn, London, EC1N 2HT.
Outlook
Following the recent opening of the 2015/16 fundraise we are delighted to have raised £30.5 million gross of fees into the Company, which is some way to reaching the £80 million total Offer. Given the successful start to the year we hope to have a Company with assets of well in excess of £275 million by the end of the current tax year.
Your Board views the outlook for our Company with confidence. The current portfolio contains a number of exciting companies which will require further funding rounds and our aim is to ensure we can take full advantage of the opportunities through our expected increase in liquid funds. We anticipate that these funds will be increased by realisations in the foreseeable future given the increase in Merger & Acquisition activity by large companies.
Cognisant of the VCT regulations, we expect the portfolio to grow in size but our investment companies require considerable input from our Investment Manager and so we would not expect the overall number of portfolio companies to increase significantly in the future. Our Investment Manager's strength lies in the identification of early stage companies, which we continue to support as they prove their business models, and this will continue. It is also our aim to ensure that we have a diverse portfolio so that the Company minimises the risk of unpredictable economic events to any one sector.
We believe this strategy will allow us to achieve significant capital growth and, as already mentioned, it is our aim to distribute this by way of an annual dividend supplemented by special distributions as and when realisations allow.
I would like to thank all our shareholders for supporting us and also for approving our merger. We are now, by some measure, the largest VCT and this will not only attract good opportunities but also reduce the unnecessary administration and cost of running five sister funds. I would also like to thank both the investment and administration teams at Octopus who have worked so hard to achieve both the performance and merger over the course of the year as well as the retired Directors of the merged companies. These are exciting times for the Company and our Investment Manager.
I hope to see as many shareholders as possible at our AGM on 18 March 2016 in London where we will give an update of our Company and future plans.
John Hustler
Chairman
3 February 2016
Investment Manager's Review
Personal Service
At Octopus, we focus on both managing your investments and keeping you informed throughout the investment process. We are committed to providing our investors with regular and open communication. Our updates are designed to keep you informed about the progress of your investment.
Octopus was established in 2000 and has a strong commitment to both smaller companies and to VCTs. At the time of writing we managed seven VCTs, including this VCT, and manage over £500 million in the VCT sector. Octopus has over 450 employees.
Investment Strategy Implementation
The Company invests in companies that we believe have great potential, but which need financial support in order to realise their potential. Each company that we target has the opportunity to create a large business by taking a relatively modest market share, given the size of the markets that they address. We are particularly interested in businesses that are led by excellent management teams and which focus on innovation through technology. Based on this investment strategy we have created a balanced portfolio spanning multiple industries and business sectors.
Having reached the level of invested funds required by HMRC, our focus has now shifted to managing the portfolio and optimising growth in the investee companies whilst also seeking to add new investments where appropriate. The current portfolio of holdings following the merger encompasses investments in 50 companies (47 unquoted and three quoted, excluding three companies in liquidation but including the underlying companies in Zenith). In aggregate, these investments employed 500 people and had a turnover of approximately £22 million at the point of initial investment. In 2013, an average of three years after initial investment, they employed 1,100 people and had revenues of over £175 million. Over the last year, the companies in the portfolio have generated more than £100m in additional revenue and employed approximately 800 additional people, with one third of the companies growing at over 50% per annum.
As Investment Manager, we typically invest in a significant minority equity stakes in these qualifying Companies. These investments provide the financial capital for the businesses to build and grow their operations with the objective being either to float or to sell these businesses at some point in the future. These entrepreneurial early stage businesses, often developing innovative new products and services, frequently face challenges as they seek to establish themselves in their market. The amount of capital we initially deploy is typically intended to be only the first investment that we will make into a business, prior to seeing if the company meets or exceeds its initial milestones.
If the business is unsuccessful in meeting these initial milestones, we strive to minimise the financial exposure of the Company to the business, to mitigate the risk of what is commonly referred to as "good money after bad".
Other businesses which meet some, but not necessarily all, of their milestones will require more time to prove their concept. As such these businesses may be reduced in value prior to our making a further investment. This is intended to give them an opportunity to progress further and prove more convincingly their business models.
Finally, there are those that meet and exceed the expectations initially set. It is these businesses in which we actively seek to increase our investment exposure as they prove their ability to create significant and valuable businesses.
Our investment approach requires us to maintain liquidity in the Company in order to ensure adequate resources are available to support further portfolio funding needs as they arise. This liquidity should be further enhanced following the current Prospectus offer for new shares as described in the Chairman's Statement, and it is an important feature of our investment strategy, with the primary objective being to deliver sustainable returns to shareholders.
Performance
The following graph represents the performance of the Company in the last five years since 31 October 2011 in NAV, dividends paid and NAV plus cumulative dividends paid (total value):
The Total Value has seen a significant increase since 31 October 2011 as shown on the graph, from 95.0p to 154.7p. This represents an increase of 62.8% in value in the last three years. Additionally the dividends paid between 31 October 2011 and 2015 were 48.5 pence per share representing a significant cash return to investors.
The discrete performance over the last five years is represented below:
| 31/10/2011 | 31/10/2012 | 31/10/2013 | 31/10/2014 | 31/10/2015 | ||
| NAV, p | 91.5 | 121.9 | 95.2 | 101.4 | 102.7 | |
| Net assets, £m | 14.8 | 21.4 | 20.9 | 32.9 | 228.4 | |
| Dividends paid, p | 3.5 | 6.0 | 42.5 | 47.5 | 52.0 | |
| Total value, p | 95.0 | 127.9 | 137.7 | 148.9 | 154.7 | |
| Discreet performance | (2.0%) | 34.6% | 7.7% | 8.1% | 3.9% | |
The following graph shows the cumulative total value since 30 April 2008. We believe that the Company is now in its growth phase.
Portfolio Review
As at 31 October 2015 the NAV was 102.7p per share, compared to 101.4p per share as at 31 October 2014 which represents a total return of 5.8p per share being an increase in NAV of 1.3p and dividends paid during the year of 4.5p (2014: 5.0p) per share. This represents a considerable increase of 5.7% (2014: 11.7%). The performance of the portfolio continued to be strong this year with a number of portfolio companies having uplifts in fair value, and these totalled £36.9 million. Downward revaluations in the period totalled £13.8 million.
In particular Zenith Holding Company, which owns a stake in Calastone, Zoopla Property Group, Nature Delivered (Graze) and Secret Escapes, through its interest in the Zenith fund, performed very well with the individual investment holdings delivering significant growth. As previously reported, these holdings were sold to Zenith in order to maintain the qualifying status of the VCT, deliver cash back to the Company and ensure that a stake could be held by the Company so that it may continue to share in the growth of the underlying assets. At the year end, Zenith comprised 15.0% of the total net assets of the Company.
As expected with the nature of the businesses we invest in, some of the portfolio companies have fallen behind expectations and budgets resulting in reductions in fair value of the companies. We work closely with the management teams of these companies to realise their potential or limit investment losses.
The Company now holds over 85% of its assets in qualifying holdings from an HMRC perspective and we continue to work with each portfolio business as they develop in their respective markets.
New and follow-on investments
Your Investment Manager is always looking for opportunities to invest in new companies where capital growth can be achieved. The Company made eight new investments in the year totalling £13.5 million taking the total number of portfolio companies to 50 as at 31 October 2015, excluding those companies in liquidation but including the underlying companies invested into through Zenith. These investments are in a variety of different sectors further diversifying the portfolio.
We have built a strong portfolio but it is important to support the companies where appropriate to allow them to invest for growth and alleviate working capital pressure. During the year, 21 follow-on investments totalling £21.6 million were made. These exclude the additions arising from the merger in November 2014.
The eight new investments comprised:
- Terido - a trading partnership managed by Octopus which supports a range of secured asset backed lending in sectors including residential property, solar and reserve power. The investment into Terido LLP was made in line with the Company's cash allocation policy, not as part of the Investment Manager's long term investment mandate.
- CurrencyFair - an online currency exchange and money transfer service.
- Stratajet - a real time search engine and booking platform for private jets, so that private jet travellers can make informed searches for charter prices with real time availability and transparent prices, as well as booking their private aircraft online.
- BridgeU - helps to bridge the transition between secondary and higher education for students by providing an individually adaptive university preparation and application platform, which helps to match students with their best fit universities and then guides them through the application process step by step.
- Eve Sleep - an ecommerce mattress retailer and brand. . The company is focused on trying to create a frictionless buying experience for the customer by offering a simplified product offering (currently only one mattress in seven sizes), combined with a hassle free and intuitive online sales experience.
- Trafi - a free mobile application (available on both iOS and Android) and website that allows people to get directions to go from A to B in urban areas using public transport
- Permutive - enables publishers to better monetise their online content by allowing publishers to integrate articles sponsored by a specific brand alongside their standard content.
- Magic Pony - utilises state of the art computer vision to achieve high resolution video content.
Subsequent to year end one new investment completed which was committed at 31 October and two separate new investments and six follow on investments were made, totalling £7.4 million. Further details can be seen in Note 17 of the full accounts.
Outlook
The merger of the five Titan funds is a big step forward for the Investment Manager, the shareholders and the investee companies. This will improve efficiencies and streamline costs and the administrative burdens providing more time to focus on and help build these companies.
We are confident that the established portfolio will continue to take advantage of economic conditions with many of the entrepreneurs looking to disrupt markets through innovation. Our primary focus is to support and build those companies within the portfolio but we also intend to add new opportunities to the portfolio.
The growth within the portfolio, and the performance of the Company, is very pleasing and with the more positive economic backdrop, we are optimistic that the portfolio will continue to grow and generate further increases in the Total Value of the Company, which will be distributed to shareholders through regular and special tax-free dividends.
Investment Portfolio
| Fixed asset investments | Sector | Investment cost as at 31 October 2015 (£'000) | Unrealised profit/(loss) (£'000) | Fair value as at 31 October 2015 (£'000) | Movement in fair value in year to 31 October 2015 (£'000) |
| Zenith Holding Company Limited | N/a | 24,843 | 9,326 | 34,169 | 4,136 |
| TouchType Limited | Telecommunications | 15,751 | 11,900 | 27,651 | 8,848 |
| Secret Escapes Limited | Consumer lifestyle and wellbeing | 15,636 | 3,973 | 19,609 | 3,973 |
| Vision Direct Group Limited | Consumer lifestyle and wellbeing | 3,745 | 6,423 | 10,168 | 5,787 |
| Amplience Limited | Technology | 9,905 | 19 | 9,924 | (203) |
| Uniplaces Limited | Consumer lifestyle and wellbeing | 3,723 | 4,781 | 8,504 | 4,483 |
| Leanworks Limited | Consumer lifestyle and wellbeing | 7,225 | - | 7,225 | - |
| Sourceable Limited | Consumer lifestyle and wellbeing | 4,622 | 1,693 | 6,315 | 1,693 |
| Aframe Media Group Limited | Media | 6,621 | (601) | 6,020 | (531) |
| Terido LLP* | N/a | 6,000 | - | 6,000 | - |
| Other** | Various | 82,482 | (6,486) | 75,996 | (5,032) |
| Total fixed asset investments | 180,553 | 31,028 | 211,581 | 23,154 | |
| Money market securities | 9,462 | - | 9,462 | ||
| OEICs | 6,899 | - | 6,899 | ||
| Cash at bank | 10,630 | - | 10,630 | ||
| Total investments, cash and cash equivalents | 207,544 | 31,028 | 238,572 | ||
| Debtors less creditors | (10,111) | ||||
| Total net assets | 228,461 |
The top 10 investments detailed in the table represent 64.1% by value of the investment portfolio and account for an uplift in valuation of £28.2 million for the year. This accounts for the material movements within the investment portfolio.
* The investment into Terido LLP was made in line with the Company's cash allocation policy, not as part of the Investment Manager's long term investment mandate.
** The other 38 investments had a combined decrease in fair value of £(5.0) million during the year of which eight are new investment companies with seven held at cost.
Valuation Methodology
Initial valuation
Financial assets are measured at fair value. The best estimate of the initial fair value of a financial asset that is either quoted or not quoted in an active market is the transaction price (i.e. cost).
Subsequent valuation
Further funding rounds are a good indicator of subsequent fair value and this measure is used where appropriate. Subsequent adjustment to the fair value of unquoted investments can be made using sector multiples based on information as at 31 October 2015, where applicable. In some cases the multiples can be compared to specific companies, especially where a particular sector multiple does not appear appropriate.
In accordance with the IPEVC valuation guidelines, investments made within 12 months are usually kept at cost unless performance indicates that fair value has changed.
Quoted investments are valued at market bid price. No discounts are applied.
If you would like to find out more regarding the IPEVC valuation guidelines, please visit their website at: www.privateequityvaluation.com.
Review of Investments
During the year 21 follow-on investments were made, amounting to £21.6 million and eight new investments amounting to £13.5 million.
Quoted and unquoted investments are valued in accordance with the accounting policy set out in accounting Note 1 of the full accounts which takes account of current industry guidelines for the valuation of venture capital portfolios and is compliant with IPEVC Valuation guidelines and current financial reporting standards.
Listed below are details of the Company's ten largest investments by value.
During the merger in November 2014 Titan 2 acquired the investments of Titan's 1, 3, 4 & 5 at their fair values, therefore the cost data shown in the investment financials below reflect the cost of the investments to Titan 2 and subsequently Titan, added to the fair value of the investments acquired during the merger.
Zenith Holding Company Limited
Zenith Holding Company has a holding in Octopus Zenith LP, an Octopus managed fund, which holds stakes in Secret Escapes, Zoopla Property Group, Nature Delivered (Graze) and Calastone, which were formerly held by Titan 1-3 prior to the merger of the five Titan VCTs in November 2014. Following the merger, Zenith became a 100% owned investment of Titan (see note 21 of the full accounts).
Founded in April 2007, Graze is the UK's first company to deliver healthy and nutritionally balanced food by post, straight to the home or office. Graze promotes a varied and balanced diet through facilitating the intake of a wide variety of smaller portions of natural, high energy foods throughout the day, allowing for a healthier approach to eating delicious foods. Customers can select Graze boxes created by the company's team of nutrition specialists to place orders for personalised assortments of foods to match their specific tastes and needs including health, diet and indulgent treats. The company has offices in the UK and the US.
Calastone is a financial technology company. Its mission is to make markets friction-free by connecting trading partners through its global fund transaction network. More than 910 customers in 27 domiciles are now processing domestic and cross border transactions via Calastone, benefitting from the cost and risk reduction opportunities transaction automation can offer. Its purpose is to use smart technology solutions and industry collaboration to enable global distribution, reduce operational risk, and enhance client profitability. Calastone is part of Fintech50, ranked in The Sunday Times Hiscox Tech Track 100 and is one of the UK Government Tech City's Future Fifty companies, recognised for high growth and transforming industries. Calastone has offices in London, Luxembourg, Hong Kong and Sydney.
Zoopla Property Group Plc (LSE:ZPLA) is a digital media business that owns and operates some of the UK's most widely recognised and trusted online brands including Zoopla, PrimeLocation, SmartNewHomes and uSwitch. Its websites and mobile apps attract over 40 million visits per month, generating over 2 million leads per month for our partners. Zoopla is the UK's most comprehensive property website, empowering consumers to make smarter property decisions; PrimeLocation is one of the UK's leading property websites, helping house-hunters in the middle and upper tiers of the market; uSwitch is the UK's leading comparison website and lead generation engine for home services switching, helping consumers to find the best deal and save money on their gas, electricity, broadband, TV, phone and personal finance products; and SmartNewHomes is the UK's leading website exclusively for new build properties and lists new developments available for sale from all the leading UK housebuilders. In addition to operating its own websites and apps, Zoopla Property Group powers the property search and/or comparison engines on a number of the UK's biggest websites, including The Times, Telegraph, Daily Mail, Homes24 and many more. Zoopla Property Group Plc was founded in 2007, listed on the London Stock Exchange in 2014, and has a highly-experienced management team, led by Founder & CEO, Alex Chesterman.
Launched in 2011, Secret Escapes offers exclusive rates (up to 70% off) on members-only flash sales for luxury travel. All of the hotels and holidays are hand-picked by a team of travel experts and while the flash sales are live on Secret Escapes, members will be guaranteed a rate cheaper than anywhere else online. Secret Escapes now has more than 19 million members, has sold more than 2 million rooms and operates in 13 countries.
Country of incorporation: The Cayman Islands
Initial investment date: June 2013
Cost (based on Titan merger valuation): £24,843,000
Valuation: £34,169,000
Last accounts: 31 October 2015
Profit before tax: £3,551,048
Net assets: £3,546,933
TouchType Limited (Trades as Swiftkey)
TouchType, trading as SwiftKey, is a leader in the development of Natural Language Processing (NLP) based language inference technologies providing innovative mobile software solutions for handset manufactures and consumers. SwiftKey's text prediction technology is designed to significantly boost the accuracy, fluency and speed of text entry on mobile devices and is installed on upwards of 250m devices across multiple platforms (BlackBerry, iOS and Android). Both Google and Apple named SwiftKey Keyboard one of the 'Top Apps of 2014', and the company has offices in London, San Francisco and Seoul, as well as people in India and China.
Initial investment date: August 2010
Cost (based on Titan merger valuation): £15,751,000
Valuation: £27,651,000
Last submitted group accounts: 31 December 2014
Turnover £8,412,000
Profit / Loss before tax: £(5,963,000)
Net Assets: £3,479,000
Secret Escapes Limited
Launched in 2011, Secret Escapes offers exclusive rates (up to 70% off) on members-only flash sales for luxury travel. All of the hotels and holidays are hand-picked by a team of travel experts and while the flash sales are live on Secret Escapes, members will be guaranteed a rate cheaper than anywhere else online. Secret Escapes now has more than 19 million members, has sold more than 2 million rooms and operates in 13 countries.
Initial investment date: April 2011
Cost (based on Titan merger valuation): £15,636,000
Valuation: £19,609,000
Last submitted group accounts: 31 December 2014
Turnover £20,385,000
Profit / Loss before tax: £(14,916,000)
Net Assets: £(6,916,000)
Vision Direct Group Limited
VisionDirect Group Ltd is the UK's largest, most trusted online retailer of contact lenses, solutions and eye care products, with sales in seven European countries through Vision Direct branded websites. It is the largest pure-play online retailer of contact lenses in the UK and a market leader in Europe. To date, it has fulfilled over 1.65m orders and has more than 700,000 customers. It has offices in Amsterdam, London and York and employs almost 100 members of staff, with sister sites in Spain, Italy, Holland and Ireland.
Initial investment date: September 2009
Cost (based on Titan merger valuation): £3,745,000
Valuation: £10,168,000
Last submitted group accounts: 31 August 2014
Turnover £21,492,000
Profit / Loss before tax: £(1,051,000)
Net assets: £8,399,000
Amplience Limited
Amplience helps retailers deliver profitable growth through improved online shopping experiences across desktop computers, tablets and smartphones. The Amplience Media Platform (AMP) enables non-technical marketing, brand and sales teams to create campaign and product media that increases customer engagement, drives conversions and Average Order Values (AOVs) across all channels and devices, thereby increasing sales for Amplience's customers. AMP is rapidly becoming the standard media platform for retail with over 100 leading UK, European and US brands, including Tesco, Shop Direct Group (Littlewoods.com), LK Bennett, Jimmy Choo, Tom Ford, Labelux and Halfords reporting significant business benefits by producing their digital media using Amplience.
Initial investment date: December 2010
Cost (based on Titan merger valuation): £9,905,000
Valuation: £9,924,000
Last submitted group accounts: 30 June 2015 (abbreviated)
Turnover not disclosed
Profit / Loss before tax: not disclosed
Net assets: £2,611,000
Uniplaces Limited
UniPlaces is the international online marketplace for student accommodation. UniPlaces solves a problem for both the demand (students looking for accommodation) and supply side (landlords) of the market. UniPlaces brings both sides of the market together to create an interactive market place which allows the parties to transact online in a far more efficient and streamlined manner. The verification and production of quality listings is what sets UniPlaces apart from its competitors.
Initial investment date: October 2013
Cost (based on Titan merger valuation): £3,723,000
Valuation: £8,504,000
Last submitted group accounts: 31 December 2014 (abbreviated)
Turnover not disclosed
Profit / Loss before tax: not disclosed
Net assets: £2,108,000
Leanworks Limited (Trades as YPlan)
YPlan (Leanworks Ltd) is a mobile ticketing app which allows consumers to book last minute tickets to music, sport and entertainment events. For the event organisers, YPlan represents an opportunity to market and sell unsold ticket inventory to nearby people, 24 to 48 hours before the event takes place. YPlan is now available in London, New York, San Francisco, Bristol, and Dublin.
Initial investment date: July 2012
Cost (based on Titan merger valuation): £7,225,000
Valuation: £7,225,000
Last submitted group accounts: 31 December 2014 (abbreviated)
Turnover not disclosed
Profit / Loss before tax: not disclosed
Net assets: £10,084,000
Sourceable Limited (Trades as Swoon Editions)
Swoon Editions (Sourceable) sells high quality furniture at insider prices. Sourcing direct from factories in India, China and Vietnam, it buys in container quantities and sells direct to consumers and through media partnerships. The volume purchasing and direct sales allows Swoon Editions to sell more efficiently than other retailers and to sell at approximately 50 per cent off retail prices whilst maintaining a 40 to 50 per cent gross margin.
Initial investment date: March 2013
Cost (based on Titan merger valuation): £4,622,000
Valuation: £6,315,000
Last submitted group accounts: 31 July 2014 (abbreviated)
Turnover not disclosed
Profit / Loss before tax: not disclosed
Net assets: £3,237,000
Aframe Media Group Limited
Aframe is a central cloud operating system for video with capabilities in the areas of collaboration, review and approval and archive. Aframe software and websites run on owned servers, so data is stored on Aframe dedicated storage arrays. Communication and transfers occur over Aframe networks.
Initial investment date: March 2012
Cost (based on Titan merger valuation): £6,621,000
Valuation: £6,020,000
Last submitted group accounts: 31 December 2014 (abbreviated)
Turnover not disclosed
Profit / Loss before tax: not disclosed
Net assets: £7,815,000
Terido LLP
Terido is a trading partnership managed by Octopus Investments which supports a range of secured asset backed lending in sectors including residential property, solar and reserve power. Terido invests in a significant number of individual companies in order to ensure diversification for the partnership. Titan's investment in Terido can be accessed at four months' notice should Titan require these funds to make other investments or pay running costs of the Company.
Cost: £6,000,000
Valuation: £6,000,000
Investment date: August 2015
Equity held: n/a
Last audited accounts: 31 March 2014
Revenues: £21.8 million
Profit before interest & tax: £20.0 million
Net assets: £174.5 million
Income receivable recognised in year: £618,000
Valuation basis: Transaction cost
If you have any questions on any aspect of your investment, please call one of the Octopus Ventures team on 0800 316 2295.
Alex Macpherson
Octopus Investments Limited
3 February 2016
Income Statement | |||||||||
| Year to 31 October 2015 | Year to 31 October 2014 | ||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||
| Gain on disposal of fixed asset investments | - | 9 | 9 | - | 8 | 8 | |||
| Gain on disposal of current asset investments | - | 178 | 178 | - | - | - | |||
| Fixed asset investment holding gains | - | 23,154 | 23,154 | - | 5,417 | 5,417 | |||
| Current asset investment holding gains | - | 194 | 194 | - | - | - | |||
| Investment income | 734 | - | 734 | 62 | - | 62 | |||
| Investment management fees | (913) | (2,738) | (3,651) | (105) | (314) | (419) | |||
| Performance fee | - | (3,369) | (3,351) | - | (903) | (903) | |||
| Other expenses | (2,053) | - | (2,053) | (431) | - | (431) | |||
| Profit before tax | (2,232) | 17,428 | 15,196 | (474) | 4,208 | 3,734 | |||
| Taxation | - | - | - | - | - | - | |||
| Profit after tax | (2,232) | 17,428 | 15,196 | (474) | 4,208 | 3,734 | |||
| Earnings per share - basic and diluted | (1.1)p | 8.8p | 7.7p | (1.6)p | 14.5p | 12.9p | |||
- The 'Total' column of this statement is the profit and loss account of the Company; the supplementary revenue return and capital return columns have been prepared under guidance published by the Association of Investment Companies.
- All revenue and capital items in the above statement derive from continuing operations.
- The Company has only one class of business and derives its income from investments made in shares and securities and from bank and money market funds.
The Company has no other comprehensive income for the period.
Balance Sheet | |||||
| As at 31 October 2015 | As at 31 October 2014 | ||||
| £'000 | £'000 | £'000 | £'000 | ||
| Fixed asset investments* | 211,581 | 27,452 | |||
| Current assets: | |||||
| Debtors | 1,790 | 240 | |||
| Money market funds* | 9,462 | 5,701 | |||
| OEICs* | 6,899 | - | |||
| Cash at bank** | 10,630 | 443 | |||
| 28,781 | 6,384 | ||||
| Creditors: amounts falling due within one year | (11,901) | (960) | |||
| Net current assets | 16,880 | 5,424 | |||
| Net assets | 228,461 | 32,876 | |||
| Called up equity share capital | 22,246 | 3,244 | |||
| Share premium | - | 9,284 | |||
| Special distributable reserve | 182,331 | 15,173 | |||
| Capital redemption reserve | 325 | 181 | |||
| Capital reserve - losses on disposals | (4,279) | (358) | |||
| - holding gains | 31,221 | 6,503 | |||
| Revenue reserve | (3,383) | (1,151) | |||
| Total equity shareholders' funds | 228,461 | 32,876 | |||
| Net asset value per share | 102.7p | 101.4p | |||
*Held at fair value through profit or loss
** Includes cash held but not yet allotted
The statements were approved by the Directors and authorised for issue on 3 February 2016 and are signed on their behalf by:
John Hustler
Chairman
Statement of changes in Equity | ||
| Year ended 31 October 2015 | Year ended 31 October 2014 | |
| £'000 | £'000 | |
| Shareholders' funds at start of year | 32,876 | 20,924 |
| Profit after tax | 15,196 | 3,734 |
| Issue of equity (net of expenses) | 53,897 | 10,413 |
| Merger share issues | 137,417 | - |
| Titan's 1, 3, 4 & 5 fee write offs | 110 | - |
| Purchase of own shares | (5,729) | (729) |
| Dividends paid | (5,306) | (1,466) |
| Shareholders' funds at end of year | 228,461 | 32,876 |
Cash Flow Statement | ||||||
| Year to 31 October 2015 | Year to 31 October 2014 | |||||
| £'000 | £'000 | |||||
| Reconciliation of profit to cash flows from operating activities | ||||||
| Profit before tax | 15,196 | 3,734 | ||||
| (Increase)/Decrease in debtors | (1,550) | 1,596 | ||||
| Debtors obtained from the merger | 6,123 | - | ||||
| Increase in creditors | 10,941 | 353 | ||||
| Creditors obtained from the merger | (14,223) | - | ||||
| Gains on disposal of fixed assets | (9) | (8) | ||||
| Gains on valuation of fixed asset investments | (23,154) | (5,417) | ||||
| Taxation | - | - | ||||
| (Outflow)/Inflow from operating activities | (6,676) | 258 | ||||
| Cash flows from investing activities | ||||||
| Purchase of fixed asset investments | (161,125) | (6,433) | ||||
| Non cash merger additions | 125,998 | - | ||||
| Sale of fixed asset investments | 159 | 376 | ||||
| (Outflow) from investing activities | (34,968) | (6,057) | ||||
| Cash flows from financing activities | ||||||
| Dividends paid | (5,306) | (1,466) | ||||
| Purchase of own shares | (5,729) | (729) | ||||
| Net proceeds from share issues | 191,424 | 10,413 | ||||
| Merger share issues | (137,417) | - | ||||
| Inflow from financing activities | 42,972 | 8,218 | ||||
| Cash acquired in merger | 8,237 | - | ||||
| OEICs acquired in merger | 11,282 | - | ||||
| Increase in cash and cash equivalents | 20,847 | 2,419 | ||||
| Opening cash and cash equivalents | 6,144 | 3,725 | ||||
| Closing cash and cash equivalents | 26,991 | 6,144 | ||||
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Octopus Titan VCT plc via Globenewswire
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