Octopus Apollo VCT plc : Half-yearly report
Octopus Apollo VCT plc
Half-Yearly Results
23 September 2013
Octopus Apollo VCT plc, managed by Octopus Investments Limited, today announces the Half-Yearly results for the six months ended 31 July 2013.
These results were approved by the Board of Directors on 23 September 2013.
You may shortly view the half-yearly report in full at www.octopusinvestments.com
About Octopus Apollo VCT plc
Octopus Apollo VCT plc ('Apollo' or 'Company') is a venture capital trust ('VCT') which aims to provide shareholders with attractive tax-free dividends and long-term capital growth, by investing in a diverse portfolio of predominantly unquoted companies. The Company is managed by Octopus Investments Limited ('Octopus' or 'Manager').
The Company, originally named Octopus Apollo VCT 3 plc, was launched in July 2006 and raised over £27.1 million (£25.9 million net of expenses) through an offer for subscription by the time it closed on 5 April 2007. On 27 September 2012, the Company acquired the net assets of Octopus Apollo VCT 1 plc, Octopus Apollo VCT 2 plc and Octopus Apollo VCT 4 plc. On the same day, the Company was renamed Octopus Apollo VCT plc. The objective of the Company is to invest in a diversified portfolio of UK smaller companies in order to generate income and capital growth over the long-term.
Further details of the Company's progress are discussed in the Chairman's Statement on pages x to x.
Venture Capital Trusts (VCTs)
VCTs were introduced in the Finance Act 1995 to provide a means for private individuals to invest in unquoted companies in the UK. Subsequent Finance Acts have introduced changes to VCT legislation. The tax benefits currently available to eligible new investors in VCTs include:
up to 30% up-front income tax relief;
exemption from income tax on dividends paid; and
exemption from capital gains tax on disposals of shares in VCTs.
The Company has been approved as a VCT by HMRC. In order to maintain its approval the Company must comply with certain requirements on a continuing basis:
at least 70% of the Company's investments must comprise 'qualifying holdings'* (as defined in the legislation);
for cash raised pre 6 April 2011 at least 30% of the 70% of qualifying holdings must be invested into Ordinary shares with no preferential rights;
for cash raised post 5 April 2011 at least 70% of the 70% of qualifying holdings must be invested into Ordinary shares with no preferential rights;
no single investment made can exceed 15% of the total Company value; and
a minimum of 10% of each Qualifying Investment must be in Ordinary shares with no preferential rights.
*A 'qualifying holding' consists of up to £5 million invested in any one year in new shares or securities in an unquoted UK company (or companies listed on AIM) which is carrying on a qualifying trade and whose gross assets do not exceed a prescribed limit at the time of investment. The definition of a 'qualifying trade' excludes certain activities such as property investment and development, financial services and asset leasing.
Financial Summary
| Six months to 31 July 2013 | Six months to 31 July 2012 | Year to 31 January 2013 | |
| Net assets (£'000s) | 64,867 | 22,794 | 47,774 |
| Net profit after tax (£'000s) | 330 | 592 | 223 |
| Net asset value per share ("NAV") | 87.3p | 91.0p | 89.3p |
| Cumulative dividends paid since launch | 20.0p | 15.0p | 17.5p |
| Proposed dividend per share | 2.5p* | 2.5p | 2.5p |
*The interim dividend of 2.5p will be paid on 15 November 2013 to shareholders on the register on 18 October 2013.
Chairman's Statement
Introduction
I am pleased to present the half-yearly report of Octopus Apollo VCT plc for the six months ended 31 July 2013.
Performance
During the period under review, the total return (net asset value plus cumulative dividends paid to date) increased from 106.8p as at 31 January 2013 to 107.3p as at 31 July 2013. This positive return is the result of loan interest income exceeding the day-to-day running costs of the Company which is particularly pleasing given the current economic climate.
Fund Raising
Following the acquisition on 27 September 2012 of Octopus Apollo VCT 1, 2 and 4, the Company invited new investors to participate in the new enlarged VCT via an offer for subscription. This offer closed on 30 June 2013 having raised over £24.5 million of new funds.
Investment Portfolio
During the period under review, £1.5 million was invested in Healthcare Services and Technology Limited, a company seeking a suitable investment in the healthcare technology sector, and £14m was invested in Terido LLP, a trading partnership which supports asset backed lending. The Company's participation in the partnership is expected to provide a more secure return to the Company than the alternatives of bank deposits or money market funds.
A partial disposal was made of the equity investment in British Country Inns and a partial loan repayment was made by Sula Power, returning in aggregate £277,000 back to the Company. The investment in Salus Services 2 and the Company's loan to Hydrobolt were also fully realised during the period, returning £1.69 million; the Company retains an equity stake in Hydrobolt.
Investment Strategy
As is highlighted from the financial results, the Company continues to be managed in line with the mandate set out in the prospectus whereby investments are made on the basis of focussing more on capital preservation than a typical VCT. Generally the Company generates its returns from interest paid on secured loan notes as well as an exposure to the value of the shares of investee companies. The investment strategy is to derive sufficient return from the secured loan notes to achieve the Company's investment aims and to use the equity exposure to boost capital returns.
The Manager has sought to mitigate risk by investing in well managed and profitable businesses with strong recurring cash-flows. Furthermore, with the majority of the investments being made in the form of secured loans, in the event of an investee company failing, the Company will rank ahead of unsecured creditors and equity investors.
Dividend and Dividend Policy
Dividends paid by a VCT are attractive as they are received by shareholders free of income tax. It is for that reason that your Board makes every effort to maintain a consistent dividend flow when possible. Your Board has declared an interim dividend of 2.5 pence per share in respect of the six months ended 31 July 2013. The dividend will be paid on 15 November 2013 to shareholders on the register on 18 October 2013.
This follows the 2.5 pence dividend that was paid to shareholders on 20 June 2013 in relation to the year ended 31 January 2013.
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 is pleased to confirm that it has been advised that Apollo is in compliance with the conditions laid down by HMRC for maintaining approval as a VCT.
A key requirement is to maintain at least the 70% qualifying investment level. As at 31 July 2013, 73.3% 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 of the Notes to the Half-Yearly Report on page x.
Outlook
Despite the current economic climate posing many challenges to businesses, it is pleasing that the Company has been able to generate a positive return and is evidence of the Investment Manager's continuing success in pursuing the Company's mandate of long-term capital growth.
Whilst challenges remain, the continuing growth and profitability of investee companies gives your Board and Investment Manager confidence that the Company will continue to be successful in adhering to the mandate stated in the prospectus and we fully expect the total return to continue to make progress.
I shall write to you again in the new year with a more detailed update in the annual report and accounts. In the meantime, if you have any questions on any aspect of your investment, please call one of the team on 0800 316 2347.
Murray Steele
Chairman
23 September 2013
Responsibility Statement of the Directors in respect of the Half-Yearly Report
We confirm that to the best of our knowledge:
the half-yearly financial statements have been prepared in accordance with the statement "Half-Yearly Financial Reports" issued by the UK Accounting Standards Board;
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
23 September 2013
| Income Statement | |||||||||
| Six months to 31 July 2013 | Six months to 31 July 2012 | Year to 31 January 2013 | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| (Loss)/gain on disposal of fixed asset investments | - | (11) | (11) | - | 22 | 22 | - | 23 | 23 |
| Fixed asset investment holding gains | - | - | - | - | 416 | 416 | - | 375 | 375 |
| Income | 1,221 | - | 1,221 | 632 | - | 632 | 1,678 | - | 1,678 |
| Investment management fees | (135) | (404) | (539) | (61) | (183) | (244) | (167) | (893) | (1,060) |
| Other expenses | (341) | - | (341) | (234) | - | (234) | (770) | - | (770) |
| Return on ordinary activities before tax | 745 | (415) | 330 | 337 | 255 | 592 | 741 | (495) | 246 |
| Taxation on return on ordinary activities | - | - | - | - | - | - | (201) | 178 | (23) |
| Return on ordinary activities after tax | 745 | (415) | 330 | 337 | 255 | 592 | 540 | (317) | 223 |
| Earnings per share - basic and diluted | 1.1p | (0.6)p | 0.5p | 1.3p | 0.9p | 2.2p | 1.5p | (0.9)p | 0.6p |
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 accompanying notes are an integral part of the half-yearly report.
The Company has no recognised gains or losses other than those disclosed in the income statement.
| Reconciliation of Movements in Shareholders' Funds | |||
| Six months ended 31 July 2013 | Six months ended 31 July 2012 | Year to 31 January 2013 | |
| £'000 | £'000 | £'000 | |
| Shareholders' funds at start of period | 47,774 | 24,337 | 24,337 |
| Profit on ordinary activities after tax | 330 | 592 | 223 |
| Shares issued upon acquisition of assets and liabilities of Octopus Apollo VCT 1, 2 and 4 plc | - | - | 26,522 |
| Stamp duty on shares issued | - | - | (31) |
| Issue of shares | 36,737 | - | 2,835 |
| Purchase of own shares | (18,216) | (1,332) | (4,233) |
| Dividends paid | (1,758) | (803) | (1,879) |
| Shareholders' funds at end of period | 64,867 | 22,794 | 47,774 |
| Balance Sheet | ||||||
| As at 31 July 2013 | As at 31 July 2012 | As at 31 January 2013 | ||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Fixed asset investments* | 53,499 | 18,658 | 39,976 | |||
| Current assets: | ||||||
| Investments* | 4,245 | 265 | 4,737 | |||
| Debtors | 890 | 551 | 936 | |||
| Cash at bank | 6,669 | 3,469 | 3,863 | |||
| 11,804 | 4,285 | 9,536 | ||||
| Creditors: amounts falling due within one year | (436) | (149) | (1,738) | |||
| Net current assets | 11,368 | 4,136 | 7,798 | |||
| Net assets | 64,867 | 22,794 | 47,774 | |||
| Called up equity share capital | 9,308 | 2,506 | 5,350 | |||
| Share premium | 35,151 | - | 2,488 | |||
| Special distributable reserve | 21,695 | 19,160 | 39,911 | |||
| Capital redemption reserve | 748 | 233 | 594 | |||
| Capital reserve - gains & losses on disposal | (3,452) | (465) | (1,213) | |||
| - holding gains & losses | 672 | 470 | 644 | |||
| Revenue reserve | 745 | 890 | - | |||
| Total equity shareholders' funds | 64,867 | 22,794 | 47,774 | |||
| Net asset value per share | 87.3p | 91.0p | 89.3p | |||
*Held at fair value through profit and loss
The statements were approved by the Directors and authorised for issue on 23 September 2013 and are signed on their behalf by:
Murray Steele
Chairman
Company Number: 05840377
| Cash Flow Statement | |||
| Six months to 31 July 2013 | Six months to 31 July 2012 | Year to 31 January 2013 | |
| £'000 | £'000 | £'000 | |
| Net cash (outflow)/inflow from operating activities | (915) | (88) | 192 |
| Financial investment : | |||
| Purchase of fixed asset investments | (15,500) | (3,750) | (4,283) |
| Sale of fixed asset investments | 1,967 | 5,201 | 5,326 |
| Management of liquid resources: | |||
| Purchase of current asset investments | - | - | (5,478) |
| Sale of current asset investments | 453 | 2,794 | 3,800 |
| Current asset investments acquired on acquisition of net assets of Octopus Apollo VCT 1, 2 and 4 plc | - | - | 1,454 |
| Dividends paid | (1,758) | (803) | (1,879) |
| Financing: | |||
| Purchase of own shares | (18,216) | (1,332) | (4,233) |
| Cash received on acquisition of net assets of Octopus Apollo VCT 1, 2 and 4 plc | - | - | 3,672 |
| Stamp duty on shares issued to acquire net assets of Octopus Apollo VCT 1, 2 and 4 plc | - | - | (31) |
| Cash received from fund raising top-up offer not allotted shares | - | - | 1,041 |
| Issue of own shares | 36,775 | - | 2,835 |
| Increase in cash at bank | 2,806 | 2,022 | 2,416 |
| Reconciliation of profit before taxation to cash flow from operating activities | |||
| Six months to 31 July 2013 | Six months to 31 July 2012 | Year to 31 January 2013 | |
| £'000 | £'000 | £'000 | |
| Return on ordinary activities after tax | 330 | 592 | 223 |
| Loss/(gain) on disposal of fixed asset investments | 11 | (22) | (23) |
| Holding gain on fixed asset investments | - | (416) | (375) |
| Decrease/(increase) in debtors | 46 | (177) | 39 |
| (Decrease)/increase in creditors | (1,302) | (65) | 328 |
| Net cash (outflow)/inflow from operating activities | (915) | (88) | 192 |
| Reconciliation of net cash flow to movement in net funds | |||
| Six months to 31 July 2013 | Six months to 31 July 2012 | Year to 31 January 2013 | |
| £'000 | £'000 | £'000 | |
| Increase in cash at bank | 2,806 | 2,022 | 2,416 |
| Movement in cash equivalent securities | (492) | (2,794) | 1,678 |
| Opening net cash resources | 8,600 | 4,506 | 4,506 |
| Net cash resources at end of period | 10,914 | 3,734 | 8,600 |
Notes to the Half-Yearly Report
1. Basis of preparation
The unaudited half-yearly results which cover the six months to 31 July 2013 have been prepared in accordance with the Accounting Standard Board's (ASB) statement on half-yearly financial reports (July 2007) and adopting the accounting policies set out in the statutory accounts of the Company for the year ended 31 January 2013, which were prepared under UK GAAP and in accordance with the Statement of Recommended Practice for Investment Companies issued by the Association of Investment Companies in January 2009.
2. Publication of non-statutory accounts
The unaudited half-yearly results for the six months ended 31 July 2013 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 2013 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 at 31 July 2013 is calculated on the basis of 65,723,882 (31 July 2012: 26,871,445 and 31 January 2013: 35,500,402) shares, being the weighted average number of shares in issue during the period.
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
The net asset value per share is based on net assets as at 31 July 2013 divided by 74,319,046 (31 July 2012: 25,056,684 and 31 January 2013: 53,502,660) shares in issue at that date.
5. Dividends
The interim dividend of 2.5 pence per share for the six months ending 31 July 2013 will be paid on 15 November 2013, to those shareholders on the register on 18 October 2013.
A final dividend, for the year ending 31 January 2013, of 2.5 pence per share was paid on 20 June 2013 to shareholders on the register on 24 May 2013.
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 2013. 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. During the period, the Company incurred management fees of £539,000 (31 July 2012: £244,000 and 31 January 2013: £1,060,000) payable to Octopus. At the period end there was £nil (31 July 2012: £nil and 31 January 2013: £nil) outstanding to Octopus. Furthermore, Octopus 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 £10,000 per annum for company secretarial services.
In the period under review, an investment was made into Terido LLP, a limited liability trading partnership. The designated members of Terido LLP are Terido DM1 Limited and Terido DM2 Limited, both of these companies being 100% subsidiaries of Octopus.
8. A version of this statement will be made available to all shareholders. Copies are also available from the registered office of the Company at 20 Old Bailey, London, EC4M 7AN, and will also be available to view on the Investment Manager's website at www.octopusinvestments.com.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: Octopus Apollo VCT plc via Thomson Reuters ONE
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