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    OAP3   GB00B17B3479

OCTOPUS APOLLO VCT PLC

(OAP3)
  Report
Delayed London Stock Exchange  -  11:35 2022-06-24 am EDT
46.60 GBX    0.00%
06/22Close of Offer to new applications
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06/22Close of Offer to new applications
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06/01Annual Report and Notice of Meeting
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Final Results

05/19/2022 | 02:01am EDT

Octopus Apollo VCT plc

Final Results

Octopus Apollo VCT plc today announces the final results for the year ended 31 January 2022.

Octopus Apollo VCT plc (“Apollo” or the “Company”) is a venture capital trust (“VCT”) which aims to provide shareholders with attractive tax-free dividends and long-term capital growth by investing in a diverse portfolio of predominantly unquoted companies. The Company is managed by Octopus Investments Limited (“Octopus” or the “Manager”).

 Year to
31 January 2022
Year to
31 January 2021
Net assets (£’000)262,959168,237
Profit after tax (£’000)31,45719,767
Net asset value (“NAV”) per share (p)50.249.2
Cumulative dividends paid since launch (p)82.176.4
NAV plus cumulative dividends paid (p)132.3125.6
Total return %*13.612.7
Dividends per share paid in the year (p)5.72.3
Proposed dividend (p)**1.31.3

*Total Return is an alternative performance measure calculated as movement in NAV in the period plus dividends paid in the period, divided by the NAV at the beginning of the period.

**The proposed second interim dividend of 1.3p per Ordinary share for the year ended 31 January 2022 will be paid on 31 May 2022 to all Ordinary shareholders on the register on 22 April 2022.


Chair’s Statement
Performance

I am pleased to present the annual results for Apollo for the year ended 31 January 2022. The NAV plus cumulative dividends per share at 31 January 2022 was 132.3p, an increase of 6.7p per share from 31 January 2021. The NAV per share increased during the year from 49.2p to 50.2p which represents, after adding back the 5.7p of dividends paid in the year, a total return for the year of 13.6% compared to 12.7% in the previous year.

I am delighted to say that Apollo has once again performed strongly, and despite these uncertain times, has delivered the strongest year ever, with a 13.6% total return. Our focus on the technology sector played a major role in Apollo’s performance and we have seen exciting growth in the value of a number of our portfolio companies.

Further details of the year’s performance are highlighted in the Investment Manager’s Review.

Fundraising
On 30 September 2021, we launched a new offer to raise up to £40 million, with an over-allotment facility of up to £35 million. The Board decided to close this offer 26 days later having raised £42 million. This represents our fastest fundraising by far and is a testament to the strong performance of Apollo. This means that Apollo raised just over £100 million during the year – another milestone. We would like to take this opportunity to welcome all new shareholders and thank all existing shareholders for their continued support.

Investment Activity
In the year under review Apollo invested £55.7 million, comprising £40.8 million into eight new investments and £14.9 million of follow-on capital into existing portfolio companies to fund their growth plans, further details of which can be found in the Investment Manager’s report. There was one partial exit and 20 full exits of portfolio companies during the year generating total proceeds to Apollo of £53.9 million.

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, and work towards the targeted 5% annual dividend yield policy.
I am pleased to confirm that the Board has proposed a second interim dividend of 1.3p per share in respect of the year ended 31 January 2022. This is in addition to the 1.3p interim dividend and the 3.1p special dividend paid during the year, and will bring the total dividends declared to 5.7p for the year, a tax-free yield of 11.6%. The dividend will be payable on 31 May 2022 to shareholders on the register at 22 April 2022.

Dividend Reinvestment Scheme (DRIS)
In common with a number of VCTs, Apollo has a dividend reinvestment scheme which was introduced in November 2014. This is an attractive scheme for investors who would prefer to benefit from additional income tax relief on their re-invested dividend. I hope that shareholders will find this scheme beneficial.

During the year to 31 January 2022, 13,197,197 shares were issued under the DRIS, equating to a reinvested amount of £6.4 million.

Share Buybacks
Apollo has continued to buy back and cancel shares as required. Subject to shareholder approval of resolution 8 at the forthcoming Annual General Meeting (AGM), this facility will remain in place to provide liquidity to investors who may wish to sell their shares, subject to Board discretion.

Dividends, whether paid in cash or re-invested under the DRIS, and share buybacks are always at the discretion of the Board, are never guaranteed and may be reviewed when necessary.

VCT Regulations Status
Following a review in the year the Board decided to change to Shoosmiths LLP to provide both the Board and Manager with advice concerning ongoing compliance with HMRC’s rules and regulations concerning VCTs. The Board 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 an 80% qualifying investment level which, at 31 January 2022, was at 100%.

Board of Directors
James Otter resigned from the Board of Apollo on 31 July 2021. James was Chair of Octopus VCT plc and joined the Board when it was merged into Apollo in 2014. On behalf of shareholders and other Board members, I would like to thank James for his insightful contributions to the Board during the uncertain and challenging times which we have experienced.

I am pleased to announce that Claire Finn was appointed to the Board as a Non-Executive Director on 21 September 2021. Claire spent the majority of her professional career working for BlackRock, where she held a variety of leadership positions. She now has a portfolio of Non-Executive Director roles and has already made a significant contribution to the Board.

Claire and I will be standing for election and re-election respectively, at the forthcoming AGM.

Annual General Meeting
The Annual General Meeting (“AGM”) will be held on 7 July 2022 at 10.00am. Full details of the business to be conducted at the AGM will be given in the Notice of the Meeting included in the Annual Report and Accounts. I would like to draw your attention to Resolution 11 : “That the Company continue in being”. This derives from a provision in the Company’s Articles of Association, whereby shareholders are required to vote on the continuation of the Company, at the 15th AGM, and every 5 years thereafter. This resolution should have been put to last year’s AGM and on behalf of the Board I apologise for this omission.

Shareholders’ views are important, and the Board encourages shareholders to vote on the resolutions within the Notice of Annual General Meeting using the proxy form, or electronically at www.investorcentre.co.uk/eproxy. The Board has carefully considered the business to be approved at the Annual General Meeting and recommends shareholders to vote in favour of all the resolutions being proposed. We encourage shareholders to submit their votes by proxy.

Shareholder Event
We will also be hosting a virtual shareholder event on 29 June 2022. This is an opportunity for shareholders to receive an update from the Investment Manager and put questions to the Chair and the Investment Manager. You can register for the event at octopusinvestments.com/apollo-shareholder-event/.

Outlook and Future Prospects
We continue to be optimistic about Apollo’s future investment prospects and its current portfolio. Even during the past year which was filled with Coronavirus and wider market uncertainties, Apollo has shown great resilience and has delivered a record 13.6% total return in the year. The majority of our portfolio companies have been performing very well and only a very small minority have been negatively influenced by recent events. As we look set to face further uncertain times with rising inflation rates and the conflict in Ukraine, the Investment Manager will continue to work closely with portfolio companies to ensure they have identified the risks to their business operations and manage any mitigations effectively. The Apollo portfolio has no exposure to Russia or Ukraine.

The investment team completed eight new investments and seven follow-on investments during the year and expects to be able to continue with further new investment activity in the upcoming year, with two new investments of £12.1 million and a follow-on investment of £2.7 million already made since the year end. In addition, a significant number of realisations were made during the year, returning £53.9m to Apollo. This, in part, led to the declaration of a special dividend during the period. The payment of any future special dividends will depend upon a range of factors and, as mentioned above, these are never guaranteed.

This strong performance and position led your Board to announce on 23 March 2022 that it is in the interest of Apollo shareholders to re-open the recent offer for subscription by utilising the over allotment facility from the September 2021 Fundraise. This will allow the investment team to continue making investments on behalf of Apollo, helping to further widen the portfolio and create opportunities for future growth.

Murray Steele
Chair
18 May 2022


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. Octopus Investments Limited also acts as Investment Manager to four other listed investment companies, with over £1.9 billion of funds under management in VCTs. If you have any questions about this report, or if it would help to speak to one of the fund managers, please do not hesitate to contact us on 0800 316 2295.

Investment Policy
The majority of companies in which the Company invests operate in sectors where there is a strong opportunity for growth. In general, we invest in technology companies that have recurring or repeating revenues from a diverse base of customers. We also seek to invest into companies that will provide an opportunity for the Company to realise its investment typically within three to seven years.

Performance
The Company made a total return per share of 13.6% in the year to 31 January 2022, which I am pleased to say is the highest total return since the inception of Octopus Apollo VCT plc. The NAV per share increased from 49.2p to 50.2p. In addition, 5.7p of dividends were paid in the period, representing a dividend yield of 11.6% and bringing cumulative dividends paid to date to 82.1p and the total return (NAV plus cumulative dividends) to 132.3p per share.

Through another year of uncertainties relating to Coronavirus and the wider market, the Company continued to perform well. In the first six months of the year, the Company reported a total return per share of 6.3%. The second half of the year generated a total return of 7.3%. This demonstrates a good level of resilience and builds on the significantly improved performance of the fund since the change in Apollo’s investment strategy in 2017-18.

Apollo provides three pillars of growth from its funding – expansion of sales and marketing functions, incremental research and development spend, and geographic expansion. These were the common themes running through the portfolio companies in the period, with the resulting company growth being the key driver of performance.

As seen through the Top 10 Investments, the performance during the year was largely attributable to strong performance in the Technology portfolio that has been constructed in recent years. Performance is discussed further in the Portfolio Review below.

Portfolio Review
As at 31 January 2022 the Company’s invested portfolio was comprised of 39 companies with a total valuation of £190.7 million. This represents 72.5% of the net assets of the fund. The portfolio includes eight quoted AIM investments (2.7% of net assets), eight unquoted co-investments (3.4% of net assets) with Octopus Titan VCT plc (an Octopus managed VCT), with the balance (66.4% of net assets) being Apollo-only investments in private companies.

During the year, the value of the invested portfolio increased by £45.0 million, including assets invested into or exited in the year. The increase is as a result of positive valuation movements across a number of investments in the portfolio including investments in Sova Assessment Limited, Ubisecure Limited, N2JB Limited (trading as Natterbox), Tendable Limited, Hasgrove Limited and The Safeguarding Company Limited. These increases were very slightly offset by a small number of negative valuation adjustments during the year, being the Company’s investments in Countrywide Healthcare Supplies Holdings Limited and Renalytix plc.

As part of liquidity management, £5 million was invested in the Sequoia Economic Infrastructure Fund (SEQI) in May 2021. This investment in combination with the previously held investment in the Octopus Portfolio Manager (OPM) fund took the total liquid investments as at 31 January 2022 to £21.4 million, at year end valuations. Octopus has waived its management fees in relation to OPM.

The Company’s investment portfolio is set in full in the Annual Report and Accounts. It continues to hold appropriate investments to meet VCT requirements.

Investment Activity
During the year, the Company disposed of 20 investments and made one part-disposal for total sale proceeds of £53.9 million. In the year, we recognised a net realised gain of £4.4 million on these transactions, primarily as a result of the disposals of Anglo European Group Limited, Veeqo Limited, and Health and Socialcare Technology Group Limited.

The Company made the following new investments during the year:

  • Tendable £4.0 million – Tendable is a quality inspection app used across NHS trusts, care homes and social care sites. Tendable’s platform replaces carrying out inspections using non-digital formats, enabling better decisions, and empowering frontline staff to own improvements.
  • Zapnito £2.8 million – Zapnito is an expert community management software-as-a-service (“SaaS”) platform, which provides B2B customers with the ability to deliver knowledge, expert content and active forums within online community networks.
  • Turtl £10.0 million – Turtl is an enterprise SaaS product which enables corporates to produce high quality, brand consistent and personalized marketing collateral at scale.
  • APLYiD £3.3 million – APLYiD is a digital onboarding and identity verification SaaS business based in New Zealand. It allows companies to seamlessly complete the necessary regulatory checks to satisfy internal policies and government legislation, and the Company’s funding is facilitating its growth in the UK market.
  • Synchtank £3.5 million – Synchtank is a cloud-based music rights and licensing management software platform for music, media and broadcast companies. Its core platform provides a centralised database to manage digital media assets.
  • Homesearch £3.0 million – Homesearch is a SaaS provider of property data for both reporting and prospecting to estate agents across the UK.
  • Mention Me £10.0 million – Mention Me is a marketing SaaS platform that helps B2C businesses acquire new customers more successfully through their referral channel. Their technology allows brands to gain deep insights into customer segmentation and run referral schemes across multiple products and geographies.
  • Value Blue £4.2 million – Value Blue is a Netherlands based provider of enterprise architecture management software, that is growing in the U.K. The product allows companies to map their existing technology architecture in a single location to easily plan, collaborate and execute both large scale transformational and everyday IT projects.

In addition to the new investments above, the Company invested £14.9 million in follow-on capital to seven existing portfolio companies to continue their growth plans.

Since the year end, the Company has also made one follow-on investment of £2.7 million and two new investments of £12.1 million.

Outlook and Future Prospects
This time last year we wrote about the hope that the Coronavirus pandemic would be brought under control as vaccines were starting to be rolled out. Whilst it has been a highly challenging year for the UK population, and the human and economic impacts are still being felt, I am pleased to report that the Company was able to operate and invest essentially normally throughout the financial year. The investment team adjusted well to hybrid working patterns and demonstrated an ability to find and execute new investments against a backdrop of many companies still operating remotely.

I am therefore delighted to say that it has been a second consecutive record year for the Company, with a 13.6% total return and a dividend yield of 11.6%. The nature of the current investment portfolio and the characteristics of the technology-focused businesses that the Company invests in means that the majority of assets have been insulated from any impact from the pandemic. They generally have recurring revenues and are therefore well positioned to be more resilient than impacted sectors such as travel, leisure or retail. Indeed, the last year reinforced that technology investing has become increasingly mainstream and that there is a growing population of potentially suitable companies for the Company to select its future investments from, as economies and Governments realise that these companies are likely to drive economic growth in a post-pandemic world.

We therefore remain optimistic and confident about the Company’s future investment prospects and its current diverse portfolio. The investment team has continued to create a healthy pipeline of new growth capital investments that meet the investment criteria of the Company owing to its ongoing origination activities. A sustained strong level of investment activity, as noted in the Chair’s Statement, has led to re-opening fundraising to ensure that the Company has sufficient capital available for the investment team to make new and follow-on investments for the foreseeable future. This will support ongoing diversification of the investment portfolio and help to facilitate further growth in the value of existing portfolio companies. We believe that this growth will ensure that the Company continues to thrive despite wider market uncertainties such as rising inflation rates and the escalating conflict in Ukraine, for which we hope that there will be a swift resolution.

If you have any questions on any aspect of your investment, please call one of the team on 0800 316 2295.

Richard Court
Octopus Investments Limited
18 May 2022


Investment Portfolio

Top 10 InvestmentsSectorInvestment cost as at
31 January 2022
£’000
Total movement in fair value since investment
£’000
Fair value as at
31 January 2022
£’000
Movement in fair value in year to 31 January 2022
£’000
% equity held by Apollo VCT
N2JB Limited (trading as Natterbox)Technology17,49012,12929,6193,8588.5%
Sova Assessment LimitedTechnology7,5009,07416,5747,51530.5%
Ubisecure Holdings LimitedTechnology5,5759,14414,7194,72330.0%
Turtl Surf & Immerse LimitedTechnology10,00042210,42242213.6%
Fuse Universal LimitedTechnology8,0002,11910,1191,5170.0%
Mention Me LimitedTechnology10,000-10,000-13.8%
The Safeguarding Company Limited (previously One Team Logic)Technology4,9514,7499,7002,41720.0%
Hasgrove LimitedTechnology3087,5097,8172,6035.4%
Tendable LimitedTechnology4,0003,3277,3273,32717.5%
Countrywide Healthcare Supplies Holdings LimitedHealthcare2,6754,5477,222(1,019)20.7%
Other* 54,24912,90367,15215,218 
Total investments 124,74865,923190,67140,581 
Current asset investments   21,429  
Cash at bank   58,332  
Debtors less creditors   (7,473)  
Net assets   262,959  

*Other comprises the remaining 29 investments whose valuation is outside the top 10: Fiscaltec Group Limited, Triumph Holdings Limited, Value Blue B.V, Ryte GMBH, Synchtank Limited, Pollen Technology Group UK, Homesearch Limited, Ergomed plc, Zapnito Limited, Dyscova Limited, Behaviosec Inc, Artesian Solutions Limited, Superior Heat Limited, EKF Diagnostics plc, Trafi Limited, Rotolight Group Ltd, Vertu Motors plc, Origami Energy Limited, Ecrebo Limited, Luther Pendragon Limited, CurrencyFair Limited, Secret Escapes Limited, Renalytix plc, Oxifree UK Limited, Eve Sleep plc, Trellus Health plc, Verici Dx plc, Segura Systems Limited and Nektan plc.

Viability Statement

In accordance with the FRC UK Corporate Governance Code published in 2018 and provision 36 of the AIC Code of Corporate Governance, the Directors have assessed the prospects of the Company over a period of five years, consistent with the expected investment holding period of a VCT investor. Under VCT rules, subscribing investors are required to hold their investment for a five year period in order to benefit from the associated tax reliefs. The Board regularly considers strategy, including investor demand for the Company’s shares, and a five year period is considered to be a reasonable time horizon for this.

The Board carried out a robust assessment of the emerging and principal risks facing the Company and its current position. This includes the impact of the pandemic, the emerging situation in Ukraine, and any other risks which may adversely impact its business model, future performance, solvency or liquidity, and focused on the major factors which affect the economic, regulatory and political environment. Particular consideration was given to the Company’s reliance on, and close working relationship with, the Investment Manager. The principal risks faced by the Company and the procedures in place to monitor and mitigate them are set out below.

The Board has carried out robust stress testing of cashflows which included; assessing the resilience of portfolio companies, including the requirement for any future financial support and the ability to pay dividends and buybacks. The Board has additionally considered the ability of the Company to comply with the ongoing conditions to ensure it maintains its VCT qualifying status under its current investment policy.

Based on the above assessment the Board confirms that it has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five year period to 31 January 2027. The Board is mindful of the ongoing risks and will continue to ensure that appropriate safeguards are in place, in addition to monitoring the cashflow forecasts to ensure that the Company has sufficient liquidity.

Emerging and principal risks, risk management and regulatory environment

The Board carries out a regular review of the risk environment in which the Company operates. The main areas of risk identified by the Board are as follows:

RiskMitigationMovement in year
VCT qualifying status risk: the Company is required at all times to observe the conditions for the maintenance of approved VCT status. The loss of such approval could lead to the Company and investors losing access to the various tax benefits associated with VCT status and investment.The Manager tracks the Company’s VCT qualifying status throughout the year, and reviews this at key points including investment, realisation, and at each monthly reporting date. This status is reported to the Board at each board meeting. The Board has also retained Shoosmiths LLP to undertake an independent VCT status monitoring role.

No change
Investment performance: the majority of the Company’s investments are in small companies which are VCT qualifying holdings and which, by their nature, entail a higher level of risk and lower liquidity than investments in large quoted companies.The Board and the Manager aim to limit the risk attached to the portfolio as a whole by careful selection and timely realization of investments and by carrying out due diligence procedures. A member of the investment team is typically appointed to the board of a portfolio company, and regular portfolio monitoring reports are prepared and examined by the Manager.

The overall risk in the portfolio is mitigated by maintaining a wide spread of holdings in terms of financing stage, age and sector. The Board reviews the investment portfolio with the Manager on a regular basis.

No change
Valuation risk: investments may be valued
inappropriately which may result in an inaccurate representation of the Company’s net assets and net asset value per share.
Valuations of portfolio companies are performed by appropriately experienced staff, with detailed knowledge of both the portfolio company and the market it operates in. These valuations are then subject to review and approval by Octopus’s independent Valuation Committee, comprised of staff with relevant knowledge of unquoted company valuations. They are then reviewed and approved by the Company’s Board of directors.

The IPEV guidelines were revised in March 2020 to cater for the Coronavirus pandemic and these have been applied to subsequent valuations. Although there was a reduction in valuation risk due to the end of restrictions relating to the Covid-19 pandemic, this was offset by an increase in valuation risk as a result of the situation in Ukraine, resulting in net no change.

No change
Financial risk: the Company is exposed to market price risk, credit risk, fair value risk, liquidity risk and interest rate risk.The Company is financed through equity and does not have any borrowings or derivative instruments. The Company invests in financial assets that may not always be readily realisable. Accordingly, the Manager seeks to maintain a proportion of the Company’s assets in cash or cash equivalents and liquid investments in order to balance irregular cash flows from realisations. At the balance sheet date the cash and cash equivalents (including cash held in liquid funds) was 30.3% of net assets (2021: 18.6%).

No change
Economic and price risk: macroeconomic conditions such as government regulation, political instability or recession could cause volatility in the markets, damaging some of the underlying assumptions in the valuations and therefore the value of Company investments. The risk is amplified for smaller companies earlier in their life cycle.To mitigate these risks the Manager constantly monitors the markets and the portfolio companies, providing performance updates to the Board at each meeting. The risk of material decline in the value of a single security is further mitigated by holding a diversified portfolio, across a broad range of sub sectors.

The Manager is continually assessing the implications of the Coronavirus pandemic as well as other macroeconomic and geopolitical uncertainties including the war in Ukraine. This continuous assessment is intended to ensure that exposure to the risks for each portfolio company will be addressed, and appropriate actions, where possible, will be implemented.

No change
Regulatory risk: in addition to specific VCT legislation mentioned above, the Company is required to comply with the Companies Act 2006, the rules of the UK Listing Authority and United Kingdom Accounting Standards. The Company is also a small registered Alternative Investment Fund Manager (“AIFM”) and must comply with the AIFM Directive. Breach of any of these might lead to suspension of the Company’s Stock Exchange listing, financial penalties or a qualified audit report.Day-to-day operational oversight of the Company is carried out by Octopus. Octopus conduct rigorous on-boarding procedures for new employees and conduct regular staff reviews and training
to ensure that teams charged with oversight of the Company are appropriately qualified to conduct their roles and ensure compliance with relevant legislation. The Board is updated regularly on all regulatory and compliance matters and takes specific legal advice where appropriate.
No change
Cash flow risk: there is a risk that the Company’s available cash will not be sufficient to meet its financial obligations.This is mitigated by frequent forecasting and close monitoring of available cash resources by the Company. The Board receives reports from the Investment Manager on future cash flows and
together they carefully consider if any cash flow related risk has been identified.

No change
Market risk: investment in unquoted companies involves a higher degree of risk than investing in quoted companies, which could result in the value of such investments, and interest income and dividends therefrom, reducing. In particular, small companies often have limited product lines, markets or financial resources. These companies may be dependent for their management on a small number of key individuals and may be more susceptible to political, exchange rate, taxation and other regulatory changes and, therefore, may not produce the expected returns. In addition, the market for securities in smaller companies is less regulated and is usually less liquid than that of securities in larger companies, bringing with it potential difficulties in acquiring, valuing and disposing of such securities. These risks are mitigated by the Managers’ extensive experience in identifying suitable investments in smaller companies.

The management of market risk is part of the investment management process and is a central feature of venture capital investment. The Company’s portfolio is managed in accordance with the policies and procedures described in the Corporate Governance statement of the Annual Report and Accounts, having regard to the possible effects of adverse price movements, with the objective of maximising overall returns to shareholders. Investments in unquoted companies, by their nature, usually involve a higher degree of risk than investments in companies quoted on a recognised stock exchange, though the risk can be mitigated to a certain extent by diversifying the portfolio across business sectors and asset classes. The overall disposition of the Company’s assets is regularly monitored by the Board.No change
Liquidity risk: the Company’s investments may be difficult to realise. The spread between the buying and selling price of shares may be wide and thus the price used for valuation may not be achievable.The Company’s liquidity is managed on a continuing basis by the Manager in accordance with policies and procedures laid down by the Board. The Board performs regular reviews of performance and monitors progress and compliance. In the mitigation and management of these risks, the Board applies rigorously the principles detailed in the Financial Reporting Council’s Guidance on Risk Management, Internal Control and Related Financial and Business Reporting.

No change

Directors’ Responsibilities Statement

The Directors are responsible for preparing the Strategic Report, the Directors’ Report, the Directors’ Remuneration Report and the Financial Statements in accordance with applicable law and regulations. They are also responsible for ensuring that the Annual Report and Accounts include information required by the Listing Rules of the Financial Conduct Authority.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws) including FRS 102 – “The Financial Reporting Standard applicable in the UK and Republic of Ireland”. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company for that period.

In preparing these financial statements, the Directors are required to:

  • select suitable accounting policies and then apply them consistently;
  • make judgements and accounting estimates that are reasonable and prudent;
  • state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;
  • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; and
  • prepare a Strategic Report, a Directors’ Report and Directors’ Remuneration Report which comply with the requirements of the Companies Act 2006.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

In so far as each of the Directors is aware:

  • there is no relevant audit information of which the Company’s auditor is unaware; and
  • the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

The Directors are responsible for preparing the annual report in accordance with applicable law and regulations. Having taken advice from the Audit Committee, the Directors consider the annual report and the financial statements, taken as a whole, provide the information necessary to assess the Company’s position performance, business model and strategy and is fair, balanced and understandable.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors confirm that, to the best of their knowledge:

  • the financial statements, prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 102, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
  • the Annual Report and Accounts (including the strategic report), give a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

Murray Steele
Chair
18 May 2022


Income Statement

  Year ended 31 January 2022Year ended 31 January 2021
  Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Realised gain on disposal of fixed asset investments -4,4394,439-946946
Realised loss on disposal of current asset investments ----(3)(3)
Change in fair value of fixed asset investments -40,58140,581-25,85725,857
Change in fair value of current asset investments -(228)(228)-1010
Investment income 2,260852,3452,063-2,063
Investment management fees (1,178)(12,331)(13,509)(653)(6,885)(7,538)
Other expenses (2,171)-(2,171)(1,568)-(1,568)
(Loss)/profit before tax (1,089)32,54631,457(158)19,92519,767
Tax ------
(Loss)/profit after tax (1,089)32,54631,457(158)19,92519,767
(Loss)/earnings per share – basic and diluted (0.2)p7.4p7.2p(0.1)p6.5p6.4p
  • The ‘Total’ column of this statement is the profit and loss account of the Company; the 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 January 2022As at 31 January 2021
  £’000£’000£’000£’000
Fixed asset investments  190,671 143,832
Current assets:     
Investments 21,429 16,657 
Debtors 3,889 2,335 
Cash at bank 58,332 14,680 
  83,650 33,672 
Creditors: amounts falling due within one year (11,362) (9,267) 
Net current assets  72,288 24,405
Net assets  262,959 168,237


Share capital
  

52,365
 

34,206
Share premium  81,600 45,141
Special distributable reserve  58,918 52,397
Capital redemption reserve  8,441 6,315
Capital reserve realised  (5,197) (9,046)
Capital reserve unrealised  68,079 39,382
Revenue reserve  (1,247) (158)
Total shareholders' funds  262,959 168,237
Net asset value per share – basic and diluted  50.2p 49.2p

The statements were approved by the Directors and authorised for issue on 18 May 2022 and are signed on their behalf by:

Murray Steele
Chair
Company number: 05840377

Statement of Changes in Equity

 Share Capital
£’000
Share Premium
£’000
Special distributable reserves*
£’000
Capital redemption reserve
£’000
Capital reserve realised*
£’000
Capital reserve unrealised
£’000
Revenue reserve*
£’000
Total
£’000
As at 1 February 202134,20645,14152,3976,315(9,046)39,382(158)168,237
Total comprehensive income for the year----(7,807)40,353(1,089)31,457
Contributions by and distributions to owners:        
Repurchase and cancellation of own shares(2,126)-(10,254)2,126---(10,254)
Issue of shares20,28585,825-----106,110
Share issue cost-(4,225)-----(4,225)
Dividends paid--(28,366)----

(28,366)
Total contributions by and distributions to owners:18,15981,600(38,620)2,126---63,265
Other movements:        
Prior year fixed asset gains now realised----11,656(11,656)--
Cancellation of share premium-(45,141)45,141-----
Total other movements-(45,141)45,141-11,656(11,656)--
Balance as at 31 January 202252,36581,60058,9188,441(5,197)68,079(1,247)262,959


 Share Capital
£’000
Share Premium
£’000
Special distributable reserves*
£’000
Capital redemption reserve
£’000
Capital reserve realised*
£’000
Capital reserve unrealised
£’000
Revenue reserve*
£’000
Total
£’000
As at 1 February 202028,99470,94716,9755,0465,7144,697-132,373
Total comprehensive income for the year----(5,942)25,867(158)19,767
Contributions by and distributions to owners:        
Repurchase and cancellation of own shares(1,269)-(5,414)1,269---(5,414)
Issue of shares6,48123,070-----29,551
Share issue cost-(569)-----(569)
Dividends paid--(7,471)----(7,471)
Total contributions by and distributions to owners:5,21222,501(12,885)1,269---16,097
Other movements:        
Prior year fixed asset gains now realised----942(942)--
Transfer between reserves----(9760)9760--
Cancellation of share premium-(48,307)48,307-----
Total other movements-(48,307)48,307-(8,818)8,818--
Balance as at 31 January 202134,20645,14152,3976,315(9,046)39,382(158)168,237

* Included in these reserves is an amount of £52,474,000 (2021: £43,193,000) which is considered distributable to shareholders per the Companies Act.

Cash Flow Statement

  Year to
31 January 2022
£’000
Year to
31 January 2021
£’000
Cash flows from operating activities   
Profit after tax 31,45719,767
Adjustments for:   
Increase in debtors (1,554)(353)
Increase in creditors 4,6414,343
Gain on disposal of fixed assets (4,439)(946)
Loss on disposal of current assets -3
Gain on valuation of fixed asset investments (40,581)(25,857)
Loss/(Gain) on valuation of current asset investments 228(10)
In-specie dividends (85)-
Net cash utilised in operating activities (10,333)(3,053)


Cash flows from investing activities
   
Purchase of fixed asset investments (55,673)15,851
Proceeds on sale of fixed asset investments 53,9393,356
Purchase of current asset investments (5,000)(12,000)
Proceeds on sale of current asset investments -9,000
Net cash utilised in investing activities (6,734)(15,495)
Cash flows from financing activities   
Movement in applications account (2,546)495
Purchase of own shares (10,254)(5,414)
Proceeds from share issues 99,69128,108
Cost of share issues (4,225)(569)
Dividends paid (net of DRIS) (21,947)(6,029)
Net cash generated from financing activities 60,71916,591
Increase/(Decrease) in cash and cash equivalents 43,652(1,957)
Opening cash and cash equivalents 14,68016,637
Closing cash and cash equivalents 58,33214,680

Events after the end of the reporting period

The following events occurred between the Balance Sheet date and the signing of these financial statements:

  • Further to the circular dated 7 December 2021, on 8 February 2022 the Company confirmed the reduction in the nominal value of the Company’s issued share capital from 10p per ordinary share to 0.1p per ordinary share, the cancellation of the share premium amount of £77,545,000 and the cancellation of the capital redemption reserve amount of £8,299,000.
  • 3.7 million shares were purchased at a price of 48.1p per share on 25 March 2022.
  • 1 million shares were issued at an allotment price of 53.2p per share on 14 April 2022.
  • 2.3 million shares were purchased at a price of 46.9p per share on 26 April 2022.
  • The Company invested a total of £12.1 million into 2 new investments and £2.7 million into a follow-on investment.
  • The Company sold Behaviosec Inc for £2.8 million.
  • The Board has assessed the impact of the sanctions on Russia and Belarus on the Company, and determined there is no material effect on the net asset value of the Company.

Notes to the financial statements

1. Principal accounting policies

The Company is a Public Limited Company (plc) incorporated in England and Wales and its registered office is 33 Holborn, London, EC1N 2HT.

The Company’s principal activity is to invest in a diverse portfolio of predominantly unquoted companies with the aim of providing shareholders with attractive tax-free dividends and long-term capital growth.

Basis of preparation

The financial statements have been prepared under the historical cost convention, except for the measurement at fair value of certain financial instruments, and in accordance with UK Generally Accepted Accounting Practice (“GAAP”), including Financial Reporting Standard 102 – ‘The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland’ (“FRS 102”), and with the Companies Act 2006 and the Statement of Recommended Practice (“SORP”) ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts (issued 2014 and updated in April 2021 with consequential amendments)’.

The principal accounting policies have remained unchanged since those set out in the Company’s 2021 Annual Report and Accounts.

2. Investment income
Accounting policy

Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis (including time amortisation of any premium or discount to redemption), so as to reflect the effective interest rate, provided it is considered probable that payment will be received in due course. Income from fixed interest securities and deposit interest is accounted for on an effective interest rate method. Investment income includes interest earned on bank balances and includes income tax withheld at source. Dividend income is shown net of any related tax credit.

Dividends receivable are brought into account when the Company’s right to receive payment is established and it is probable that payment will be received. Fixed returns on debt are recognised provided it is probable that payment will be received in due course. The nature of dividends received is assessed to establish whether they are revenue or income dividends. During the year the Company received shares in Trellus Health plc and Verici Dx plc as a result of in-specie dividends. These have been treated as capital income.

Disclosure

  31
January
31
January
 20222022
 £’000£’000
Loan note interest receivable1,9722,063
Dividends receivable
In-specie dividends        
288
85
-
-
 2,3452,063

3. Investment management fees

 31 January 202231 January 2021
 RevenueCapitalTotalRevenueCapitalTotal
 £’000£’000£’000£’000£’000£’000
Investment management fee1,1783,5344,7126531,9592,612
Investment performance fee-8,7978,797-4,9264,926
 1,17812,33113,5096536,8857,538

For the purpose of the revenue and capital columns in the Income Statement, the management fee has been allocated 25% to revenue and 75% to capital, in line with the Board’s expected long-term split of returns in the form of income and capital gains respectively from the Company’s investment portfolio. The investment performance fee, explained below, is allocated 100% to capital as it is deemed that capital appreciation on investments has primarily driven the total return of the Company above the required hurdle rate at which the performance fee is payable. The management fee, administration and accountancy fees are calculated based on the NAV which is then multiplied by the number of shares in issue, calculated on a daily basis.

Octopus provides investment management, accounting and administration services and company secretarial services to the Company under a management agreement which may be terminated at any time thereafter by not less than twelve months’ notice given by either party. No compensation is payable in the event of terminating the agreement by either party, if the required notice period is given. The fee payable, should insufficient notice be given, will be equal to the fee that would have been paid should continuous service be provided. The basis upon which the management fee is calculated is disclosed within Note 19 to the financial statements.

The Company has established a performance incentive scheme whereby the Manager is entitled to an annual performance related incentive fee in the event that certain performance criteria are met. This scheme is in line with industry standards. Further details of this scheme are disclosed within Note 19 to the financial statements. As at 31 January 2022 £8,797,000 was due to the manager by way of annual performance fee (2021: £4,926,000).

4. Other expenses
Accounting Policy

All expenses are accounted for on an accruals basis. Expenses are charged wholly to revenue, apart from management fees charged 75% to capital and 25% to revenue, performance fees charged wholly to capital and transaction costs. Transaction costs incurred when purchasing or selling assets are written off to the Income Statement in the period that they occur.

Disclosure

 31
January
31
January
 20222021
 £’000£’000
Impairment of accrued loan note interest receivable-5
Ongoing trail commission690499
Accounting and administration services662413
Legal fees2824
Other administration expenses531412
Directors’ fees98100
Registrars’ fees11475
Fees payable to the Company’s auditor for audit services4840
 2,1711,568

The ongoing charges ratio of the Company for the year to 31 January 2022 was 2.7% (2021: 2.5%). Total annual running costs are capped at 3% of average net assets (2021 cap: 3.3% of average net assets). This figure excludes any extraordinary items, costs related to mergers, adviser charges, impairment of interest and performance fees.

VAT is included within other administration expenses. No non-audit services were provided by the Company’s auditor.

5. Tax
Accounting Policy

Current tax is recognised for the amount of income tax payable in respect of the taxable profit/(loss) for the current or past reporting periods using the current UK corporation tax rate. The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue return on the “marginal” basis as recommended in the SORP.

Deferred tax is recognised in respect of all timing differences at the reporting date. Timing differences are differences between taxable profits and total comprehensive income as stated in the Financial Statements that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in Financial Statements.

Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Disclosure

 31 January 202231 January 2021
 RevenueCapitalTotalRevenueCapitalTotal
 £’000£’000£’000£’000£’000£’000
(Loss)/profit before tax(1,089)32,54631,457(158)19,92519,767
Tax at 19% (2021: 19%)(207)6,1845,977(30)3,7863,756
Effects of:      
Non-taxable dividend income(55)(16)(71)---
Non-taxable capital gains on valuations and disposals-(8,511)(8,511)-(5,094)(5,094)
Expenses not deductible for tax purposes-1212-55
Excess management expenses on which deferred tax not recognised2622,3312,593301,3031,333
       
Total tax charge------

Approved VCTs are exempt from tax on chargeable gains within the Company. Since the Directors intend that the Company will continue to conduct its affairs so as to maintain its approval as a VCT, no deferred tax has been provided in respect of any capital gains or losses arising on the revaluation or disposal of investments. In March 2021, the UK Government announced that from 1 April 2023, the main rate of Corporation Tax will be increased to 25%. Consequently, deferred tax has been calculated at the year end using a tax rate of 25%. As at 31 January 2022, there is an unrecognised deferred tax asset of £6,622,000 (2021: £2,446,000) in respect of surplus management expenses, based on a prospective tax rate of 25% (2021: 19%). This deferred tax asset could in future be used against taxable profits. Provided the Company continues to maintain its current tax status, it is unlikely that the expenses will be utilised and that the Company will obtain any benefit from this asset.

6. Dividends
Accounting Policy

Dividends payable are recognised as distributions in the Financial Statements when the Company’s liability to make payment has been established. This liability is established on the record date, the date on which those shareholders on the share register are entitled to the dividend. Interim dividends to equity shareholders are declared by the directors.

Disclosure

 31
January
31
January
 20222021
 £’000£’000
Dividends paid on ordinary shares  
Final dividend – 1.3p paid 23 July 2021 (2021: 1.1p)5,7253,370
Interim dividend – 1.3p paid 14 January 2022 (2021: 1.2p)6,6894,101
Special dividend – 3.1p paid 14 January 2022 (2021: N/A)15,952-
 28,3667,471
During the year £6,419,000 (2021: £1,442,000) of dividends were reinvested under DRIS.  
 31
January
31
January
 2022 2021
 £’000£’000
Dividends paid and proposed in respect of the year Ordinary shares  
Interim dividend – 1.3p paid 14 January 2022 (2021: 1.2p)6,6894,101
Special dividend – 3.1p paid 14 January 2022 (2021: N/A)15,952-
Second interim dividend proposed – 1.3p payable 31 May 2022 (2021: Final dividend of 1.3p)6,7715,573
 29,4129,674
The second interim dividend proposed of 1.3p per share for the year ended 31 January 2022 will be paid on 31 May 2022 to shareholders on the register on 22 April 2022.

7. Earnings per share

 31 January 202231 January 2021
 RevenueCapitalTotalRevenueCapitalTotal
 £’000£’000£’000£’000£’000£’000
(Loss)/profit attributable to ordinary shareholders (£’000)(1,089) 32,54631,457(158)19,92519,767
Earnings per ordinary share (p) (0.2) 7.47.2(0.1)6.56.4

The earnings per share is based on 438,445,830 (2021: 308,643,164) shares, being the weighted average number of shares in issue during the year.

There are no potentially dilutive capital instruments in issue and, as such, the basic and diluted earnings per share are identical.

8. Net Asset Value per share

 31
January
31
January
 20222021
 Ordinary sharesOrdinary shares
Net assets (£)262,959,000168,237,000
Shares in issue523,651,962342,057,670
Net asset value per share (p)50.249.2

There are no potentially dilutive capital instruments in issue and, as such, the basic and diluted NAV per share are identical.

9. Related party transactions

Several members of the Octopus investment team hold non-executive directorships as part of their monitoring roles in the Company’s portfolio companies, but they have no controlling interests in those companies. The Manager receives transaction fees and directors’ fees from these portfolio companies. During the year ended 31 January 2022, directors’ fees of £601,000 attributable to the investments of the Company were received by the Manager (2021: £522,000).

10. 2022 financial information

The figures and financial information for the year ended 31 January 2022 are extracted from the Company’s annual financial statements for the period and do not constitute statutory accounts. The Company’s annual financial statements for the year to 31 January 2022 have been audited but have not yet been delivered to the Registrar of Companies. The Auditors’ report on the 2022 annual financial statements was unqualified, did not include a reference to any matter to which the auditors drew attention without qualifying the report, and did not contain any statements under Sections 498(2) or 498(3) of the Companies Act 2006.

11. 2021 financial information

The figures and financial information for the period ended 31 January 2021 are compiled from an extract of the published financial statements for the period and do not constitute statutory accounts. Those financial statements have been delivered to the Registrar of Companies and included the Auditors’ report which was unqualified, did not include a reference to any matter to which the auditors drew attention without qualifying the report, and did not contain any statements under Sections 498(2) or 498(3) of the Companies Act 2006.

12. Annual Report and financial statements
The Annual Report and financial statements will be posted to shareholders in late May and will be available on the Company’s website. The Notice of Annual General Meeting is contained within the Annual Report.

13. General information
Registered in England & Wales. Company No. 05840377
LEI: 213800Y3XEIQ18DP3O53

14. Directors
Murray Steele (Chair), Christopher Powles, Alex Hambro and Claire Finn.

15. Secretary and registered office
Octopus Company Secretarial Services Limited
33 Holborn, London EC1N 2HT


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Financials
Sales 2022 47,1 M 57,9 M 57,9 M
Net income 2022 31,5 M 38,7 M 38,7 M
Net cash 2022 79,8 M 98,0 M 98,0 M
P/E ratio 2022 6,52x
Yield 2022 5,56%
Capitalization 267 M 328 M 328 M
EV / Sales 2021 4,01x
EV / Sales 2022 3,51x
Nbr of Employees 4
Free-Float 99,9%
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Managers and Directors
William Murray Black Steele Independent Non-Executive Chairman
Ian Potter Investment Director
Christopher John Powles Independent Non-Executive Director
Alexander Robert Hambro Independent Non-Executive Director
Claire Elizabeth Catherine Finn Non-Executive Director