Half-year report

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18.09.2020, 19:05  |  110   |   |   

CORRECTION to the RNS released on 18 September 2020, 10:05 a.m. : The interim dividend payment date stated in the Chairman's statement was incorrect, it should have been "will be paid to shareholders on 15 January 2021" and not the incorrect date of 7 January 2021. The rest of the announcement remains unchanged as corrected below.

Octopus Apollo VCT Plc  
Half-Yearly Results
18 September 2020

Octopus Apollo VCT plc, managed by Octopus Investments Limited, today announces its unaudited half-yearly results for the six months ended 31 July 2020.

These results were approved by the Board of Directors on 18 September 2020.

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

Financial Headlines

  Six months to
31 July 2020
Six months to
31 July 2019
Year to
31 January 2020
Net assets (£’000s) 141,330 122,093 132,373
Return on ordinary activities after tax (£’000s) 1,891 1,433 4,144
Net asset value per share (‘NAV’) 46.1 46.2 45.7
Cumulative dividends paid since launch (p per share) 74.1 72.6 74.1
NAV plus cumulative dividends paid (p) 120.2 118.8 119.8
Total return %* 0.9 1.3 3.4
Ordinary dividend paid in period (p) ** - 1.5 3.0
Ordinary dividend declared in the period (p) *** 1.2 1.5 1.1

*Total return is calculated as (movement in NAV + dividends paid in the period) divided by the NAV at the beginning of the period.

**A dividend of 1.1p was paid on 7 September 2020. See note 8 for information on Post Balance Sheet Events.

***The interim dividend will be paid on 15 January 2021 to shareholders on the register at 29 December 2020.

Chairman’s Statement

I am pleased to present the half-yearly report of Octopus Apollo VCT for the six months ended 31 July 2020.

The Total Return increased by 0.9% during the six months. In keeping with the regular dividend policy, the Board has declared an interim dividend of 1.2p which will be paid to shareholders on 15 January 2021.

The six months to 31 July 2020 have been a volatile and uncertain period for the economy and for businesses operating within this environment. During this period, the Board has kept the impact of the pandemic on the Company closely under review and has incorporated the effects and response to coronavirus as part of our regular Board agenda. On 2 April 2020, due to the coronavirus pandemic, we reviewed the portfolio since the year ended 31 January 2020 and this led to us announce a reduction in the NAV per share from 45.7p to 42.9p. Since then, the coronavirus pandemic along with the lockdown continued to impose great uncertainty for UK companies. Although there have been a range of impacts on the portfolio companies over the last months, the overall portfolio has shown great resilience as a result of the low exposure to sectors that have been severely impacted (e.g. leisure and travel) and a strong focus on technology companies.

In the six month period, the Company invested £2.7 million in follow-on funding rounds into two existing investments, with one further investment made after the end of the period which will be reflected in the full year report. The overall performance in the period ultimately delivered modest growth, demonstrating the robustness of the portfolio against a backdrop of unprecedented uncertainty. Although the climate remains uncertain, I remain optimistic for the future given the composition of the portfolio and recent performance.

Murray Steele
Chairman
18 September 2020
Interim Management Report

Performance

In the six months under review the NAV Total Return has increased by 0.9%. This performance is mainly attributable to positive fair value movements in particular in the newer growth capital part of the portfolio, offset by adverse movements in the fair value of a number of legacy assets in the portfolio, in particular energy-generating assets.

Portfolio Activity
In the period under review the value of the portfolio has increased by £3.3 million, excluding additions. This increase is mainly driven by Veeqo Limited (£2.2 million valuation increase, N2JB Limited (trading as Natterbox) (£2.2 million valuation increase) and Fiscaltec Group Limited (£1.4 million valuation increase) partially offset by valuation decreases of £2.8 million on the Reserve Power portfolio (Kabardin Limited, Valloire Limited and Red Poll Power Limited) and £3.5 million for Rotolight Group Limited. There were other smaller valuation adjustments across the portfolio which in aggregate contributed to an overall increase in the value of the portfolio.

During the period £2.7 million was invested into the following follow-on investments:

•    N2JB Limited (trading as Natterbox) £2.5 million – a London-based provider of business to business cloud telephony services that are uniquely integrated into Customer Resource Management (“CRM”) software platforms; and

•    Trafi Limited £0.2 million – a provider of Mobility-as-a-Service to residents acting as an alternative to private hire vehicles.

Transactions with Manager

Details of amounts paid to the Manager are disclosed in note 7 to the financial statements.

Share Buybacks

The Company has continued to buy back shares as required. In the six months to July 2020, the Company bought back 4,637,730 Ordinary shares for total consideration of £1.9 million.

Dividend and Dividend Policy

It is the 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.

The Board has declared an interim dividend of 1.2p per Ordinary share in respect of the period ended 31 July 2020. The dividend will be payable on 15 January 2021 to Ordinary shareholders on the register at 29 December 2020.

VCT Qualifying Status

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

A key requirement is to ensure that at least 80% of the assets of the fund are in VCT qualifying investments. As at 31 July 2020, 90.3% of the portfolio, as measured by HMRC rules, was invested in VCT qualifying investments.

The Finance Act 2018 made a number of changes to VCT rules on qualifying holdings, with the main change being VCTs are now required to hold at least 80% of its investments in VCT qualifying holdings, up from 70%. This applies to accounting periods starting on or after 6 April 2019, so for Apollo these rules apply from 1st February 2020.

Principal Risks and Uncertainties

The principal risks and uncertainties are described in detail within the strategic report in the Company’s annual report for the year ended 31 January 2020.

Summary and Future Prospects

The political and economic environment continues to be very uncertain in the UK primarily as a result of the ongoing coronavirus pandemic. To date the impact on the portfolio has been limited as a result of the Investment Manager’s defensive approach to structuring investments and the focus on technology investments which should be more resilient to the lockdown measures which have been imposed. The investment team remains highly vigilant in carefully monitoring the situation and any potential impact, directly or indirectly, on the portfolio to ensure the safety and robustness of the underlying assets and, indeed, their employees. 

The sub-portfolio of investments completed after the significant change in VCT rules in 2017 is performing strongly and now represents the largest component and driver of performance in the Company, at 52.8% of the total invested portfolio, which provides further optimism for the future. The investment team has primarily made follow-on investments during this period, but we have developed a strong pipeline of new VCT-qualifying investment opportunities that we anticipate being able to complete in the coming months.

Richard Court
Octopus Investments Limited
18 September 2020

Investment Portfolio

Top 10 Investments Sector Investment cost as at 31 July 2020 £’000 Total movement in fair value to 31 July 2020
£’000
Fair value as at 31 July 2020 £’000 Movement in fair value in period
£’000
% equity held by Apollo VCT % equity held by all funds managed by Octopus
Fixed asset investments              
Natterbox (N2JB Limited) Technology 10,490 6,451 16,941 2,155 9.0 9.0
Healthcare and Services Technology Limited Healthcare 7,186 2,355 9,541 1,045 10.0 10.0
Ubisecure Holdings Limited Technology 4,950 3,231 8,181 1,055 30.0 30.0
Simply Cook Limited Consumer Products 6,750 767 7,517 767 23.5 23.5
Countrywide Healthcare Services Holdings Limited Healthcare 2,675 3,871 6,546 1,189 20.7 20.7
Anglo European Group Limited Manufacturing 5,000 1,364 6,364 (588) 26.7 26.7
Veeqo Limited Technology 3,300 2,576 5,876 2,181 19.7 19.7
Fuse Limited Technology 5,000 387 5,387 219 0.0 0.0
One team Logic Limited Technology 3,200 1,314 4,514 1,136 15.5 15.5
Fiscaltec Limited Technology 3,000 1,500 4,500 1,404 13.5 13.5
Other* Various 52,623 (17,500) 35,123 (7,256)    
Total investments   104,174 6,316 110,490 3,307    
Current asset investments       25,659      
Cash at bank       3,656      
Debtors less creditors       1,525      
Total net assets       141,330      

* Comprises 40 other investments: Acquire Your Business Limited, Angelico Solar Limited, Artesian Solutions Limited, Augean plc, Barrecore Limited, Behaviometrics AB, Bramante Solar Limited, British Country Inns plc, Canaletto Solar Limited, Cello Group plc, CurrencyFair Limited, Dyscova Limited, Ecrebo Limited, EKF Diagnostics Holdings plc, Ergomed plc, Eve Sleep plc, Hasgrove Limited, Kabardin Limited, Leonardo Solar Limited, Luther Pendragon Limited, Mi-Pay Group plc, Modigliani Solar Limited, Nektan plc, Origami Energy Limited, Oxifree Group Holding Limited, Pirlo Solar Limited, Red Poll Power Limited, Renalytix plc, Rotolight Group Limited, Secret Escapes Limited, Segura Systems Limited, Sourceable Limited (Swoon Editions), Superior Heat Limited, Tintoretto Solar Limited, Tiziano Solar Limited, Trafi Limited, Triumph Holdings Limited, Valloire Power Limited, Vertu Motors plc, Winnipeg Heat Limited.

Directors’ Responsibilities Statement

We confirm that to the best of our knowledge:

•    the half-yearly financial statements have been prepared in accordance with the Financial Reporting Standard 104 “Interim Financial Reporting” issued by the Financial Reporting Council;

•    the half-yearly financial statements give a true and fair view of the assets, liabilities, financial position, and profit or loss of the Company;

•    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
18 September 2020

Income Statement

  Unaudited Unaudited Audited
  Six months to 31 July 2020 Six months to 31 July 2019 Year to 31 January 2020
  Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Realised gain on disposal of fixed asset investments 6 6 4,872 4,872
Realised gain on disposal of current asset investments _ 46 46 _ 46 46
Change in fair value of fixed asset investments 3,306 3,306 1,849 1,849 1,641 1,641
Change in fair value of current asset investments 9 9 179 179 261 261
Investment income 1,580 1,580 1,573 1,573 3,309 3,309
Investment management fees (see note 7) (313) (1,307) (1,620) (266) (1,932) (2,198) (559) (3,411) (3,970)
Other expenses (1,384) (1,384) (22) (22) (2,015) (2,015)
Profit before tax (117) 2,008 1,891 1,285 148 1,433 735 3,409 4,144
Tax
Profit after tax (117) 2,008 1,891 1,285 148 1,433 735 3,409 4,144
Earnings per share – basic and diluted  0.0p 0.6p 0.6p 0.5p 0.1p 0.6p 0.3p 1.3p 1.6p

•    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 Company has no recognised gains or losses other than those disclosed in the income statement.

•    The accompanying notes are an integral part of the half-yearly report.

Balance Sheet

  Unaudited
As at 31 July 2020
Unaudited
As at 31 July 2019
Audited
As at 31 January 2020
  £’000 £’000 £’000 £’000 £’000 £’000
Fixed asset investments   110,490   93,372   104,534
Current assets:            
Investments 25,659   13,567   13,649  
Debtors 2,881   2,405   1,982  
Cash at bank 3,656   20,288   16,637  
  32,196   32,260   32,268  
Creditors: amounts falling due within one year (1,356)   (7,539)   (4,429)  
Net current assets   30,840   28,721   27,839
Net assets   141,330   122,093   132,373
             
Share capital   30,637   26,430   28,994
Share premium   77,822   59,620   70,947
Special distributable reserve   15,060   23,142   16,975
Capital redemption reserve   5,509   4,465   5,046
Capital reserve realised   4,407   4,691   5,714
Capital reserve unrealised   8,012   2,460   4,697
Revenue reserve   (117)   1,285  
Total equity shareholders’ funds   141,330   122,093   132,373
Net asset value per share   46.1p   46.2p   45.7p

The statements were approved by the Directors and authorised for issue on 18 September 2020 and are signed on their behalf by:

Murray Steele
Chairman
Company Number: 05840377

Statement of Changes in Equity

  Share capital
£’000
Share premium
£’000
Special distributable reserves
£’000
Capital redemption reserve
£’000
Capital reserve realised
£’000
Capital reserve unrealised
£’000
Revenue reserve
£’000
Total
£’000
 
As at 1 February 2020 28,994 70,947 16,975 5,046 5,714 4,697 132,373  
Total comprehensive income for the period: (1,307) 3,315 (117) 1,891  
Contributions by and distributions to owners:                  
Repurchase and cancellation of own shares (464) (1,915) 463 (1,916)  
Issue of shares 2,107 6,875 8,982  
Dividends paid  
Total contributions by and distributions to owners 1,643 6,875 (1,915) 463 7,066  
Other movements:                  
Prior period holding gains/(losses) now realised -  
Total other movements -  
As at 31 July 2020 30,637 77,822 15,060 5,509 4,407 8,012 (117) 141,330  
                 
  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 2019 25,250 53,256 29,602 3,914 7,698 (696) 119,024  
Total comprehensive income for the period: (1,879) 2,028 1,285 1,878  
Contributions by and distributions to owners:                  
Repurchase and cancellation of own shares (551) (2,478) 551 (2,478)  
Issue of shares 1,731 6,364 8,095  
Dividends paid (3,982) (3,982)  
Total contributions by and distributions to owners 1,180 6,364 (6,460) 551 1,635  
Other movements:                  
Prior period holding losses now realised (1,128) 1,128  
Total other movements (1,128) 1,128 -  
As at 31 July 2019 26,430 59,620 23,142 4,465 4,691 2,460 1,285 122,093  


  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 2019 25,250 53,256 29,602 3,914 7,698 (696) 119,024
Total comprehensive income for the year: 1,507 1,902 735 4,144
Contributions by and distributions to owners:                
Repurchase and cancellation of own shares (1,132)  (5,017) 1,132 (5,017)
Issue of shares 4,876 18,376 23,252
Share issue cost (685) (685)
Dividends paid (7,610) (735) (8,345)
Total contributions by and distributions to owners 3,744 17,691 (12,627) 1,132 (735) 9,205
Other movements:                
Prior year holding losses now realised (3,491) 3,491
Total other movements (3,491) 3,491
As at 31 January 2020 28,994 70,947 16,975 5,046 5,714 4,697 132,373

Cash Flow Statement

  Unaudited
Six months to
31 July 2020

£’000
Unaudited
Six months to
31 July 2019
£’000
Audited
Year to
31 January 2020
£’000
Cash flows from operating activities:      
Profit after tax 1,891 1,433 4,144
Adjustments for:      
(Increase)/decrease in debtors (1,001) 176 598
(Decrease)/increase in creditors (2,973) 1,918 2,790
Gain on disposal of fixed assets - (6) (4,872)
Gain on revaluation of fixed asset investments (3,306) (1,849) (1,641)
Gain on disposal of current assets - (46) (46)
Gain on revaluation of current asset investments (9) (179) (261)
Cash from operations (5,398) 1,447 712
Cash flows from investing activities:      
Purchase of fixed asset investments (2,650) (11,477) (29,277)
Purchase of current asset investments (12,000)
Disposal of current asset investments - 5,000 5,000
Disposal of fixed asset investments - 6,498 17,794
Net cash flows from investing activities (14,650) 21 (6,483)
      (6,483)
Cash flows from financing activities:      
Purchase of own shares (1,915) (2,478) (5,017)
Share issues 8,982 8,095 21,042
Dividends paid - - (6,820)
Net cash flows from financing activities 7,067 5,617 9,205
(Decrease)/ increase in cash and cash equivalents (12,981) 7,085 3,434
Opening cash and cash equivalents 16,637 13,203 13,203
      13,203
Closing cash and cash equivalents 3,656 20,288 16,637

Notes to the Half-Yearly Report
1.   Basis of preparation

The unaudited half-yearly report which cover the six months to 31 July 2020 has been prepared in accordance with the Financial Reporting Council’s (FRC) Financial Reporting Standard 104 “Interim Financial Reporting” (March 2018) and the Statement of Recommended Practice for Investment Companies, re-issued by the Association of Investment Companies in February 2018.

The Directors consider it appropriate to adopt the going concern basis of accounting. The Directors have not identified any material uncertainties to the company’s ability to continue to adopt the going concern basis over a period of at least twelve months from the date of approval of the financial statements. In reaching this conclusion the Directors have had regard to the potential impact on the economy and the Company of the current Coronavirus pandemic.

The principal accounting policies have remained unchanged from those set out in the Company’s 2020 Annual Report and Accounts.

2.   Publication of non-statutory accounts

The unaudited half-yearly report for the six months ended 31 July 2020 does not constitute Statutory Accounts within the meaning of s.415 of the Companies Act 2006. The comparative figures for the year ended 31 January 2020 have been extracted from the audited financial statements for that year, which have been delivered to the Registrar of Companies. The independent auditor’s report on those financial statements, in accordance with chapter 3 of part 16 of the Companies Act 2006, was unqualified. This half-yearly report has not been reviewed by the Company’s auditor.

3.   Earnings per share

The earnings per share is based on 300,616,820 shares, being the weighted average number of shares in issue during the period (31 January 2020: 264,800,099; 31 July 2019: 252,299,145).

There are no potentially dilutive capital instruments in issue and, therefore, no diluted earnings per share figures are relevant. The basic and diluted earnings per share are therefore identical.

4.   Net asset value per share

  31 July 2020 31 July 2019 31 January 2020
Net assets (£) 141,330,000 122,093,000 132,373,000
Shares in Issue 306,367,852 264,300,126 289,936,208
Net asset value per share (p) 46.1 46.2 45.7

5.   Dividends

The interim dividend of 1.2p per share for the six months ending 31 July 2020 will be paid on 15 January 2021, to those shareholders on the register on 29 December 2020.

6. Principal risks and uncertainties

The principal risks and uncertainties faced by the Company are described in detail within the strategic report in the Company’s annual report for the year ended 31 January 2020.

The principal risks include loss of VCT status, investment risk, valuation risk, financial risk, economic risk, internal control risk, regulatory risk, cash flow risk, market risk liquidity risk and price risk. The Board has also considered emerging risks, including the Coronavirus pandemic, which the Board seeks to mitigate by setting policy and reviewing performance.

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 annum of the net assets of the Company for the investment management services.

The Company has incurred management fees of £1,620,000 during the period to 31 July 2020 (31 July 2019: £2,198,000; 31 January 2020: £3,970,000).

During the period the Company has incurred performance fees of £368,000 (31 July 2019: £211,000, an adjustment of £870,000 was also made for historic performance fees; 31 January 2020: £1,740,000) which are included in the above management fees.

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

The Company receives certain reductions in the management fee, including for investments in other Octopus managed funds, to ensure the Company is not double charged on these products. These rebates amounted to £57,000 for the current period (31 July 2019: £111,000; 31 January 2020 £236,000).

8. Post balance sheet events

A dividend of 1.1p was paid on 7 September 2020 to all ordinary shareholders who were on register on 14 August 2020. This caused NAV to decrease from 46.1p to 45.0p.

On 7 September, 1,400,927 Ordinary Shares were issued at a price of 45.0p per share to shareholders who elected to receive Ordinary Shares under the Dividend Reinvestment Scheme as an alternative to the 1.1p dividend.

The Company invested a total of £0.7 million into one follow-on investment. The Company also received £0.6 million for the disposal of one investment.

9. Additional Information

An online version of this report will be available to view on the Investment Manager’s website at www.octopusinvestments.com. Hard copy versions are available on request from the registered office of the Company at 33 Holborn, London, EC1N 2HT.


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