TIDMOAP3
Octopus Apollo VCT plc
Final Results
11 April 2017
Octopus Apollo VCT plc, managed by Octopus Investments Limited, today
announces the final results for the year ended 31 January 2017.
These results were approved by the Board of Directors on 11 April 2017.
You may, in due course, view the Annual Report in full at
www.octopusinvestments.com. All other statutory information can also be
found there.
Financial Summary
Year to 31 January 2017 Year to 31 January 2016
Net assets (GBP'000)* 141,799 127,741
Return on ordinary
activities after tax
(GBP'000)* 5,172 2,831
Net asset value per share 63.2p 82.3p
(NAV) **
Cumulative dividends paid 54.0p 32.5p
since launch**
NAV plus cumulative 117.2p 114.8p
dividends paid**
Proposed final dividend - 1.7p 2.5p
Ordinary share
* Comparative figures include the combined Ordinary and D Ordinary share
classes
** Comparative figures are for the Ordinary Share class only
Note that all comparative figures relate only to the Company, prior to
the merger with Octopus Eclipse VCT plc, and are therefore not a true
comparison to the period under review.
The final proposed dividend of 1.7p per Ordinary share for the year
ended 31 January 2017 will, subject to shareholder approval at the
Annual General Meeting, be paid on 28 July 2017 to all Ordinary
shareholders on the register on 30 June 2017.
Chairman's Statement
Introduction
I am pleased to present the Annual Report of Apollo for the year ended
31 January 2017 and I should like to welcome all new shareholders
following the recent fund raising and acquisition of the assets and
liabilities of Octopus Eclipse VCT plc ("Eclipse").
Performance
On a total return basis, after adding back the 5p of ordinary dividends
paid in the year as well as the 16.5p special dividend paid, the NAV has
risen 2.9%. The NAV plus cumulative dividends has risen from 114.8p per
share as at 31 January 2016 to 117.2p per share as at 31 January 2017.
However as the special dividend was partly funded by the repayment of
loans to companies, the NAV of the Ordinary share class has fallen from
82.3p per share as at 31 January 2016 to 63.2p per share as at 31
January 2017.
Fund Raising
During the year GBP31.4 million was raised under the Offer for
Subscription which was launched in November 2015, to raise up to GBP30
million with an overallotment facility of GBP10 million. This offer
closed in September 2016, fully subscribed having raised approximately
GBP40.9 million.
A new Offer for Subscription was launched in November 2016 to raise up
to GBP20 million. Up to 31 January 2017, GBP4.5 million had been raised
under the Offer. The Offer was fully subscribed and closed in March
2017, eight months ahead of schedule.
Further details can be found in the Directors' report and in note 16 of
the full Annual Report and Accounts.
Conversion of D Ordinary Shares and D Ordinary Share Dividend
In August 2016, the Company completed the Octopus VCT 2 plc ("OVCT 2")
merger by converting the D Ordinary shares into Ordinary shares and by
paying a dividend of 92.3p to those D Ordinary shareholders who elected
to exit. Those shareholders who converted their D Ordinary shares did so
at a conversion ratio of 1.11205, resulting in a total of 3,850,093
Ordinary shares being issued. 15,620,519 D Ordinary shareholders elected
to receive the D share dividend, resulting in a total cash dividend of
GBP14.4 million.
Merger with Eclipse
On 19 December 2016 the Company acquired the assets and liabilities of
Eclipse, increasing the net assets of the Company by GBP21.6 million.
Eclipse was established in 2004 as an evergreen VCT seeking to deliver
absolute returns on its investments primarily in unquoted and AIM listed
companies.
Board
Following the acquisition of Eclipse's assets and liabilities ("the
transaction") I am delighted to welcome Alex Hambro, the former Chairman
of Eclipse, to the Board. Alex brings with him a wealth of knowledge of
VCT investing and smaller companies in general. I am also pleased that
Christopher Powles and James Otter have continued as Directors of the
Company, retaining their considerable experience. I should also like to
take this opportunity to thank Ian Pearson, who resigned following the
transaction, for his contribution to the Company. Resolutions to appoint
Alex Hambro and to re-elect James Otter will be proposed at the
forthcoming AGM.
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.
Given the performance of the Ordinary share portfolio your Board has
proposed a final dividend of 1.7p per Ordinary share in respect of the
year ended 31 January 2017. This is in addition to the 2.5p interim
dividend and the 16.5p special dividend, both paid in December 2016, and
will bring the total dividends declared on the Ordinary share class to
20.7p for the year. Excluding the special dividend, this represents a
similar return of capital in previous years of 5.1%. The dividend will
be payable on 28 July 2017 to Ordinary shareholders on the register at
30 June 2017.
Dividend Reinvestment Scheme (DRIS)
In common with a number of VCTs, the Company has a dividend reinvestment
scheme which was introduced in November 2014. This is an attractive
scheme for investors who do not need income, but 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 2017 8,288,612 shares were issued under
the DRIS, returning GBP5.2 million to the Company.
Share Buybacks
Your Company has continued to buy back shares as required. Subject to
shareholder approval of resolution 10 at the forthcoming annual general
meeting this facility will remain in place to provide liquidity to
investors who may wish to sell their shares. Details of the share
buybacks undertaken during the year can be found in the Directors'
Report in the full Annual Report and Accounts.
Investment Portfolio
The transaction with Eclipse on 19 December 2016 resulted in the Company
acquiring its GBP21.6 million investment portfolio which had been
invested under a similar mandate to Apollo's current investment
strategy.
During the 12 months to 31 January 2017, Apollo made the following
disposals:
Gain/(loss) on Sale
Initital Cost GBP Sale Proceeds GBP GBP
CSL Dualcom 10,806,000 12,277,000 1,471,000
SCM World* 5,000,000 5,722,000 722,000
Project Tristar 798,000 2,191,000 1,393,000
3AM 2,000,000 1,742,000 (258,000)
Atlantic Screen
International 1,877,000 1,500,000 (377,000)
Callstream Group** 472,000 938,000 466,000
5AM 850,000 622,000 (228,000)
21,803,000 24,992,000 3,189,000
*SCM world proceeds and gain on sale have increased since interim report
by GBP297,000, relating to additional proceeds due under an earn-out
arrangement that was agreed when the business was sold.
**Callstream proceeds have decreased since the interim period due to a
reduction in the expected deferred consideration.
SCM World was acquired by Gartner Inc, a US quoted company with
strategic overlap in the supply chain advisory sector. The majority
shareholders of the business took the decision to sell, based on the
valuation offered. The overall annualised return to Apollo, including
loan interest and dividends was 22%. The other disposals related to
investments that had been in the portfolio for several years. In the
case of Callstream, Tristar and CSL Dualcom the annualised returns
received over the lifetime of the investments were 19%, 17% and 12%
respectively.
In March 2016 the Company invested GBP9 million into eight companies
seeking to develop solar farms in Sardinia. The transaction is
attractive to Apollo given the element of contracted revenue streams and
the underlying demand of the macroeconomic environment. Nine sites have
been identified (one company will own two sites) and detailed due
diligence has been conducted on the first two sites. No material
concerns arose and construction work is due to start in April with
revenue generation expected at the end of 2017.
In July 2016, Apollo completed its GBP5 million investment in ISG
Technology, a specialist service provider to multi-site organisations
such as supermarkets, which installs and maintains WiFi and related
connectivity systems. This investment was made through the investment
company Coupra Limited.
Another investment completed in July was into Spectra Care Group, a
manufacturer and distributor of medical equipment for elderly or obese
patients being cared for in their homes. Apollo invested GBP2.5 million
alongside GBP2.2 million from Eclipse and so, following the VCT merger,
Apollo now has a GBP4.7 million investment in the business. Both Apollo
and Eclipse made these investments through the investment company
Dyscova Limited.
More recently, Apollo has also made a number of small follow-on
investments into assets previously held as part of the Eclipse
portfolio. Between the merger on 19 December 2016 and 31 January 2017,
Apollo invested GBP360,000 into Artesian, CurrencyFair, MIRACL and
Ecrebo.
Investment Strategy
As set out in the prospectus, the aim of the Company is to make
investments to achieve an appropriate balance of income and capital
growth, having regard for venture capital legislation. To date the
Manager has been successful in achieving this aim, as evidenced by the
positive return on ordinary activities.
Typically the structure of the investments is weighted more heavily
towards loan based instruments as opposed to equity. Such investments
provide fixed returns and payments are generally ranked above most other
creditors, allowing for future visibility and security. This strategy
also reduces the downward risk that is an intrinsic element of an equity
investment.
VCT Qualifying Status
PricewaterhouseCoopers LLP provides the Board and 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 laid down
by HMRC for maintaining approval as a VCT.
A key requirement is now to maintain the 70% qualifying investment
level. As at 31 January 2017, over 85% of the portfolio, as measured by
HMRC rules, was invested in VCT qualifying investments. Further
information on VCT regulation is detailed in the Directors' Report
within the full Annual Report and Accounts.
Annual General Meeting
The Company's Annual General Meeting will take place on 12 July 2017 at
4.00 p.m. I look forward to welcoming you to the meeting which will be
held at the offices of Octopus Investments Limited at 33 Holborn, London,
EC1N 2HT. Directions to their office can be found by visiting their
website at: www.octopusinvestments.com.
Electronic Communications
Based on feedback from shareholders, and in order to reduce the cost of
printing and the consequential impact on the environment, we now offer
shareholders the opportunity to forgo their printed report and account
documents in favour of receiving electronic or mail notification with
details of how to view the documents online. If you would like to change
the format in which you receive this report, please contact Octopus or
Computershare using the contact details provided in the annual report
and accounts.
Outlook and future prospects
Since the Company's launch the returns to shareholders have shown low
volatility year on year, which is testament to the prudent investment
approach adopted by the Manager. The portfolio has generally been
performing well and your Board and Manager believe we can continue to
find suitable investments to support the Company's mandate
Murray Steele
Chairman
11 April 2017
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. We currently manage six VCTs, including
this one, and manage over GBP600 million in the VCT sector.
Investment Policy
The majority of companies in which Apollo invests operate in sectors
where there is a high degree of predictability. Ideally, we seek
companies that have contractual revenues from financially sound
customers and that will provide an opportunity for the Company to
realise its investment within three to five years.
Performance
The Company made a total return per Ordinary share of 2.9% between 31
January 2016 and 31 January 2017. Whilst the NAV per Ordinary share
decreased from 82.3p to 63.2p, 21.5p of dividends were paid over the
period, bringing cumulative dividends paid to date to 54p and the total
value (NAV plus cumulative dividends) to 117.2p per share.
Portfolio Review
The fund is comprised of 59 portfolio companies with a total valuation
of GBP112.9 million. The GBP21.6 million portfolio of assets of Eclipse
VCT acquired in December 2016 was made up 32 of investments in unquoted
and AIM listed companies. This includes 10 quoted AIM investments
representing c. 22% of NAV, 14 Titan VCT coinvestments (31% of NAV),
with the balance (46% of NAV) being more typical Eclipse/Apollo
investments.
In the year under review the Company invested GBP9.0m into eight
companies alongside GBP29.6 million of EIS funding to provide
construction finance for solar power generation activities in Sardinia.
It also used the investment company Dyscova Limited to invest GBP4.7
million in Spectra Care Group, a manufacturer and distributor of medical
equipment for elderly or obese patients, and used the investment company
Coupra Limited to invest GBP5 million in ISG Technology Limited, a
specialist service provider to large organisations such as supermarkets,
which installs and maintains Wi-Fi and related connectivity systems.
There were a number of exits of portfolio companies during the year,
including the last of the longstanding investments in media assets.
Other notable disposals were SCM World, Callstream, Tristar and CSL
Dualcom. The annualised returns received over the lifetime of these
investments were 22%, 19%, 17% and 12% respectively and, in the case of
SCM World, further proceeds are expected during 2017 in relation to an
earn-out arrangement agreed with the buyer of the business. To date,
three of the eight Investment Companies have been invested: Aquaso (TSC),
Coupra (ISG) and Dyscova (Spectra). Three of the remaining five
companies (Byena, Emercor and Finnavor) were wound up in December 2016,
returning GBP14.9 million in cash to Apollo.
Shortly after 31 January 2017, the Company invested GBP33 million in the
Octopus Portfolio Manager ("OPM") funds, GBP4.5 million from each of the
two remaining investment companies, Galvara Limited and Haravar Limited,
and GBP24 million from Apollo's cash reserves, in order to keep the
money in liquid investments rather than cash until new deals are
completed. OPM offers 10 different investment categories (1-10), where
at the lower-risk end of the scale, investment is in bonds, and at the
high-risk end in equities. An investment of GBP9 million was made in
OPM1, GBP10 million in OPM2 and GBP14 million in OPM3. The latest VCT
rules permit cash to be invested for liquidity management purposes so
long as it can be accessed within seven days, which is the case with the
OPM funds. Octopus has waived its management fees in relation to OPM to
ensure it is not taking fees twice on the same funds under management.
The Company's investment portfolio continues to hold appropriate
investments to meet all the requirements for it to fully qualify as a
VCT. The Manager now has the opportunity to make a number of further
investments with the aim of accelerating the NAV of the Company over the
foreseeable future.
Outlook and Future Prospects
Following another strong year of exits in 2016 we remain optimistic
about the outlook for the portfolio and future investment prospects. The
Company has a large and diverse portfolio, has weathered the difficult
economic conditions of the past few years and has continued to grow.
The investment team has been increasingly active in the search for new
opportunities and has been focused on ensuring that its nationwide
network of contacts understands the impact on strategy of the VCT
investment rule changes introduced in November 2015. We are now seeing
the pipeline of potential deals steadily increase and we expect to
complete some exciting new investments during 2017. The recent
investments and exits during the last twelve months have further raised
the profile of the investment team, resulting in more inbound
opportunities.
The strong take up in the fundraising and the recent exits provide
significant financial capacity for new investments and, as one of the
largest VCTs in the country, Apollo has the ability to pursue larger
deals than most VCTs and provide significant follow-on investment, which
is a strong competitive advantage.
If you have any questions on any aspect of your investment, please call
one of the team on 0800 316 2295.
Grant Paul-Florence
Octopus Investments Limited
11 April 2017
Directors' Responsibilities Statement
The Directors are responsible for preparing the Strategic Report,
Directors' Report, Directors' Remuneration Report and the financial
statements in accordance with applicable law and regulations.
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 judgments 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.
The Directors confirm that:
-- so far as each Director is aware, there is no relevant audit information
of which the Company's auditor is unaware; and
-- the Directors have taken all the steps that they ought to have taken as
Directors in order to make themselves aware of any relevant audit
information and to establish that the auditors are 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.
To the best of our knowledge:
-- the financial statements, prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable laws), including Financial Reporting Standard
102 - "The Financial Reporting Standard applicable in the UK and Republic
of Ireland", give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
-- the annual report, including the Strategic Report, includes 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.
On behalf of the Board
Murray Steele
Income Statement
Year ended Year ended
31 January 2017 31 January 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Realised gain on
disposal of fixed asset
investments - 2,658 2,658 - 1,112 1,112
Change in fair value of
fixed asset
investments - 4,525 4,525 - 1,776 1,776
Investment income 4,128 - 4,128 4,524 - 4,524
Investment management
fees (647) (2,844) (3,491) (595) (2,182) (2,777)
Other expenses (2,654) - (2,654) (1,625) - (1,625)
FX translation - 6 6 - - -
Return on ordinary
activities before tax 827 4,345 5,172 2,304 706 3,010
Taxation on return on
ordinary activities - - - (615) 436 (179)
Return on ordinary
activities after tax 827 4,345 5,172 1,689 1,142 2,831
Earnings per share - 0.5p 2.5p 3.0p 1.2p 0.8p 2.0p
basic and diluted
-- 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
Note that all comparative figures relate only to the Company, prior to
the merger with Octopus Eclipse VCT plc, and are therefore not a true
comparison to the period under review.
Comparative numbers reflect the 2016 audited statutory income statement
which combined the Ordinary and Apollo D Ordinary share income
statements.
The Company has no other comprehensive income for the period.
Balance Sheet
As at As at
31 January 2017 31 January 2016
GBP'000 GBP'000 GBP'000 GBP'000
Fixed asset investments* 112,884 116,628
Current assets:
Debtors 4,077 5,305
Cash at bank 29,229 10,275
33,306 15,580
Creditors: amounts falling due within
one year (4,391) (4,467)
Net current assets 28,915 11,113
Net Assets 141,799 127,741
Share capital 22,603 13,896
Share premium 34,231 48,893
Special distributable reserve 76,144 60,748
Capital redemption reserve 2,832 2,557
Capital reserve realised (1,537) (1,866)
Capital reserve unrealised 7,520 3,510
Revenue reserve - 3
FX Translation Reserve 6 -
Total shareholders' funds 141,799 127,741
Net asset value per share - basic and 63.2p 82.3p
diluted
*Held at fair value through profit or loss
Note that all comparative figures relate only to the Company, prior to
the merger with Octopus Eclipse VCT plc, and are therefore not a true
comparison to the period under review.
Comparative numbers reflect the 2016 audited statutory balance sheet
which combined the Ordinary and Apollo D balance sheets
The statements were approved by the Directors and authorised for issue
on 11 April 2017 and are signed on their behalf by:
Murray Steele
Chairman
Company number: 05840377
Cash Flow Statement
Year to Year to
31 January 2017 31 January 2016
GBP'000 GBP'000
Cash from operating activities
Return on ordinary activities after tax 5,172 2,831
Adjustments for:
Decrease/(increase) in debtors 1,228 (2,423)
(Decrease)/increase in creditors (76) 102
Debtors acquired in the transaction 848 382
Creditors acquired in the transaction (157) (123)
Gain on disposal of fixed assets (2,658) (1,112)
Gain on valuation of fixed asset
investments (4,525) (1,776)
Cash from operations (168) (2,119)
Cash flows from investing activities
Purchase of fixed asset investments (9,269) (53,650)
Sale of fixed asset investments 40,531 57,271
Cash acquired in the transaction 622 303
Dividend paid to exiting D Shareholders (14,418) -
Net cash flows from investing activities 17,466 3,924
Cash flows from financing activities
Purchase of own shares (1,955) (3,597)
Share issues 41,152 30,670
Dividends paid (37,541) (39,867)
Net cash flows from financing activities 1,656 (12,794)
Increase/(decrease) in cash and cash
equivalents 18,954 (10,989)
Opening cash and cash equivalents 10,275 21,264
Closing cash and cash equivalents 29,229 10,275
Cash and cash equivalents comprise
Cash at bank 29,229 10,275
29,229 10,275
Note that all comparative figures relate only to the Company, prior to
the merger with Octopus Eclipse VCT plc, and are therefore not a true
comparison to the period under review.
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Octopus Apollo VCT plc via Globenewswire
(END) Dow Jones Newswires
April 11, 2017 13:14 ET (17:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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