Octopus Apollo VCT plc : Half-yearly report

Octopus Apollo VCT plc

Half-Yearly Results

 

29 September 2014

Octopus Apollo VCT plc, managed by Octopus Investments Limited, today announces its half-yearly results for the six months ended 31 July 2014.

The results were approved by the Board of Directors on 29 September 2014.

Financial Summary

	Six months to 31 July 2014	Six months to 31 July 2013	Year to 31 January 2014
Net assets (£'000s)	66,801	64,867	63,905
Return on ordinary activities after tax (£'000s)	2,003	330	1,751
Net asset value per share ("NAV")	86.9p	87.3p	86.8p
Cumulative dividends declared since launch	25.0p	20.0p	22.5p
Total return (NAV plus cumulative dividends declared)	111.9p	107.3p	109.3p
Proposed dividend per share	2.5p*	2.5p	2.5p

*The interim dividend of 2.5p will be paid on 7 November 2014 to shareholders on the register on 10 October 2014.

Reconciliation of the Movement in NAV per share

NAV as at 31 January 2014	86.8p
Income	1.8p
General Expenses	(0.8)p
Management fees	(0.7)p
Performance fees	(0.5)p
Unrealised gains on investments	2.7p
Realised gains on investments	0.1p
Dividends paid	(2.5)p
NAV as at 31 July 2014	86.9p

Chairman's Statement

Introduction
I am pleased to present the half-yearly report of Octopus Apollo VCT plc for the six months ended 31 July 2014.

Performance
During the period under review, the total return (net asset value plus cumulative dividends paid to date) increased from 109.3p as at 31 January 2014 to 111.9p as at 31 July 2014. This positive return comes largely as a result of an overall uplift in the value of the Company's portfolio. A further contributing factor is the revenue profits generated by the loan interest income exceeding the day-to-day running costs of the Company.

Fund Raising
The Company launched a Top Up Offer on 2 December 2013. I am pleased to report that this was well received and the offer closed on 21 February 2014 having raised in excess of £4.0 million of new funds.

Possible Merger and Fundraising
An announcement has been published today stating that your Board has entered into discussions with the Board of Octopus VCT PLC ("OVCT") regarding a possible merger between the Company and OVCT. These discussions may or may not lead to an agreement to merge the companies. Further details of any proposed merger will be provided to Shareholders in due course. The Company also proposes to launch an offer for subscription to raise up to £30 million.

Investment Portfolio
During the period under review, the Company increased its participation in Terido LLP, a limited liability trading partnership also managed by Octopus, by £750,000, to £14,750,000. In April 2014 the Company invested £2,675,000 in Countrywide Healthcare Supplies, a company which provides a range of supplies to care homes. Additionally, in May 2014, £3,758,000 was invested in Vista Retail Support, a leading IT service and support company operating within the retail market.

A number of loans have been partially or fully repaid during the period: a partial loan repayment of £334,000 was received from Callstream in February 2014, together with a redemption premium of £95,000; the £3,500,000 loan to Borro was fully repaid in March 2014, along with all outstanding interest; and a partial loan repayment of £464,000 was received from Sula Power in July 2014.

The Company realised in full its investment in Hydrobolt, an investment which originally cost £1,000,000. Proceeds of £1,467,000 were received on 31 March 2014. This, combined with the £700,000 loan repayment in June 2013, resulted in an overall capital gain of £1,167,000. The Company also received £504,000 in loan interest over the life of this investment.

The investment in Bruce Dunlop and Associates was realised for proceeds of £415,000 in July 2014, which is a modest improvement on the written down value of this investment of £350,000 as at 31 January 2014. This, combined with £623,000 in loan interest received over the life of this investment, brings the total proceeds to £1,038,000, compared with the original investment of £2,035,000.

The portfolio has enjoyed a successful period with an overall uplift in its value of £2,064,000. Most notable were the uplifts in Clifford Thames Group (£698,000), Project Tristar (£518,000), Mablaw 555 (Technical Software Consultants) (£314,000), Callstream (£210,000) and Resilient Corporate Services (£198,000).

Investment Strategy
As set out in the prospectus, the aim of the Company is to make investments that focus more on capital preservation than a typical VCT. To date the Investment 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.

Dividend and Dividend Policy
Dividends paid by a VCT are attractive as they are received by shareholders free of income tax. It is for that reason that your Board makes every effort to maintain a consistent dividend flow when possible. Your Board has declared an interim dividend of 2.5 pence per share in respect of the six months ended 31 July 2014. The dividend will be paid on 7 November 2014 to shareholders on the register on 10 October 2014.

This follows the 2.5 pence dividend that was paid to shareholders on 22 July 2014 in relation to the year ended 31 January 2014.

VCT Qualifying Status
PricewaterhouseCoopers LLP provides the Board and Investment Manager with advice concerning ongoing compliance with Her Majesty's Revenue & Customs (HMRC) rules and regulations concerning VCTs. The Board is pleased to confirm that it has been advised that Apollo is in compliance with the conditions laid down by HMRC for maintaining approval as a VCT.

A key requirement is to maintain at least the 70% qualifying investment level. As at 31 July 2014, 86.0% of the portfolio, as measured by HMRC rules, was invested in VCT qualifying investments.

Principal Risks and Uncertainties
The principal risks and uncertainties are set out in note 6 of the Notes to the Half-Yearly Report.

Outlook
The outlook for the economy continues to improve and we are delighted with the ongoing solid performance of our investments, with a pleasing uplift in the value of the portfolio in the six months to 31 July 2014. This, along with the profits generated by its income, has led to an increase in the total return of the Company.

Your Board and Investment Manager remain confident there will be further progress in the Company.

I shall write to you again in the new year with a more detailed update in the annual report and accounts. In the meantime, if you have any questions on any aspect of your investment, please call one of the team on 0800 316 2295.

Murray Steele
Chairman
29 September 2014

Responsibility Statement of the Directors in respect of the Half-Yearly Report

We confirm that to the best of our knowledge:

• the half-yearly financial statements have been prepared in accordance with the statement "Half-Yearly Financial Reports" issued by the UK Accounting Standards Board;

• the half-yearly report includes a fair review of the information required by the Financial Conduct Authority's Disclosure and Transparency Rules, being:

• an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements;
• a description of the principal risks and uncertainties for the remaining six months of the year; and
• a description of related party transactions that have taken place in the first six months of the current financial year, that may have materially affected the financial position or performance of the Company during that period and any changes in the related party transactions described in the last annual report that could do so.

On behalf of the Board

Murray Steele
Chairman
29 September 2014

Income Statement
	Six months to 31 July 2014			Six months to 31 July 2013			Year to 31 January 2014
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Realised gain/(loss) on disposal of fixed asset investments	-	104	104	-	(11)	(11)	-	(10)	(10)
Fixed asset investment holding gains	-	2,064	2,064	-	-	-	-	1,116	1,116
Investment income	1,381	-	1,381	1,221	-	1,221	2,979	-	2,979
Investment management fees	(136)	(801)	(937)	(135)	(404)	(539)	(273)	(1,194)	(1,467)
Other expenses	(609)	-	(609)	(341)	-	(341)	(707)	-	(707)
Return on ordinary activities before tax	636	1,367	2,003	745	(415)	330	1,999	(88)	1,911
Taxation on return on ordinary activities	-	-	-	-	-	-	(400)	240	(160)
Return on ordinary activities after tax	636	1,367	2,003	745	(415)	330	1,599	152	1,751
Earnings per share - basic and diluted	0.8p	1.8p	2.6p	1.1p	(0.6)p	0.5p	2.3p	0.2p	2.5p

• The 'Total' column of this statement is the profit and loss account of the Company; the supplementary revenue return and capital return columns have been prepared under guidance published by the Association of Investment Companies.
• All revenue and capital items in the above statement derive from continuing operations.
• The Company has only one class of business and derives its income from investments made in shares and securities and from bank and money market funds.
• The Company has no recognised gains or losses other than those disclosed in the income statement.
• The accompanying notes are an integral part of the half-yearly report.

Reconciliation of Movements in Shareholders' Funds
	Six months ended 31 July 2014	Six months ended 31 July 2013	Year to 31 January 2014
	£'000	£'000	£'000
Shareholders' funds at start of period	63,905	47,774	47,774
Return on ordinary activities after tax	2,003	330	1,751
Issue of shares	3,866	36,737	20,585
Enhanced buyback	-	-	(737)
Purchase of own shares	(1,052)	(18,216)	(1,859)
Dividends paid	(1,921)	(1,758)	(3,609)
Shareholders' funds at end of period	66,801	64,867	63,905

The Company has no recognised gains or losses other than the results for the period as set out above.

Balance Sheet
	As at 31 July 2014		As at 31 July 2013		As at 31 January 2014
	£'000	£'000	£'000	£'000	£'000	£'000
Fixed asset investments*		57,438		53,499		54,306
Current assets:
Investments - money market funds*	4,262		4,245		4,254
Debtors	1,716		890		1,653
Cash at bank	4,392		6,669		7,910
	10,370		11,804		13,817
Creditors: amounts falling due within one year	(1,007)		(436)		(4,218)
Net current assets		9,363		11,368		9,599
Total assets less current liabilities		66,801		64,867		63,905
Called up equity share capital		7,688		9,308		7,362
Share premium		-		35,151		35,140
Special distributable reserve		55,522		21,695		19,116
Capital redemption reserve		2,005		748		2,704
Capital reserve gains & losses on disposal		(3,146)		(3,452)		(2,445)
Capital reserve holding gains & losses		4,096		672		2,028
Revenue reserve		636		745		-
Total equity shareholders' funds		66,801		64,867		63,905
Net asset value per share		86.9p		87.3p		86.8p

*Held at fair value through profit and loss

The statements were approved by the Directors and authorised for issue on 29 September 2014 and are signed on their behalf by:

Murray Steele
Chairman
Company Number: 05840377

Cash Flow Statement
	Six months to 31 July 2014	Six months to 31 July 2013	Year to 31 January 2014
	£'000	£'000	£'000
Net cash outflow from operating activities	(3,439)	(915)	(89)
Financial investment :
Purchase of fixed asset investments	(10,433)	(15,500)	(16,500)
Sale of fixed asset investments	9,469	1,967	3,276
Dividends paid	(1,921)	(1,758)	(3,609)
Management of liquid resources:
Purchase of current asset investments	(8)	-	(17)
Sale of current asset investments	-	453	500
Financing:
Enhanced share buyback	-	-	(737)
Purchase of own shares	(1,052)	(18,216)	(1,859)
Cash received from fund raising top-up offer, shares not yet allotted	-	-	2,497
Issue of own shares	3,866	36,775	20,585
(Decrease)/increase in cash at bank	(3,518)	2,806	4,047

Reconciliation of profit before taxation to cash flow from operating activities
	Six months to 31 July 2014	Six months to 31 July 2013	Year to 31 January 2014
	£'000	£'000	£'000
Return on ordinary activities after tax	2,003	330	1,751
(Increase)/decrease in debtors	(63)	46	(717)
Decrease in creditors	(3,211)	(1,302)	(17)
(Gain)/loss on disposal of fixed assets	(104)	11	10
Holding (gain)/loss on fixed asset investments	(2,064)	-	(1,116)
Outflow from operating activities	(3,439)	(915)	(89)

Reconciliation of net cash flow to movement in net funds
	Six months to 31 July 2014	Six months to 31 July 2013	Year to 31 January 2014
	£'000	£'000	£'000
(Decrease)/increase in cash at bank	(3,518)	2,806	4,047
Movement in cash equivalent securities	8	(492)	(483)
Opening net funds	12,164	8,600	8,600
Net funds at end of period	8,654	10,914	12,164

Notes to the Half-Yearly Report

1.         Basis of preparation
The unaudited half-yearly results which cover the six months to 31 July 2014 have been prepared in accordance with the Accounting Standard Board's (ASB) statement on half-yearly financial reports (July 2007) and adopting the accounting policies set out in the statutory accounts of the Company for the year ended 31 January 2014, which were prepared under UK GAAP and in accordance with the Statement of Recommended Practice for Investment Companies issued by the Association of Investment Companies in January 2009.

2.         Publication of non-statutory accounts
The unaudited half-yearly results for the six months ended 31 July 2014 do not constitute statutory accounts within the meaning of s.415 of the Companies Act 2006. The comparative figures for the year ended 31 January 2014 have been extracted from the audited financial statements for that year, which have been delivered to the Registrar of Companies. The independent auditor's report on those financial statements, in accordance with chapter 3 of part 16 of the Companies Act 2006, was unqualified. This half-yearly report has not been reviewed by the Company's auditor.

3.         Earnings per share
The earnings per share at 31 July 2014 is calculated on the basis of 77,328,986 (31 July 2013: 65,723,882 and 31 January 2014: 69,891,331) shares, being the weighted average number of shares in issue during the period.

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

4.         Net asset value per share
The net asset value per share is based on net assets as at 31 July 2014 divided by 76,883,845 (31 July 2013: 74,319,046 and 31 January 2014: 73,620,903) shares in issue at that date.
               
5.         Dividends
The interim dividend of 2.5 pence per share for the six months ending 31 July 2014 will be paid on 7 November 2014, to those shareholders on the register on 10 October 2014.

A final dividend, for the year ended 31 January 2014, of 2.5 pence per share was paid on 22 July 2014 to shareholders on the register on 27 June 2014.

6.         Principal Risks and Uncertainties
The Company's assets consist of equity and fixed-rate interest investments, cash and liquid resources. Its principal risks are therefore market risk, credit risk and liquidity risk. Other risks faced by the Company include economic, loss of approval as a VCT, investment and strategic, regulatory, reputational, operational and financial risks. These risks, and the way in which they are managed, are described in more detail in the Company's Annual Report and Accounts for the year ended 31 January 2014. The Company's principal risks and uncertainties have not changed materially since the date of that report.

7.         Related Party Transactions
Octopus acts as the investment manager of the Company. Under the management agreement, Octopus receives a fee of 2.0 per cent per annum of the net assets of the Company for the investment management services. During the period, the Company incurred management fees of £937,000 (31 July 2013: £539,000 and 31 January 2014: £1,467,000) payable to Octopus. At the period end there was £392,000 (31 July 2013: £nil and 31 January 2014: £375,000) outstanding to Octopus. These management fees include an accrual for £392,000 in performance fees due to Octopus Investments, which will be payable after the year end if the performance criteria continues to be met.  Furthermore, Octopus provides administration and company secretarial services to the Company. Octopus receives a fee of 0.3 per cent per annum of net assets of the Company for administration services and £10,000 per annum for company secretarial services.

The Company has an investment in Terido LLP, a limited liability trading partnership also managed by Octopus. The designated members of Terido LLP are Terido DM1 Limited and Terido DM2 Limited, both of these companies being 100% subsidiaries of Octopus. The Company does not incur management fees on the balance held in Terido LLP, in order to avoid duplication, as Octopus's management fees are taken directly from Terido LLP.

8.         Other Information
A version of this statement will be made available to all shareholders. Copies are also available from the registered office of the Company at 20 Old Bailey, London, EC4M 7AN, and will also be available to view on the Investment Manager's website at www.octopusinvestments.com.

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This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX 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

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