Octopus Titan VCT plc : Final Results and Compl...
Octopus Titan VCT plc
Annual Report & Accounts for the year ended 31 October 2016, and Compliance with Market Abuse Regulations
31 January 2017Octopus Titan VCT plc ('Titan'), managed by Octopus Investments Limited ('Octopus'), today announces the final results for the year to 31 October 2016.
These results were approved by the Board of Directors on 30 January 2017.
You may view the Annual Report in full at www.octopusinvestments.com in due course. All other statutory information will also be found there.
Titan 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 predominately unquoted companies.
Financial Summary
| As at 31 October 2016 | As at 31 October 2015 | |
| Net assets (£'000s) | 315,976 | 228,461 |
| Profit after tax (£'000s) | 14,227 | 15,196 |
| Net asset value per share ('NAV') | 97.9p | 102.7p |
| Cumulative dividends paid since launch | 61p | 52.0p |
| NAV plus cumulative dividends paid ('Total Value') | 158.9p | 154.7p |
| Total Return* | 4.2p | 5.8p |
| Total Return %** | 4.1% | 5.7% |
| Dividends paid in the year | 9.0p | 4.5p |
| Final dividend proposed | 3.0p | 2.0p |
* Calculated as the change in NAV in the period plus dividends paid in the period
** Calculated as total return / opening NAV
Key Dates
Final dividend payment date 28 April 2017
Annual General Meeting 23 March 2017 (2.30 p.m. at 33 Holborn, London EC1N 2HT)
Half-yearly results to 30 April 2017 published June 2017
Annual results to 31 October 2017 announced January 2018
Annual Report and financial statements published February 2018
Chairman's Statement
I am pleased to present the annual results for Octopus Titan VCT plc for the year ended 31 October 2016.
We were delighted with the response to our 2015/2016 fund raising which raised a total of over £102 million before the expenses of the Offer. Since this Offer opened in September 2015, and up to the end of our financial year, we have deployed £55 million in new and follow-on investments, £22 million in dividends to shareholders (£9 million within FY 2015), £7 million in Buybacks and £11 million in running costs. In view of the strong opportunity for follow on investment into our existing portfolio and the significant pipeline of new investment opportunities, your Board announced a further fund raising in 2016/2017 in August and we are delighted with the response to date from both existing and new shareholders. We have currently raised £60 million under this offer and Titan now has net assets of £372 million. Further details are given under the Fundraise section.
We are particularly pleased that the performance of the fund has been recognised through winning the 2016 awards of 'VCT of the year' and 'Best Exit' (Magic Pony) at the Investor AllStars in November and the 'Growth Investor of the year' at the 2016 Growth Investor Awards. Furthermore Swiftkey won the 'UKBAA Exit of the Year Award' at the UK Business Angels Association Awards 2016. These are prestigious awards and acknowledge the notable success of our Investment Manager in choosing and developing young technology companies and for which I would like to thank them on the Shareholders' behalf.
Performance
The Net Asset Value ('NAV') per share at 31 October 2016 was 97.9p (2015: 102.7p) representing a total return for the year of 4.2p per share after taking account of dividends paid of 9.0p per share in the year. We are pleased with this total return of 4.1%, which brings the total return for Titan to 63.9p since our original fund raising completed in 2008. The underlying performance of the portfolio, calculated as the profit in the year attributable to the aggregate of the revaluation gains and disposal losses, divided by the value of the portfolio at the start of the year, was 10.8%.
The table below reconciles the NAV at the start of the year to the NAV at the year end.
| Pence per ordinary share | |
| NAV at 31 October 2015 | 102.7 |
| Valuation uplift | 7.8* |
| Fund running expenses | (2.5) |
| Performance fee | (1.1) |
| NAV at 31 October 2016 before dividends | 106.9 |
| Final dividend paid on 29 April 2016 | (2.0) |
| Special dividend paid on 29 April 2016 | (5.0) |
| Interim dividend paid on 2 September 2016 | (2.0) |
| NAV at 31 October 2016 | 97.9 |
*This corresponds to an increase in the value of £25.8 million (2015: £23.5 million)
Investment Portfolio
Titan made three extremely successful disposals in the year - SwiftKey, Magic Pony Technology and Vision Direct Group, which, in total, yielded proceeds of over £48 million for Titan and produced realised gains on the invested capital totalling over £38 million. Additionally a further 2 million shares in Zoopla Property Group were sold on behalf of Zenith LP, in which Titan has a stake, through Zenith Holding Company, generating proceeds of £4.4 million. These disposals are discussed further in the Investment Manager's Review.
Titan made six new investments and 24 follow-on investments in the year, together totalling £46 million invested. The number of portfolio companies increased slightly to 52 as at 31 October 2016 (excluding three companies in liquidation and one company in administration but including the underlying companies held by Zenith LP). I believe that this investment profile firmly demonstrates the strong pipeline of deals generated by our Managers and supports our philosophy of continuing to support investee companies as they achieve milestones.
The acquisitions and disposals, combined with an overall uplift in valuation of £25 million took the total portfolio value to £226 million at 31 October 2016 and total net assets to £316 million.
The investment portfolio has also continued to mature and has had another strong year of performance. Shareholders will recall that Titan 1-3's holdings in Calastone, Nature Delivered (Graze), Secret Escapes and Zoopla Property Group were transferred into a separate fund, with Titan continuing to hold an interest in them via its holding in Zenith Holding Company Limited ("Zenith"). Titan also maintains a direct holding in Secret Escapes. This transaction allowed Titan to realise value for further investment in new and existing portfolio companies at earlier stages of development as well as ensuring that we did not breach VCT qualifying conditions in relation to these holdings. Our holding in Zenith has continued to show a strong uplift in value in the year, driven predominantly by meaningful gains in Calastone and Secret Escapes. In addition to the success shown by Zenith and Titan's direct holding in Secret Escapes, we are also delighted with the performances of Titan's holdings in Amplience and Semafone, which have shown significant uplifts in value in the year.
Unfortunately, but not unexpectedly when investing in early stage technology companies, there are a few investments that have fallen short of expectations and where we have taken valuation write downs in the year, with our investment in Aframe Media Group unfortunately placed into administration in April 2016, although a small holding in Excession Technologies Limited was gained as a result. Our Investment Manager is working hard alongside the companies that are underperforming to assist them to realise their potential or limit investment losses.
Further information can be seen in the Investment Manager's Review.
Performance Incentive fees
I am pleased to say that the fund's performance in the year has meant that the Investment Manager has earned a performance fee of £3.4 million. Now that the hurdle has been achieved in respect of shares relating to Titans 1-4 and shares issued since the merger, the performance fee in respect of those shares is 20% on all gains above a total value of 148.9p, subject to a High Water Mark.
Dividend and Dividend Policy
It remains your Board's policy to strive to maintain a regular dividend, whilst retaining the appropriate level of liquidity in Titan. Titan is targeting regular tax-free annual dividends of 5.0p per share for the year ended 31 October 2017. As shareholders will be aware, Titan has paid an interim dividend of 2.0p in respect of 2016 (on 2 September 2016) in addition to a final dividend of 2.0p in respect of the 2015 financial year and a special dividend of 5.0p in respect of the successful exit of Swiftkey, both paid on 29 April 2016. This takes the total dividends paid in the year to 9.0p per share (2015: 4.5p per share). A final dividend of 3.0p is proposed in respect of the 2016 financial year, payable on 28 April 2017 to those shareholders on the share register on 7 April 2017.
Fundraise and Buybacks
Titan successfully raised £102.3 million (£98.7 million net of costs) during the year. The majority of the funds raised are being used to make new investments and to support existing portfolio companies, where the Investment Manager sees the opportunity for further growth.
The Board announced a further opportunity to invest in Titan to raise up to £70 million (with a facility to raise a further £50 million) on 23 August 2016. On 16 December and 21 December, £60 million in total (£57 million net of costs) was allotted. I would like to thank all shareholders who have supported the fund raising and welcome new shareholders. Given the allotments made to date, your Board is confident that we will achieve at least our fund-raising target of £70 million and has also announced that the over-allotment facility may be used. We are confident that this fund raising will provide significant funds to invest in the strong pipeline of new and follow-on investments which our Investment Manager is seeing.
During the year, Titan repurchased 4.3 million shares. The Board continues to buy back shares from shareholders at no greater than a 5% discount to NAV. The Board will continue to monitor the volume of shares bought back and at present intends to maintain the existing limit of the share capital that it buys back and cancels each year at 5%. I am pleased to see that the current demand from shareholders to buy back shares is well below this level. This policy will, of course, continue to operate at the Board's discretion. However, it is the Board's intention that shareholders should be able to sell their shares back to Titan in the absence of an active secondary market, since we believe that this share buyback policy enhances Titan's attractiveness as an investment for both existing and new shareholders.
VCT Qualifying Status
PricewaterhouseCoopers LLP provides both the Board and the Investment Manager with advice concerning ongoing compliance with HMRC rules and regulations concerning VCTs. The Board has been advised that Titan is in compliance with the conditions laid down by HMRC for maintaining approval as a VCT.
A key requirement is for 70% of the portfolio to remain continually invested in qualifying investments. As at 31 October 2016, over 90% of Titan (as measured by HMRC rules) was invested in VCT qualifying investments across a variety of industries.
The government continues to adjust the legislation surrounding VCTs to ensure that money remains directed at the companies and sectors that need it the most. The most recent changes, which came into effect on 6 April 2016, have tightened the conditions under which a VCT can make non-qualifying investments, typically made with assets over and above the 70% VCT qualifying threshold. Historically VCTs could invest up to 30% of their eligible assets into a wide range of non-qualifying investments. In future, non-qualifying investments can only be made into highly liquid investments such as main market listed securities, Alternative Investment Funds (AIFs) or Open-Ended Investment Companies (OEICs). We do not believe these changes will have a significant impact on Titan.
As the largest provider of VCTs in the market, Octopus continues to work closely with the UK Government to help achieve the best possible outcome for the VCT industry and for the UK's smaller companies. We welcome continued Government support for the VCT industry.
Annual General Meeting ("AGM")
Titan's Annual General Meeting will take place on 23 March 2016 at 2:30pm and will be held at the offices of Octopus Investments Limited, 33 Holborn, London, EC1N 2HT and I hope to meet as many shareholders as possible at this event, which provides an opportunity for them to meet the Board and our Managers and to hear an update on Titan's activities and future plans.Outlook
2017 promises to be a year of change but it is often during periods of change that entrepreneurial businesses are best placed to thrive. Despite the uncertainties which the current state of the Brexit negotiations brings, we have a well-diversified portfolio of exciting young and emerging technology businesses. These are run by energetic and intelligent entrepreneurs who view the opportunities with excitement and have the ambition to create businesses that will be World class in both size and impact. Our Investment Manager's recently opened office in New York is ideally timed to help our investee companies take advantage of the impending changes in the USA following President Trump's election and their presence in the USA goes to the heart of our Manager's view that Venture Capital is most effective when it is combined with practical, and effective value adding support.
Our current fundraise, having already achieved half of the overall total Offer, looks set to take Titan's total assets to over £400 million. The funds raised will be available to ensure we can continue to support our cash hungry portfolio of just over 50 companies. We believe that our Investment Manager's team is very capable of supporting this portfolio but we recognise that the total number of portfolio companies under management cannot increase dramatically as each business requires significant hands on support. Our aim therefore is to maintain a flow of investments both into and out of the portfolio and the events of 2016 amply justify our confidence.
We are by some measure the largest single VCT and our merger has contributed to the economies of scale, particularly with regard to administration. Many other VCTs have had to change their strategy following the changes to the VCT legislation; we are far less implicated than most of the other VCTs since we are firmly in the space for which HM Government designed the scheme.
We believe that our strategy will allow us to achieve significant capital growth and, as already mentioned, it is our aim to distribute this by way of an annual dividend supplemented by special distributions as and when realisations allow.
If you are unable to attend the AGM on 23 March 2017, I would urge you to complete the proxy form, either on the form enclosed or via the Computershare web portal. If you have any questions regarding Titan, please do not hesitate to write to me or Octopus Ventures, our Fund Manager.
John Hustler
Chairman
30 January 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. At the time of writing we manage six VCTs, including this VCT, and manage over £600 million in the VCT sector. Octopus has over 460 employees.
Investment Strategy Implementation
Titan invests in companies that we believe have great potential, but which need financial support in order to realise their potential. Each company that we target has the opportunity to create a large business by taking a relatively modest market share, given the size of the markets that they address. We are particularly interested in businesses that are led by excellent management teams and which focus on innovation through technology. Based on this investment strategy we have created a balanced portfolio spanning multiple industries and business sectors.
Having reached the level of invested funds required by HMRC, our focus has now shifted to managing the portfolio and optimising growth in the investee companies whilst also seeking to add new investments where appropriate. The current portfolio of holdings encompasses investments in 52 companies (49 unquoted and three quoted, excluding three companies in liquidation and one in administration but including the underlying companies in Zenith). Over the last year, the companies in the portfolio have generated more than £147m in additional revenue and employed approximately 800 additional people, with over a third of the companies growing revenue at over 50% per annum.
As Investment Manager, we typically invest in significant minority equity stakes in these qualifying Companies. These investments provide the financial capital for the businesses to build and grow their operations with the objective being either to float or to sell these businesses at some point in the future. These entrepreneurial early stage businesses, often developing innovative new products and services, frequently face challenges as they seek to establish themselves in their market. The amount of capital we initially deploy is typically intended to be only the first investment that we will make into a business, prior to seeing if the company meets or exceeds its initial milestones.
If the business is unsuccessful in meeting these initial milestones, we strive to minimise the financial exposure of Titan to the business, to mitigate the risk of what is commonly referred to as "good money after bad".
Other businesses which meet some, but not necessarily all, of their milestones will require more time to prove their concept. As such these businesses may be reduced in value prior to our making a further investment. This is intended to give them an opportunity to progress further and prove more convincingly their business models.
Finally, there are those that meet and exceed the expectations initially set. It is these businesses in which we actively seek to increase our investment exposure as they prove their ability to create significant and valuable businesses.
Our investment approach requires us to maintain liquidity in Titan in order to ensure adequate resources are available to support further portfolio funding needs as they arise. This liquidity should be further enhanced following the current Prospectus offer for new shares as described in the Chairman's Statement, and it is an important feature of our investment strategy, with the primary objective being to deliver sustainable returns to shareholders.
Performance
The Total Value has seen a significant increase since 31 October 2012 as shown on the graph, from 127.9p to 158.9p. This represents an increase of 24% in value in the last four years. Additionally the dividends paid between 31 October 2012 and 2016 were 55.0p per share representing a significant cash return to investors.
The performance over the last five years is represented below:
| 31/10/2012 | 31/10/2013 | 31/10/2014 | 31/10/2015 | 31/10/2016 | |
| NAV, p | 121.9 | 95.2 | 101.4 | 102.7 | 97.9 |
| Dividends paid, p | 6.0 | 42.5 | 47.5 | 52.0 | 61.0 |
| Total value, p | 127.9 | 137.7 | 148.9 | 154.7 | 158.9 |
| Total return % * | 36.0% | 8.0% | 11.8% | 5.7% | 4.1% |
* The figures for 2012-2015 have been recalculated using a different method to the prior year Accounts, as detailed below the Financial Summary at the start of this announcement.
Portfolio Review
As at 31 October 2016 the NAV was 97.9p per share, compared to 102.7p per share as at 31 October 2015 which represents an increase in NAV of 4.2p per share less dividends paid during the year of 9.0p (2015: 4.5p) per share. This represents a considerable increase of 4.1% (2015: 5.7%). The performance of the portfolio continued to be strong this year with a number of portfolio companies having uplifts in fair value which totalled over £37 million. Downward revaluations in the period totalled £12 million.
In particular Zenith Holding Company, which owns a stake in Calastone, Zoopla Property Group, Nature Delivered (Graze) and Secret Escapes, through its interest in the Zenith fund, performed very well with the individual investment holdings delivering significant growth. As previously reported, these holdings were sold to Zenith in order to maintain the qualifying status of the VCT, deliver cash back to Titan and ensure that a stake could be held by Titan so that it may continue to share in the growth of the underlying assets. At the year end, Zenith comprised 13% of the total net assets of Titan.
As expected with the nature of the businesses we invest in, some of the portfolio companies have fallen behind expectations and budgets resulting in reductions in fair value of the companies. We work closely with the management teams of these companies to realise their potential or limit investment losses.
Titan now holds over 90% of its assets in qualifying holdings from an HMRC perspective and we continue to work with each portfolio business as they develop in their respective markets.
Disposals
Titan made three extremely successful disposals in the year - SwiftKey, Magic Pony Technology and Vision Direct Group, which, in total, yielded proceeds of over £48 million for Titan and produced realised gains on the invested capital totalling over £38 million.
New and follow-on investments
Your Investment Manager is always looking for opportunities to invest in new companies where capital growth can be achieved. Titan made six new investments in the year totalling £8 million taking the total number of portfolio companies to 52 as at 31 October 2016 (49 unquoted and three quoted, excluding three companies in liquidation and one in administration but including the underlying companies in Zenith). These investments are in a variety of different sectors further diversifying the portfolio.
We have built a strong portfolio but it is important to support the companies where appropriate to allow them to invest for growth and alleviate working capital pressure. During the year, 24 follow-on investments totalling over £38 million were made.
The six new investments comprised:
- Big Health Limited - a digital medicine company that creates mobile apps to deliver cognitive behavioural therapy (CBT) to sufferers of mental health disorders.
- Bought By Many Limited - an online insurance intermediary which enables existing insurers to provide insurance policies to very specific customer segments
- Chronext AG - an online market place for purchasing authenticated new and second-hand luxury watches
- Segura SystemsLimited - offers a Software-as-a-Service (SaaS) solution, Segura Order Manager, which aims to solve the problem of supply chain visibility.
- Streetbees.com Limited - a network of on-demand, mobile participants that can be recruited and mobilised to provide consumer insights, market research, and a broad range of deep market intelligence solutions to principally consumer-facing businesses
- Wave Optics Limited - a business that designs a critical component, known as a waveguide, for use in Augmented Reality (AR) glasses
Subsequent to year end two follow-on investments completed which were committed at 31 October and eight separate follow-on investments and two new investments were made, totalling £13.5 million.
Outlook
The entrepreneurial ecosystem in the UK and across Europe is coming of age. Despite an uncertain time in the wider markets the businesses we are seeing continue to raise their ambitions and the endless power of technology to disrupt, replace and reinvent whole industries makes the next decade extremely exciting for our investee companies.
Our primary focus is to build on the success of our established portfolio whilst actively seeking new opportunities. We are confident that due to our sectoral diversity, ability to recognise World class innovation and our reputation for supporting exceptional management teams, that we are well positioned to continue to attract, grow and exit from industry defining businesses. All of these factors combine to make us optimistic about our clear intention to generate further increases in the Total Value of Titan, which will be distributed to shareholders through regular and special tax-free dividends.
Valuation Methodology
Initial valuation
Financial assets are measured at fair value. The best estimate of the initial fair value of a financial asset that is either quoted or not quoted in an active market is the transaction price (i.e. cost).
Subsequent valuation
Further funding rounds are a good indicator of subsequent fair value and this measure is used where appropriate. Subsequent adjustment to the fair value of unquoted investments can be made using sector multiples based on information as at 31 October 2016, where applicable. In some cases the multiples can be compared to specific companies, especially where a particular sector multiple does not appear appropriate.
In accordance with the IPEVC valuation guidelines, investments made within 12 months are usually kept at cost unless performance indicates that fair value has changed.
Quoted investments are valued at market bid price. No discounts are applied.
If you would like to find out more regarding the IPEVC valuation guidelines, please visit their website at: www.privateequityvaluation.com.
Investment Portfolio
| Fixed asset investments | Sector | Investment cost as at 31 October 2016 (£'000) * | Amount invested in the year ending 31 October 2016 (£'000) |
| Zenith Holding Company Limited ** | Other | 14,701 | - |
| Secret Escapes Limited | Travel & Leisure | 4,256 | - |
| Amplience Limited | Business Software | 5,986 | - |
| Sourceable Limited | Ecommerce | 6,957 | 2,928 |
| Uniplaces Limited | Property | 4,657 | 2,125 |
| Semafone Limited | Business Software | 3,594 | - |
| Sofar Sounds Limited | Travel & Leisure | 7,705 | 4,949 |
| London House Exchange Limited | Property | 5,175 | 4,320 |
| Conversocial Limited | Business Software | 4,165 | 916 |
| CurrencyFair Limited | Financial Services | 5,547 | 2,731 |
| Zynstra Limited | Business Software | 5,840 | 1,475 |
| Artesian Solutions Limited | Business Software | 4,838 | 637 |
| Oxcis Aviation Limited | Travel & Leisure | 5,614 | 3,968 |
| Iovox Limited | Business Software | 2,889 | 1,150 |
| Eve Sleep Limited | Ecommerce | 2,394 | 1,804 |
| Metrasens Limited | Hardware | 2,688 | - |
| The Faction Collective SA | Travel & Leisure | 2,429 | 147 |
| MIRACL Limited | Security | 7,320 | 2,722 |
| Adbrain Limited | Advertising | 4,663 | 1,603 |
| UltraSoC Technologies Limited | Hardware | 7,754 | 667 |
| Big Health Limited | Health and Medicinal | 3,276 | 3,276 |
| Origami Energy Limited | Hardware | 2,033 | 1,283 |
| Bought By Many Limited | Financial Services | 2,780 | 2,780 |
| Smartkem Limited | Hardware | 2,714 | 932 |
| Surrey NanoSystems Limited | Hardware | 1,993 | - |
| Elliptic Enterprise Limited | Business Software | 1,662 | 677 |
| Ecrebo Limited | Business Software | 2,151 | - |
| TrialReach Limited | Health and Medicinal | 1,438 | 376 |
| Tailsco Limited | Food | 1,506 | 1,314 |
| Streethub Limited | Ecommerce | 851 | - |
| Mi-Pay Group plc | Business Software | 3,011 | - |
| Chronext AG | Ecommerce | 797 | 797 |
| Segura Systems Limited | Business Software | 1,085 | 1,085 |
| Trafi Limited | Travel & Leisure | 800 | - |
| BridgeU Inc. | Business Software | 979 | - |
| e-Therapeutics plc | Health and Medicinal | 2,415 | - |
| Michelson Diagnostics Limited | Health and Medicinal | 4,542 | 73 |
| Wave Optics Limited | Hardware | 362 | 362 |
| Bowman Power Limited | Hardware | 2,305 | - |
| Time Out Group PLC | Travel & Leisure | 555 | - |
| Behaviometrics AB | Security | 502 | - |
| Excession Technologies Limited | Business Software | 208 | 108 |
| Permutive Inc. | Business Software | 391 | - |
| Phasor Inc. | Hardware | 250 | - |
| Streetbees.com Limited | Business Software | 140 | 140 |
| Seedcamp III LP | Other | 110 | 37 |
| Mailcloud Limited | Business Software | 327 | - |
| Hubbub Deliveries Limited | Food | 1,133 | - |
| Kabbee Exchange Limited | Travel & Leisure | 2,000 | - |
| Affectv Limited | Advertising | 2,627 | - |
| Magic Pony Technology Limited | Hardware | - | 544 |
| Total fixed asset investments | 154,115 | 45,926 |
* Investment cost reflects the amount invested into each portfolio company from Titan's 1 - 5 before the 2014 merger and from Titan after the merger. This is different to the book cost which includes the holding gains / (losses) on assets which transferred from Titan's 1, 3, 4 & 5 to Titan 2 (now Titan) during the 2014 merger, as Titan purchased these assets at fair value.
** Owns stakes in Nature Delivered Limited (trades as graze), Secret Escapes Limited, Calastone Limited and Zoopla plc.
The top 10 investments detailed in the table represent 63% by value of the investment portfolio and account for an uplift in valuation of £28 million for the year.
The table above excludes three companies in liquidation (Shopa Limited, Phase Vision Limited and Applied Superconductor Limited) and one in administration (Aframe Media Group Limited).
Review of Investments
During the year 24 follow-on investments were made, amounting to over £38 million and six new investments amounting to £8 million.
Listed below are details of Titan's ten largest investments by value.
Zenith Holding Company Limited
Zenith Holding Company has a holding in Octopus Zenith LP, an Octopus managed fund, which holds stakes in Secret Escapes, Zoopla Property Group, Nature Delivered (Graze) and Calastone, which were formerly held by Titan 1-3 prior to the merger of the five Titan VCTs in November 2014. Following the merger, Zenith became a 100% owned investment of Titan.
Founded in April 2007, Graze is the UK's first company to deliver healthy and nutritionally balanced food by post, straight to the home or office. Graze promotes a varied and balanced diet through facilitating the intake of a wide variety of smaller portions of natural, high energy foods throughout the day, allowing for a healthier approach to eating delicious foods. Customers can select Graze boxes created by the company's team of nutrition specialists to place orders for personalised assortments of foods to match their specific tastes and needs including health, diet and indulgent treats. The company has offices in the UK and the US.
Calastone is a financial technology company. Its mission is to make markets friction-free by connecting trading partners through its global fund transaction network. More than 910 customers in 27 domiciles are now processing domestic and cross border transactions via Calastone, benefitting from the cost and risk reduction opportunities transaction automation can offer. Its purpose is to use smart technology solutions and industry collaboration to enable global distribution, reduce operational risk, and enhance client profitability. Calastone is part of Fintech50, ranked in The Sunday Times Hiscox Tech Track 100 and is one of the UK Government Tech City's Future Fifty companies, recognised for high growth and transforming industries. Calastone has offices in London, Luxembourg, Hong Kong and Sydney.
Zoopla Property Group Plc (LSE:ZPLA) is a digital media business that owns and operates some of the UK's most widely recognised and trusted online brands including Zoopla, PrimeLocation, SmartNewHomes and uSwitch. Its websites and mobile apps attract over 40 million visits per month, generating over 2 million leads per month for our partners. Zoopla Property Group Plc was founded in 2007, listed on the London Stock Exchange in 2014, and has a highly-experienced management team, led by Founder & CEO, Alex Chesterman.
Launched in 2011, Secret Escapes is an online travel club. Members of Secret Escapes may purchase luxury holidays at significant discounts. Members have the opportunity to purchase for a limited period of time (less than seven days) but can choose when to stay at a particular hotel over an extended period of time. The business has offices in London, Sweden, Spain, Poland, Germany, Singapore and the US.
Country of incorporation: The Cayman Islands
Initial investment date: June 2013
Investment Cost: £14,701,000
Valuation including impending distributions: £40,192,000 *
Last accounts: 31 October 2015
Profit before tax: £3,551,048
Net assets: £3,546,933
* £6,432,000 is owing to Titan arising from historic partnership distributions. The remaining £33,759,000 relates to Titan's remaining value in Zenith.
Secret Escapes Limited
Launched in 2011, Secret Escapes is an online travel club. Members of Secret Escapes may purchase luxury holidays at significant discounts. Members have the opportunity to purchase for a limited period of time (less than seven days) but can choose when to stay at a particular hotel over an extended period of time. The business has offices in London, Sweden, Spain, Poland, Germany, Singapore and the US.
Initial investment date: April 2011
Investment Cost: £4,256,000
Valuation: £23,389,000
Last submitted group accounts: 31 December 2015
Turnover: £30,888,000
Profit before tax: £(21,467,000)
Net Assets: £10,729,000
Amplience Limited
Amplience helps retailers deliver profitable growth through improved online shopping experiences across desktop computers, tablets and smartphones. Amplience continues to make good progress with recent customer wins including Furniture Village, Sears and Playmobile. Future growth will be underpinned by the recent launch of its new content authoring product (a next generation content management system) which is attracting significant interest from new and existing customers.
Initial investment date: December 2010
Investment Cost: £5,986,000
Valuation: £14,847,000
Last submitted group accounts: 30 June 2015 (abbreviated)
Turnover: not disclosed
Profit before tax: not disclosed
Net assets: £2,611,000
Sourceable Limited (trades as Swoon Editions)
Swoon Editions (Sourceable) sells high-quality furniture at insider prices. Sourcing direct from factories in India, China and Vietnam, it buys in container quantities and sells direct to consumers and through media partnerships. The volume purchasing and direct sales allow Swoon Editions to sell more efficiently than other retailers and to sell at approximately 50 per cent off retail prices, while maintaining a 40 to 50 per cent gross margin.
Initial investment date: March 2013
Investment Cost: £6,957,000
Valuation: £11,897,000
Last submitted group accounts: 31 July 2015 (abbreviated)
Turnover: not disclosed
Profit before tax: not disclosed
Net assets: £4,329,038
Uniplaces Limited
Uniplaces is the international online marketplace for student accommodation. Uniplaces solves a problem for both the demand (students looking for accommodation) and supply side (landlords) of the market. Uniplaces brings both sides of the market together to create an interactive marketplace, which allows the parties to transact online in a far more efficient and streamlined manner. The verification and production of quality listings is what sets Uniplaces apart from its competitors.
Initial investment date: October 2013
Investment Cost: £4,657,000
Valuation: £10,629,000
Last submitted group accounts: 31 December 2014 (abbreviated)
Turnover: not disclosed
Profit before tax: not disclosed
Net assets: £2,108,000
Semafone Limited
Semafone allows consumers to give their credit card details to call centre operators securely via the telephone keypad while still engaged in a conversation with the agent. The core value proposition is based on the prevention of card-not-present fraud, together with the avoidance of any associated loss of reputation. Their product enables the call centres to become 'PCI DSS compliant' as no card data is seen, heard or recorded anywhere in the call centre.
Initial investment date: June 2010
Investment Cost: £3,594,000
Valuation: £9,220,000
Last submitted group accounts: 31 December 2015
Turnover: £5,046,245
Profit before tax: £(1,837,231)
Net Assets: £2,554,196
Sofar Sounds Limited
Sofar Sounds organises small, intimate music performances in unique spaces across the globe. Each event is filmed and can be watched free online via their dedicated YouTube multi-channel network. This broadcasting capability has created a community of music lovers from across the world, online and in person. The business is supported by a volunteer network of scouts and event producers, helping Sofar recruit hand-picked artists to play at the gigs.
Initial investment date: March 2014
Investment Cost: £7,705,000
Valuation: £8,928,000
Last submitted group accounts: 31 December 2015 (abbreviated)
Turnover: not disclosed
Profit before tax: not disclosed
Net Assets: £2,015,000
London House Exchange Limited (trades as Property Partner)
Property Partner (London House Exchange Ltd) uniquely combines residential crowdfunding with a secondary exchange upon which investors can trade their holdings. The company allows anyone to invest in an individual property of their choice, with as little or as much as they wish, so they can own a share of the property, receive rental income and access capital growth. Property Partner carries out the letting and management of the properties on behalf of investors.
Property Partner brings accessibility, simplicity and transparency to a residential property market that has traditionally had high barriers to entry.
Initial investment date: September 2014
Investment Cost: £5,175,000
Valuation: £8,098,000
Last submitted group accounts: 31 December 2015
Turnover: £379,055
Profit before tax: £(4,247,024)
Net Assets: £2,160,394
Conversocial Limited
Conversocial is a cloud solution that enables businesses to manage digital media as a large-scale customer service channel. The company's software is used in the contact centres of major retailers, travel companies, banks and telecommunications companies to help them deal with questions and complaints through channels like Facebook and Twitter. Conversocial has over 200 clients, including Google, Tesco, Sainsbury's, Waitrose, Marks & Spencer, Barclaycard, Hertz and Coach. It is headquartered in London and New York.
Initial investment date: May 2013
Investment Cost: £4,165,000
Valuation: £7,683,000
Last submitted group accounts: 31 December 2015 (abbreviated)
Turnover: not disclosed
Loss before tax: not disclosed
Net Assets: £14,885,319
CurrencyFair Limited
Currency Fair is an online currency exchange and money transfer service. Currency Fair allows its customers to transact in two ways. First, it can make instant currency transactions at a set rate (with the liquidity provided by Currency Fair). Second, through the peer-to-peer marketplace, where a user can set their own target exchange rates and then wait to see if this is matched by other peers in the market. The marketplace model gives the customer control and transparency over their transfers, and a choice between cost and speed of transaction, at a significantly better price than traditional exchange services, such as banks and foreign exchange brokers. Currency Fair's headquarters are in Dublin, Ireland.
Initial investment date: March 2015
Investment Cost: £5,547,000
Valuation: £7,212,000
Last submitted group accounts: 30 June 2015 (abridged)
Turnover: not disclosed
Profit before tax: £(3,270,408)
Net Assets: £5,412,472
How Octopus creates and delivers value for the shareholders of Titan
Titan focuses on providing early stage, development and expansion funding to predominantly unquoted companies. The focus has been to establish a portfolio of qualifying investments in companies that have the potential to achieve a high level of profitability through the combination of:-
· Scalability: The potential to deliver services to significant numbers of new customers at very low incremental cost and to generate repeat sales from customers.
· Scope: The ability to expand into complementary areas by leveraging customer and/or distributor relationships, new product development or brand positioning.
· Pricing power: An ability to charge high and defensible prices for its products or services as a result of having intellectual property rights, a strong brand and/or a dominant position in a market niche.
The Investment Manager looks to identify opportunities where the people involved - the entrepreneur, management team, investors, advisers and any other significant stakeholders - have a record of success. In accordance with its investment policy Titan will invest across a range of technology sectors.
A key part of our ability to attract and support the UK's most promising businesses is our demonstrable track record of providing value adding hands-on support and advice to our portfolio. One example of this is the 2016 opening of an Octopus Ventures office in New York that was set up with the sole purpose of helping the businesses that we have backed to successfully scale in the US. Currently just over half of the companies in the Titan portfolio are now operational in the US and with our support we expect this number to grow as an increasing number of the companies start to realise their global ambitions.
Investment Process
The Investment Manager follows a multi-stage process prior to making qualifying investments in unquoted companies.
Initial Screening
If the initial review of the business plan is positive, a meeting is held with the management team of the business in order to assess the team in terms of its ability to achieve the objectives set out in the business plan. The proposition is then discussed and reviewed with the other members of the Octopus team and a decision is taken as to whether to continue discussions with the company with a view to making an investment.
Due Diligence
Prior to making an investment, due diligence is carried out on the potential investment company. The due diligence process includes a review of the investment company's technology, discussions with customers and suppliers, competitive analysis, assessment of the capabilities of the management team and financial analysis. In addition, the Octopus investment team is supported by the Octopus Venture Partners - a group of around 90 entrepreneurs and business experts including a number of ex-FTSE chairmen and chief executive. The Octopus Venture Partners may be involved at an early stage in the investment decision making process, involving members with relevant industry experience as part of the initial due diligence and they may go on to invest alongside Octopus in investee companies.
Additionally, Octopus also draws on professional input from lawyers, accountants and other specialists as required in order to conduct the due diligence and draw up the required legal documentation in order to complete an investment.
Post-Investment Monitoring
Octopus will usually appoint at least one representative to the board of each investment company. The majority of the investments are expected to be held for approximately five years. There may, however, be opportunities to exit profitably on shorter timescales. The Investment Manager will conduct a regular review of the portfolio, during which each investment company will be assessed in terms of its commercial and financial progress, its strategic positioning, requirement for further capital, progress towards an eventual exit and its current and prospective valuation. As each company matures, the exit considerations become more specific, with a view to establishing a definitive action plan in order to achieve a successful sale of the investment. Throughout the cycle of an investment the Investment Manager will remain proactive in determining the appropriate time and route to exit. It is expected that the majority of exits will be by means of a trade sale or by a float/IPO.
If you have any questions on any aspect of your investment, please call one of the Octopus Ventures team on 0800 316 2295.
Octopus Ventures Team
Octopus Investments Limited
30 January 2017
Income Statement | |||||||||
| Year to 31 October 2016 | Year to 31 October 2015 | ||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||
| (Losses) / Gains on disposal of portfolio investments | - | (3,122) | (3,122) | - | 9 | 9 | |||
| Gain on disposal of OEIC investments | - | - | - | - | 178 | 178 | |||
| Portfolio investment holding gains | - | 25,245 | 25,245 | - | 23,154 | 23,154 | |||
| OEIC investment holding gains | - | 2,896 | 2,896 | - | 194 | 194 | |||
| Investment income | (299) | - | (299) | 734 | - | 734 | |||
| Investment management fees | (1,383) | (4,149) | (5,532) | (913) | (2,738) | (3,651) | |||
| Performance fee | - | (3,388) | (3,388) | - | (3,369) | (3,369) | |||
| Other expenses | (2,310) | - | (2,310) | (2,053) | - | (2,053) | |||
| FX translation | - | 737 | 737 | - | - | - | |||
| Profit / (Loss) before tax | (3,992) | 18,219 | 14,227 | (2,232) | 17,428 | 15,196 | |||
| Taxation | - | - | - | - | - | - | |||
| Profit / (Loss) after tax | (3,992) | 18,219 | 14,227 | (2,232) | 17,428 | 15,196 | |||
| Earnings per share - basic and diluted | (1.4)p | 6.3p | 4.9p | (1.1)p | 8.8p | 7.7p | |||
- The 'Total' column of this statement is the profit and loss account of Titan; 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.
- Titan has only one class of business and derives its income from investments made in shares and securities and from bank and money market funds.
Titan has no other comprehensive income for the period.
Balance Sheet | |||||
| As at 31 October 2016 | As at 31 October 2015 | ||||
| £'000 | £'000 | £'000 | £'000 | ||
| Fixed asset investments* | 225,536 | 211,581 | |||
| Current assets: | |||||
| OEICs* | 62,795 | 6,899 | |||
| Cash at bank** | 30,355 | 10,630 | |||
| Debtors | 12,637 | 1,790 | |||
| Money market funds | 7,494 | 9,462 | |||
| 113,281 | 28,781 | ||||
| Current liabilities | (22,841) | (11,901) | |||
| Net current assets | 90,440 | 16,880 | |||
| Net assets | 315,976 | 228,461 | |||
| Called up share capital | 32,262 | 22,246 | |||
| Share premium | 1,619 | - | |||
| Special distributable reserve | 240,172 | 182,331 | |||
| Capital redemption reserve | 749 | 325 | |||
| Capital reserve - gains / (losses) on disposals | 1,777 | (4,279) | |||
| - holding gains | 46,035 | 31,221 | |||
| Revenue reserve | (7,375) | (3,383) | |||
| Translation reserve | 737 | ||||
| Total equity shareholders' funds | 315,976 | 228,461 | |||
| Net asset value per share | 97.9p | 102.7p | |||
*Held at fair value through profit or loss
** Includes cash held but not yet allotted
The statements were approved by the Directors and authorised for issue on 30 January 2017 and are signed on their behalf by:
John Hustler
Chairman
Statement of changes in Equity | ||
| Year ended 31 October 2016 | Year ended 31 October 2015 | |
| £'000 | £'000 | |
| Shareholders' funds at start of year | 228,461 | 32,876 |
| Profit after tax | 14,227 | 15,196 |
| Issue of equity (net of expenses) | 105,947 | 53,897 |
| Merger share issues | - | 137,417 |
| Titan's 1, 3, 4 & 5 fee write offs | - | 110 |
| Purchase of own shares | (3,922) | (5,729) |
| Dividends paid | (28,737) | (5,306) |
| Shareholders' funds at end of year | 315,976 | 228,461 |
Cash Flow Statement | ||||||
| Year to 31 October 2016 | Year to 31 October 2015 | |||||
| £'000 | £'000 | |||||
| Reconciliation of profit to cash flows from operating activities | ||||||
| Profit before tax | 14,227 | 15,196 | ||||
| Increase in debtors | (10,847) | (1,550) | ||||
| Debtors obtained from the 2014 merger | - | 6,123 | ||||
| Increase in creditors | 10,940 | 10,941 | ||||
| Creditors obtained from the 2014 merger | - | (14,223) | ||||
| Gains / (losses) on disposal of fixed assets | 3,122 | (9) | ||||
| Gains on valuation of fixed asset investments | (25,245) | (23,154) | ||||
| Other | (25) | - | ||||
| Outflow from operating activities (a) | (7,828) | (6,676) | ||||
| Cash flows from investing activities | ||||||
| Purchase of fixed asset investments | 10 | (45,926) | (161,125) | |||
| Non cash merger additions | - | 125,998 | ||||
| Sale of fixed asset investments | 10 | 54,119 | 159 | |||
| Inflow / (Outflow) from investing activities (b) | 8,193 | (34,968) | ||||
| Cash flows from financing activities | ||||||
| Dividends paid | 7 | (28,737) | (5,306) | |||
| Purchase of own shares | 14 | (3,922) | (5,729) | |||
| Net proceeds from share issues | 105,947 | 191,424 | ||||
| Merger share issues | - | (137,417) | ||||
| Inflow from financing activities (c) | 73,288 | 42,972 | ||||
| Cash and cash equivalents acquired in merger | ||||||
| Cash acquired in merger | - | 8,237 | ||||
| OEICs acquired in merger | - | 11,282 | ||||
| Acquired from merger (d) | - | 19,519 | ||||
| Increase in cash and cash equivalents (a + b + c + d) | 73,653 | 20,847 | ||||
| Opening cash and cash equivalents | 26,991 | 6,144 | ||||
| Closing cash and cash equivalents | 100,644 | 26,991 | ||||
Titan is satisfied that all inside information which the Directors and Titan may have leading up to the announcement of the year end results for the year ended 31 October 2016, has been notified to a Regulated Information Service and, therefore, Titan is not prohibited from dealing in its own securities.
For further information please contact:
Nicola Board
Company Secretary
0207 776 8663
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Octopus Titan VCT plc via Globenewswire
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