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2013-06-25 18:38 CEST
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Octopus Titan VCT 5 PLC : Half-yearly report

Octopus Titan VCT 5 plc
Half-Yearly Results

25 June 2013

Octopus Titan VCT 5 plc, managed by Octopus Investments Limited, today announces the Half-Yearly results for the six months ended 30 April 2013.

These results were approved by the Board of Directors on 25 June 2013.

You may shortly view the Half-Yearly Report in full at:

 http://www.octopusinvestments.com/vctarchive/titan5.html

About Octopus Titan VCT 5 PLC

Octopus Titan VCT 5 plc ('Titan 5', 'Company' or 'VCT') 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. The Company is managed by Octopus Investments Limited ('Octopus' or 'Investment Manager').

Titan 5 was incorporated on 13 October 2010 and raised a total of £13.7 million (£12.9 million net of expenses) through an Offer for Subscription. A further £6.07 million in aggregate has been raised by way of top-ups, being £1.18 million net of expenses in 2012 and £4.58 million net of expenses in 2013. Titan 5 invests primarily in unquoted UK smaller companies and aims to deliver a substantial level of returns on its investments over the medium to long term.

Venture Capital Trusts (VCTs)

VCTs were introduced in the Finance Act 1995 to provide a means for private individuals to invest in unquoted companies in the UK.  Subsequent Finance Acts have introduced changes to VCT legislation. The tax benefits currently available to eligible new investors in VCTs include:

  • up to 30% up-front income tax relief;

·                     exemption from income tax on dividends paid; and
·                     exemption from capital gains tax on disposals of shares in VCTs.

The Company has been provisionally approved as a VCT by HMRC.  In order to achieve approval the Company must comply with certain requirements on a continuing basis, including: 

  • at least 70% of the Company's investments must comprise 'qualifying holdings'*(as defined in the legislation);
  • for cash raised pre 6 April 2011 at least 30% of the 70% of qualifying holdings must be in eligible ordinary shares with no preferential rights;
  • for cash raised post 5 April 2011 at least 70% of the 70% of qualifying holdings must be in eligible ordinary shares with no preferential rights;
  • no single investment can exceed 15% of the total Company value; and
  • a minimum of 10% of each Qualifying Investment must be in Ordinary shares with no preferential rights.

*A 'qualifying holding' consists of up to £5 million invested in any one year in new shares or securities in an unquoted company (or companies quoted on AIM) which is carrying on a qualifying trade and whose gross assets do not exceed £15 million at the time of investment. The definition of a 'qualifying trade' excludes certain activities such as property investment and development, financial services and asset leasing. The Company will continue to ensure its compliance with these qualification requirements.

Financial Summary

Six months to
30 April 2013
6 months to 30 April 2012 Year to 31
October 2012
Net assets (£'000s) 17,943 13,674 13,142
Return on ordinary activities after tax (£'000s) 222 (110) (643)
Net asset value per share (NAV) 89.7p 91.8p 88.2p

Chairman's Statement

I am pleased to present the results for the six month period ended 30 April 2013.

Performance

During the six month period to 30 April 2013, the net asset value per share (NAV) has had an uplift of 1.5p per share rising from 88.2p to 89.7p representing an increase of 1.7%. This increase in NAV is due to the strong performance in both the OEICs and the investment portfolio which together exceeded the standard running costs of the fund.

Titan 5 is still in the early stages of investment. Following the recent fund raise as detailed overleaf, the now enlarged Fund is 27.9% invested as at 30 April 2013. As mentioned in the first Annual Report, the NAV will be linked increasingly to the value of the investments in the portfolio companies as the VCT becomes fully invested.

Investment Portfolio Review

The portfolio has seen an overall uplift in fair value of £213,000 during the period largely due to the strong performances of Amplience and Y-Plan which have seen increases of £191,000 and £153,000 respectively. Unfortunately, as is expected in this market, some of the investment companies, namely Lifebook and Semafone, have fallen behind expectations and have therefore had downward valuations.

During the period, Titan 5 made two new investments of £285,000 into Metrasens, a technology business specialising in products for the healthcare and security markets and £350,000 into TrialReach, a company which helps pharmaceutical companies and clinical research organisations reach, engage and enrol patients in clinical trials through its online market place. Titan 5 also made three follow-on investments of £425,000 into Amplience, £314,000 into Aframe and £70,000 into Faction collective. This took the number of companies in the portfolio to 12.

Subsequent to the period end, Titan 5 has made the following new and follow-on investments:

  • On 10 May, £175,000 into a social technology company in the user driven marketing space. Further details of which shall be announced in due course.
  • On 28 May, £500,000 in Conversocial, a software service company which helps customer service teams inside businesses manage customers who contact them via social media.
  • On 3 June, £149,000 in Decoholic, an online retailer of home furniture that offers handmade furniture at discount prices.
  • On 3 June, £526,000 follow-on investment into Faction Collective
  • On 5 June, £565,000 follow-on investment into Leanworks

These additions in the period ensure we continue to create a balanced investment portfolio spanning multiple industries and business sectors. There are a number of further investments in the pipeline which we expect to complete in the coming months and we are confident of meeting the 70% qualifying investment level prior to 31 October 2013.

Open Ended Investment Companies (OEICs)

Titan 5 continues to hold investments in three OEICs which have seen an overall uplift in fair value of £288,000 in the six months to 30 April 2013. The best performance continued to be in the CF Octopus UK Micro Cap Growth Fund which increased in fair value by 11.4%.

Your Board continues to keep the investments in the OEICs under review and believes it is important to reduce the risk profile of our non-qualifying investments to protect the capital. As the VCT builds its investment portfolio, there will be cash requirements beyond the funds held on deposit and in money market accounts and we will realise these investments where necessary to maintain the required degree of liquidity.  

Fund Raising

The Company, together with the other Titan funds, offered the opportunity to invest into the VCTs through a linked share offer. It is pleasing to report that this offer raised £4,579,000 net of costs into the Fund. A further offer of shares in the Titan VCTs in the current tax year is under consideration.

The majority of funds raised will be used to invest in new portfolio companies as well as providing further investment into the existing portfolio companies where the Investment Manager sees the opportunity for business growth.

VCT Qualifying Status

PricewaterhouseCoopers LLP provides both the Board and Investment Manager with advice on the ongoing compliance with HMRC rules and regulations concerning VCTs. The Board has been advised that Titan 5 is in compliance with the conditions laid down by HMRC for maintaining provisional approval as a VCT. 

A key requirement is to achieve the 70% qualifying investment level prior to 31 October 2013. As at 30 April 2013, 45.6% of the portfolio (as measured by HMRC rules, which excludes new funds raised for three accounting periods) was invested in VCT qualifying investments. In view of the investments made post period end as well as the current investment pipeline, the Board continues to be confident that the 70% target will be met by the required date.

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 ways in which they are managed, are described in more detail in the Company's Annual Report and Accounts for the period ended 31 October 2012. The Company's principal risks and uncertainties have not changed materially since the date of that report.

Outlook

The economic climate remains challenging for many companies with banks reluctant to lend finance and increased working capital pressures. Although these factors provide an uncertain environment for many businesses, there are opportunities to invest in attractive businesses as they seek alternative sources of funding as a result.

Your Board is working hard alongside your Investment Manager to continue to develop the portfolio. We are pleased with the progress made in this period both in terms of investments made and also in seeing an overall uplift in fair value. We look forward to the coming few years as our portfolio starts to mature and we will see further capital growth.

Jane O'Riordan                                     
Chairman
25 June 2013

Investment Portfolio

Qualifying investments Sector  Investment cost at 30 April 2013 (£'000) Unrealised profit/ (loss) (£'000)  Carrying value at 30 April 2013 (£'000) Change in valuation in the period (£'000) % equity held by Titan 5 (fully diluted) % equity managed by Octopus
(fully diluted)
Amplience Limited Technology 808 191 999 191 10.07% 47.62%
Rangespan Limited Consumer lifestyle and well being 736 - 736 - 5.14% 25.71%
Aframe Limited Media 714 (200) 514 - 10.20% 20.65%
Iovox Limited Telecommunications 500 - 500 - 5.45% 24.94%
Artesian Solutions Limited Technology 350 - 350 - 3.91% 24.17%
Semafone Limited Telecommunications 397 (48) 349 (48) 2.15% 38.53%
Metrasens Limited Consumer lifestyle and well being 285 - 285 - 2.25% 30.37%
Leanworks Limited (YPlan) Consumer lifestyle and well being 125 153 278 153 3.70% 14.63%
Lifebook Limited Consumer lifestyle and well being 370 (93) 278 (93) 7.29% 32.64%
Michelson Diagnostics Limited Consumer lifestyle and well being 305 (153) 153 - 3.23% 42.87%
The Faction Collective SA Consumer lifestyle and well being 209 10 219 10 5.48% 11.50%
TrialReach Limited Healthcare 350 - 350 - 5.00% 21.43%
Total qualifying investments 5,150 (140) 5,010 213
Money market securities 5,119                - 5,119      
OEICs 3,600 459 4,059      
Cash at bank           3,778                - 3778
Total investments 17,647 319 17,966
Net current assets (23)
Total net assets 17,943

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 Services Authority 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

Jane O'Riordan 
Chairman
25 June 2013


Income Statement

Six months to 30 April 2013 Six months to 30 April 2012 Year to 31 October 2012
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Loss on disposal of fixed asset investments - - - - - - - (4) (4)
Fixed asset investment holding gains/(losses) - 213 213 - - - - (353) (353)
Current asset investment holding gains - 288 288 - 115 115 - 164 164
Other income 15 - 15 24 - 24 43 - 43
Investment management fees (37) (110) (147) (29) (88) (117) (61) (184) (245)
Other expenses (147) - (147) (132) - (132) (248) - (248)
Return on ordinary activities before tax (169) 391 222 (137) 27 (110) (266) (377) (643)
Taxation on return on ordinary activities - - - - - - - - -
Return  on ordinary activities after tax (169) 391 222 (137) 27 (110) (266) (377) (643)
Earnings per share - basic and diluted (1.1)p 2.5p 1.4p (2.2)p (0.8)p (3.0)p (1.9)p (2.6)p (4.5)p
  • 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 the results for the period as set out above.
  • The accompanying notes are an integral part of the half-yearly report.
Reconciliation of Movements in Shareholders' Funds
Six months to 30 April 2013 Six months to 30 April 2012 Year to 31 October 2012
£'000 £'000 £'000
Shareholders' funds at start of period 13,142 12,660 12,660
Return on ordinary activities after tax 222 (110) (643)
Issue of equity (net of expense) 4,579 1,189 1,190
Redemption of shares - (65) (65)
Shareholders' funds at end of period 17,943 13,674 13,142

Balance Sheet

As at 30 April 2013 As at 30 April 2012 As at 31 October 2012
£'000 £'000 £'000 £'000 £'000 £'000
Fixed asset investments* 5,010 2,263 3,353
Current assets:
Money market securities and other deposits* 9,177 9,436 8,046
Debtors 53 6 326
Cash at bank 3,779 2,169 1,459
13,009 11,611 9,831
Creditors: amounts falling due within one year (76) (200) (42)
Net current assets 12,993 11,411 9,789
Net assets 17,943 13,674 13,142
Called up equity share capital 2,001 1,490 1,490
Share premium 5,130 1,062 1,062
Special distributable reserve 11,493 11,493 11,493
Capital redemption reserve 7 7 7
Capital reserve - losses on disposal (395) (186) (285)
                           - holding gains 319 122 (182)
Revenue reserve (612) (314) (443)
Total equity shareholders' funds 17,943 13,674 13,142
Net asset value per share 89.7p 91.8p 88.2p

*at fair value through profit and loss

The statements were approved by the Directors and authorised for issue on 25 June 2013 and are signed on their behalf by:

Jane O'Riodan
Chairman

Company Number: 07035434

Cash flow statement

Six months to 30 April 2013 Six months to 30 April 2012 Year to 31 October 2012
£'000 £'000 £'000
Net cash inflow/(outflow) from operating activities 28 (126) (829)
Financial investment:
Purchase of fixed asset investments (1,443) (1,958) (3,634)
Sale of fixed asset investments - - 229
Management of liquid resources:
Purchase of current asset investments (2,009) (1,667) (2,632)
Disposal of current asset investments 1,165 1,860 4,264
Taxation - - -
Financing:
Issue of equity 4,579 1,189 1,190
Share issue expenses - (65) (65)
Increase/(decrease) in cash resources at bank 2,320 (767) (1,477)

                                                                                                                  

Reconciliation of net cash flow to movement in net funds

Six months to 30 April 2013 Six months to 30 April 2012 Year to 31 October 2012
£'000 £'000 £'000
Increase/(decrease) in cash resources at bank 2,320 (767) (1,477)
Movement in cash equivalents 1,131 (78) (1,468)
Opening net cash resources 9,505 12,450 12,450
Net funds at period end 12,956 11,605 9,505

Reconciliation of return before taxation to cash flow from operating activities

 

Six months to 30 April 2013 Six months to 30 April 2012 Year to 31 October 2012
£'000 £'000 £'000
Return on ordinary activities before tax 222 (110) (643)
Loss on disposal of fixed asset investments - - 4
(Gain)/loss on valuation of fixed asset investments (213) - 353
Gain on valuation of current asset investments (288) (115) (164)
Decrease/(increase) in debtors 273 29 (291)
Increase/(decrease) in creditors 34 70 (88)
Inflow/(outflow) from operating activities 28 (126) (829)

Notes to the Half-Yearly Report

1.         Basis of preparation
The unaudited half-yearly results which cover the six months to 30 April 2013 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 October 2012, 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 30 April 2013 do not constitute statutory accounts within the meaning of Section 415 of the Companies Act 2006. The comparative figures for the year ended 31 October 2012 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, part 16 of the Companies Act 2006, was unqualified. This half-yearly report has not been reviewed by the Company's auditor.

3.         Earnings per share
The earnings per share is based on 15,725,855 (30 April 2012: 13,828,560 and 31 October 2012: 14,368,376) 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 returns per share figures are relevant. The basic and diluted earnings per share are therefore identical.

4.         Net asset value per share
The calculation of NAV per share as at 30 April 2013 is based on 20,013,790 (30 April 2012: 14,899,391 and 31 October 2012: 14,899,391) ordinary shares in issue at that date.

5.         Related Party Transactions
Octopus Investments Limited 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 £147,000 payable to Octopus (30 April 2012: £117,000 and 31 October 2012: £310,000). At the period end there was £nil stated within prepayments (30 April 2012: £nil and 31 October 2012: £68,000). 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 £15,000 per annum for company secretarial services.

6.         Additional information
Copies of this report are available from the registered office of the Company at 20 Old Bailey, London, EC4M 7AN.

HUG#1711972