OCTOPUS TITAN VCT PLC
Annual report and financial statements for the year ended 31 December 2021
Octopus Titan VCT plc (‘Titan’ and ‘the Company’) today announces the final results for the year to 31 December 2021 as below.
Titan’s mission is to invest in the people, ideas and industries that will change the world.
Octopus Titan VCT plc has earned a reputation for backing pioneering entrepreneurs. It invests in companies that are using technology to shape the future.
Highlights
| 2021 | 2020 | |
| Net assets (£’000) | £1,373,041 | £1,043,325 |
| Profit after tax (£’000) | £216,557 | £75,323 |
| NAV/share | 105.7p | 97.0p |
| NAV + cumulative dividends | 197.7p | 178.0p |
| Total return (p)1 | 19.7p | 6.8p |
| Total return %2 | 20.3% | 7.1% |
| Dividends paid in the year | 11.0p | 5.0p |
| Dividend yield %3 | 11.3% | 5.3% |
| Dividend declared | 3.0p | 3.0p |
- Total return is an alternative performance measure, calculated as movement in NAV per share in the period plus dividends paid in the period.
- Total return % is an alternative performance measure, calculated as total return/opening NAV.
- Dividend yield is an alternative performance measure, calculated as dividends paid/opening NAV.
Chair’s statement
I am pleased to present the annual results for Titan for the year ended 31 December 2021.
- £202 million raised in 29 days in Titan’s latest fundraise, meaning in 2021 Titan successfully raised £256 million.
- In 2021 we saw Titan exit seven companies for a profit – returning £237 million of gross proceeds to Titan.
- Total return over five years of 40%.
- 11p of dividends paid in the year (2020: 5p), with a further 3p dividend declared for payment in May 2022.
The NAV per share at 31 December 2021 was 105.7p which, adjusting for dividends paid, represents a 20.3% increase from 31 December 2020. This increase reflects impressive performance across several portfolio companies and the efforts of the Octopus team and the pioneering entrepreneurs within the portfolio.
On 21 October 2021, we launched a new offer to raise up to £125 million, with an over-allotment facility of up to £75 million. We are delighted that this offer closed 29 days later having raised slightly more than £200 million. This represents our fastest fundraising by far and is a testament to the strong performance of Titan. We would like to take this opportunity to welcome all new shareholders and thank all existing shareholders for their continued support.
In addition to proceeds received from our fundraise, Titan benefitted from seven profitable exits in the year including Depop being acquired by Etsy for $1.625 billion and WaveOptics being sold to SNAP for over $500 million. Collectively, the seven companies received investment of £48 million from Titan and the combined realised consideration totalled £237 million (in cash, shares and/or deferred amounts).
Alongside these exits, the year also saw some very significant further investments in the portfolio, led by new investors, including ManyPets (previously trading as BoughtByMany) raising $350 million at a valuation of more than $2 billion, Cazoo raising $1.6 billion and listing on the New York Stock Exchange for $8 billion, and Permutive raising $75 million, led by SoftBank. More can be read on some of these raises in the Portfolio Manager’s review.
In the 12 months to 31 December 2021, we utilised £325 million of our cash resources, comprising £143 million in new and follow-on investments, £102 million in dividends (net of the Dividend Reinvestment Scheme), £35 million in share buybacks, £27 million in annual investment management fees and other running costs, and an £18 million performance fee payable in respect of the year ended 31 December 2020. Together, this utilised 130% of our cash and cash equivalents at 31 December 2020. The cash and corporate bond balance of £381 million at 31 December 2021 represents 28% of net assets at that date, compared to 23% at 31 December 2020, reflecting the significant disposal proceeds in the year and that the fundraise closed in November fully subscribed, compared to previous years’ typical closing dates of March or April. We anticipate that this cash level will fall to approximately £210 million, after the payment of the second interim dividend and performance fees in April.
Performance incentive fees
Titan’s impressive performance since 31 December 2020, including the numerous and significant disposals in the year, has given rise to a performance fee being payable to Octopus of £64 million. The performance fee is calculated as 20% on net gains above the High Water Mark, the highest total return as at previous year ends, of 178p as at 31 December 2020.
Dividends
Following careful consideration, I am pleased to confirm that on 17 March 2022 the Board declared a second interim dividend of 3p per share in respect of the year ending 31 December 2021. This will be paid on 17 May 2022 to shareholders on the register as at 29 April 2022, resulting in full year dividends of 11p. This represents a tax-free yield of 17% on the NAV at 31 December 2020. As shareholders will know, our ambition is to pay an annual dividend of 5.0p per share, supplemented by special dividends when appropriate.
If you are one of the 27% of shareholders who take advantage of the Dividend Reinvestment Scheme (‘DRIS’), your dividend will be received in Titan shares. This is an excellent way to achieve your investment objectives for those of you who prefer the capital value of your investment to grow, particularly given the additional tax relief received on the new shares.
Since inception, we have now paid 92p in tax‑free dividends per share, excluding the recently declared dividend.
Fundraise and buybacks
In addition to our recent fundraise mentioned above, Titan successfully closed its previous offer during the year, which opened in October 2020 and which saw £121 million raised by March 2021.
During the period, Titan repurchased 33.8 million shares (representing 3.1% of the net asset value as at 31 December 2021). The Board has continued to buy back shares from shareholders at no greater than a 5% discount to NAV per share. Whilst the Board will seek authority to continue to be able to buy back up to 14.99% of Titan’s shares, the Directors intend that this authority will only be used for a maximum of 5% of the share capital annually.
Board of Directors
As shareholders may recall, we have maintained a policy of Board succession and last year we appointed Anthony Rockley and Gaenor Bagley to the Board. Following their appointments, I believe that, after joining the Board as Chair of Octopus Titan 2 VCT in October 2007, I should retire from the Board and so will not be seeking re-election at the forthcoming Annual General Meeting (‘AGM’). It has been a pleasure to work with Octopus over the last 15 years, guiding Titan through different phases of growth and seeing it go from strength to strength.
I am pleased to announce that Tom Leader has agreed to take over as Chair and Anthony Rockley will undertake Tom’s current role of Chair of the Audit Committee. I would like to take this opportunity to thank them both for taking on these roles. Jane O’Riordan, Matt Cooper and Gaenor Bagley will be continuing in their roles on the Board, and I wish the Board every success in the future.
Jo Oliver, Octopus Ventures’ lead fund manager for Titan, will also be stepping back from focusing on Titan full time. He will remain involved with the Octopus Ventures team and the Titan portfolio, but in a reduced capacity. I am pleased to announce that Malcolm Ferguson (Partner at Octopus Ventures) will be the lead fund manager going forward. We would like to thank Jo for all his hard work and commitment to the success of Titan over the last 13 years.
AGM and shareholder event
The Annual General Meeting will take place on 14 June 2022 from 12pm and will be held at the offices of Octopus Investments Limited, 33 Holborn, London, EC1N 2HT. Full details of the business to be conducted at the AGM will be given in the Notice of the Meeting to be published in due course.
We always welcome questions from our shareholders at the AGM but this year, to ensure we can respond to any questions you may have for either the Portfolio Manager or Titan Board prior to the proxy forms needing to be completed, we are pleased to offer shareholders the opportunity to attend an online shareholder webinar. At this event we will have Jo Oliver and myself presenting on Tuesday 7 June 2022 at 12pm. For details of how to sign up please see octopustitanvct.com. Alternatively, shareholders are also invited to send any questions they may have via email to TitanAGM@octopusinvestments.com.
Outlook
I am pleased to announce such an impressive uplift in NAV per share over the last 12 months, especially with the persistent and ever-changing backdrop that the Covid-19 pandemic has created. The macro environment of the past two years has seen an unprecedented level of global change with the pandemic often forcing faster adoption of new technologies as well as a surge in demand for change, which has given many businesses the opportunity and platform to thrive. Some of the companies within the portfolio have benefitted from this rapidly changing landscape, as evidenced by the successful exits from some such as Depop, WaveOptics, Semafone and Conversocial and the growth of others such as ManyPets, Permutive and Quit Genius, detailed further in the Portfolio Manager’s review. On the other hand, other industries have been impacted more deeply and some portfolio companies are still working hard to recover to pre-pandemic trading levels, such as The Plum Guide and Secret Escapes operating in the travel industry, or even reassessing their business models. As we now look set to face another uncertain time with the conflict in Ukraine, the team at Octopus Ventures will continue to work closely with the portfolio to ensure a good understanding of the impact associated with each company and we of course hope for a swift resolution to the crisis.
I was delighted earlier in the year to be able to announce the payment of a special dividend, which means 11p of cumulative dividends will be paid in relation to the performance of Titan in 2021. 2021 has been an impressive and exciting year for Titan, with a record‑breaking fundraise; an impressive array of profitable exits; and 31 new investments completing. This was recognised with Titan winning the Venture Capital Trust of the Year at the GP Bullhound Investor Allstars awards, a great accolade. I am sure shareholders would like to join the Board in thanking the Octopus Ventures team for these excellent results.
In 2021, the Octopus Ventures team began to deploy the Ventures EIS Service alongside Titan into qualifying opportunities and to date 24 co-investments have been made from two tranches of this service. A Knowledge Intensive (KI) EIS Fund was recently announced, and this is currently being raised alongside a new VCT, the Future Generations VCT, both of which may invest alongside Titan where a company meets the mandate of all funds. This new VCT is looking to back businesses which Octopus Ventures believes will address one of three sustainable themes to both help drive real societal change, as well as having the potential to offer financial return. Titan will continue to invest mainly in UK-based tech-enabled companies with global ambitions and the potential to grow quickly, and where an opportunity also meets the new VCT’s mandate, that fund may co-invest with Titan. We are pleased with how Octopus Ventures is managing this process in accordance with the allocation policy which has been agreed with the Board, including the retention of Titan’s rights to invest further in existing portfolio companies where it chooses to do so. The Board believes that the increase of funds for new and follow‑on investments could be a competitive advantage and differentiating factor when investing, whilst also enabling Titan to focus on its sustainable growth objective.
Titan deployed £143 million into new and follow-on opportunities in the year, which brings the total number of companies in the portfolio to 107 at 31 December 2021. To be able to support the deployment rate and number of companies in the portfolio, the Octopus Ventures team has scaled up in line with this growth with seven new investment professionals joining the team and eight additional operational staff. Its talent team, which supports the portfolio’s entrepreneurs on their journey to scale their businesses, now has individuals assigned to the five areas of investment focus, allowing them to be experts in their specific area. The diversity and volume of exciting new deals completed in 2021 and the upcoming pipeline of opportunities is testament to the work the investment team continues to put into sourcing, securing and working with such businesses successfully. VCTs have long provided a compelling opportunity for UK investors to provide funding for such businesses in a tax-efficient way, and we look forward to Titan continuing to do so in the coming year.
I would like to conclude by thanking both the Board and the Octopus Ventures team on behalf of all shareholders for their hard work, without which Titan would not continue to achieve such performance.
John Hustler
Chair
21 April 2022
Portfolio Manager’s review
At Octopus, our focus is on managing your investments and providing investors with open communication. Our annual and interim 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 five VCTs, including Titan, with assets of over £1.9 billion.
The Total Value has seen a significant increase since the end of Titan’s first year (31 October 2008), as shown on the graph, from 89.9p to 197.7p at 31 December 2021. This represents an increase of 120% in value since Titan’s first full year, and dividends paid since inception of 92p. Since Titan launched, a total of over £330 million has been distributed back to shareholders in the form of tax-free dividends. This includes dividends reinvested as part of the DRIS.
Focus on performance
The NAV of 105.7p per share at 31 December 2021 represents an increase in NAV of 19.7p per share versus a NAV of 97p per share as at 31 December 2020, after adding back dividends paid during the year of 11p (2020: 5p) per share, an increase of 20.3% in the year.
The performance over the five years to 31 December 2021 is shown below:
| Year ended | Year ended | Period ended | Year ended | Year ended | |
| 31 October | 31 October | 31 December | 31 December | 31 December | |
| 2017 | 2018 | 20191 | 2020 | 2021 | |
| NAV, p | 96.4 | 93.1 | 95.2 | 97.0 | 105.7 |
| Cumulative dividends paid, p | 66.0 | 71.0 | 76.0 | 81.0 | 92.0 |
| Total Value, p | 162.4 | 164.1 | 171.2 | 178.0 | 197.7 |
| Total return | 3.6% | 1.8% | 7.6% | 7.1% | 20.3% |
| Dividend yield | 5.1% | 5.2% | 5.4% | 5.3% | 11.3% |
| Equivalent dividend yield for a higher rate tax payer | 7.6% | 7.7% | 8.0% | 7.8% | 16.8% |
1 Note, the period to December 2019 was 14 months.
The uplift in valuation over 2021 has been driven by the strength of performance of several outstanding companies in the portfolio. In addition to a number of successful disposals, the increase in valuation of certain companies, including ManyPets, vHive, Glofox and DeadHappy, has played a key role. Collectively, 55 Titan portfolio companies drove an increase of £367 million, including valuation uplifts on companies disposed of in the period. In the year, the portfolio raised over £2 billion in investment rounds. Please refer to the exit table and the NAV bridge for more information.
On the other hand, as is to be expected when investing in early-stage companies, 31 companies saw a collective decrease in valuation of £57 million. The businesses that contributed most significantly to this were Amplience and Trouva, with the former raising $100 million of capital from new investors at a lower valuation than we were previously holding it at, and the latter experiencing a significant decline in its trading performance in the year. Many of the other companies faced different challenges, some of which are sector specific, including the Covid-19 pandemic, which has had a continued impact on some sectors. Of these 31 companies, 16 saw a reduction in value of 5% or less, typically due to fluctuations in the foreign exchange rates or net cash levels in the companies, and Octopus believes that many of them have the potential to overcome the issues they face and get their growth plans back on track, including Amplience which we consider has a significant opportunity ahead of it. Octopus will continue to work with these companies to help them realise their ambitions. In some cases, the support offered could include further funding, to ensure a business has the capital it needs to execute on its strategy.
The loss on Titan’s cash and cash equivalent investments was £1.5 million in the year to 31 December 2021 (2020: gain of £4.8 million). The Board’s objective for these investments is to generate sufficient returns through the cycle to cover costs, at limited risk to capital.
Disposals
2021 has been a good year for profitable disposals for Titan. Seven full disposals completed in the period (Depop, WaveOptics, Skew, Semafone, Conversocial, OpenSignal and CB4), with one partial profitable realisation (Cazoo). In total, these disposals will return £237 million to Titan in cash, shares and/or deferred amounts, with £191 million of this having been received in 2021. There have also been two disposals made at a partial loss (Property Partner sold to Better.com and Titan’s listed holding in e-Therapeutics) and two at a full loss (Systum, which was placed into liquidation, and Mush, which sold to Mumsnet). In aggregate these losses generated £4 million of proceeds compared to an investment cost of £12 million. The underperformance of a portfolio company is always disappointing for Octopus and shareholders alike, but it’s a key characteristic of a venture capital portfolio, and we believe the successful disposals will continue to significantly outweigh the losses, as they did in 2021.
| Year to | Oct-17 | Oct-18 | Dec-191 | Dec-20 | Dec-21 | Total |
| Dividends (£'000) | 22,272 | 24,178 | 33,187 | 46,037 | 101,976 | 227,650 |
| Disposal proceeds (£'000) | 9,362 | 22,367 | 26,334 | 23,915 | 221,504 | 303,482 |
- Note, the period to December 2019 was 14 months.
- Note, this table includes proceeds received within the period.
New and follow-on investments
Titan completed follow-on investments into 24 companies and made 31 new investments. Together, these totalled £143 million (made up of £45 million invested into the existing portfolio and £98 million into new companies). This compares with 15 new investments and 30 follow-on investments in 2020, together totalling £96 million. The total value of the portfolio as at 31 December 2021 is £1,005 million.
Below are some examples of our new investments made across our five areas of focus during the year.
Fintech
- Raylo offers a subscription model for leasing refurbished personal electronic devices; and
- Tatum is making it easier for companies to develop their own blockchain-based products.
Deep tech
- Bkwai has built a data analytics platform for smart infrastructure and construction assets; and
- iSize has developed a software platform to optimise video quality while reducing the video size, making it cheaper and quicker to transmit.
Health
- Overture is making IVF more accessible than ever; and
- LVNDR is offering a digital clinic for the LGBTQ+ community.
Consumer
- Taster is Europe’s leading digital restaurant group, bringing the best of street food to customers across France, the UK, Spain and Belgium; and
- HURR is a fashion peer‑to‑peer rental platform.
Business-to-business software
- Kleene provides an end‑to‑end data pipeline solution to help businesses connect all their critical data sources; and
- Contingent has built a real‑time, supply chain visibility platform applicable across industries.
Q+A
How do you value a portfolio company?
Titan’s unquoted portfolio companies are valued in accordance with UK GAAP accounting standards and the International Private Equity and Venture Capital (IPEV) valuation guidelines. This means we value the portfolio at Fair Value, with all companies being valued at least twice yearly, for our interim (June) and annual accounts (December).
What do you mean by ‘Fair Value’?
When we say Fair Value, we mean the price we expect people would be willing to buy or sell an asset for, assuming they had all the information available we do, are knowledgeable parties with no pre-existing relationship, and that the transaction is carried out under the normal course of business.
Who values the portfolio and what oversight is there to make sure this is right?
The Octopus Investment Managers involved with the portfolio companies, either in the capacity of a Director or Observer on the Board, or the primary contact, will draft the initial valuation proposal based on the latest developments with the portfolio and the wider market in which they operate. This is then reviewed, challenged, and ultimately approved by our Valuations Manager and Partners. These proposed valuations will then be sent to the Octopus Valuations Committee and Titan Board who will meet to discuss them in detail, revise as necessary and ultimately sign them off.
The Board seek interim audit procedures specifically for the top 25 holdings at the interims to gain additional comfort over fair value. There are also more valuation checkpoints throughout the year in advance of allotments, DRIS, share buybacks and other share-related transactions, which means that the portfolio’s valuation is reviewed to ensure NAV is fairly represented prior to these corporate actions. BDO LLP are the external auditors of Titan and perform a review of the annual accounts which includes valuations.
As part of our continuous improvement processes, we periodically review the actual realised value of our investments compared to their last holding value and refine our valuation methodologies accordingly. This, combined with the high proportion of valuations that are based on the terms of further funding rounds led by new external investors, firmly underpins the robustness of the Titan valuation process.
The table below illustrates the split of valuation methodology (shown as a percentage of portfolio value and number of companies). Market derived valuation includes valuations based on funding rounds that typically completed in the year or shortly after the year end and exits of companies where terms have been agreed with an acquirer. Multiples is predominantly for valuations that are based on a multiple of revenues for portfolio companies.
| Valuation methodology | By value | By number of companies |
| Market derived valuation | 53% | 63% |
| Multiples | 38% | 31% |
| Quoted | 8% | 2% |
| Exit proceeds | 1% | 4% |
Outlook
With the world adapting and acclimatising to the ongoing challenges of the Covid-19 pandemic, the team at Octopus Ventures has been delighted by the performance of Titan and inspired by the resilience and drive of the management teams we work with. We believe that this strength and ambition will ensure that Titan continues to thrive despite the escalating conflict in Ukraine, for which we hope that there will be a swift resolution.
We believe that backing exceptional entrepreneurs in their ambition to change the world requires more than just financial support. That’s why we also work to equip them with the platform and tools they need to succeed. From sharing expertise and insights learned through experience, to supporting companies in their mission to build incredible teams, and sharing our network, we believe it’s important to be a genuinely active investor and so it is typical for a member of the Octopus Ventures team to join the board of a portfolio company to provide ongoing support.
Our in-house Talent team draws on experience developed on the ground to offer tailored advice to our portfolio companies. We believe that the portfolio management team is the key determining factor for a company’s success and so we support their recruitment, hold specialist workshops, provide access to executive coaches and mental health specialists, and make introductions across our global network — putting founders in touch with individuals or enterprises we think can help.
This support is an investment in the future, designed to bolster resilience so that our portfolio companies can weather periods of disruption, and to help them develop the culture and capabilities they need to drive ongoing success. And it sets Octopus Ventures apart, offering us a competitive advantage in winning the best investment opportunities and proving our value beyond just investment.
Looking back on the new investments we have made in 2021, we are encouraged to report that 28% of them were founded by an entrepreneur who identifies as female. Octopus Ventures is ranked third in Europe’s VCs to be investing in female co-founders from 2016 to 2021 according to Sifted — but we believe there is much work still to be done to improve the diversity and inclusion yet further, including racial and ethnic diversity. It has been shown that teams of diverse founders create more innovation and, on average, better financial outcomes in venture-funded start ups, for example 30% higher multiples are achieved on invested capital when companies are acquired or go public. To help us fulfil this goal, we have been signatories to HMT’s Investing in Women Code since 2020. This pledge commits us to improving conditions, and ensuring female founders have the space, and opportunity, to flourish. We want to implement real and effective change across our policies and investment approach to offer an accessible investment platform designed to allow female management teams to succeed.
Alongside looking to back diverse management teams, we look to invest in companies tackling some of the biggest challenges facing society today. So in 2021, we also took a forensic look at the fertility sector, to highlight the incredible work being done by start ups around the world, looking to tackle the global rising infertility rates. We published our findings in the Future of Fertility report, which is available to read here: https://octopusventures.com/future-of-fertility/#explore.
We were delighted by the support we’ve had from Titan investors, and the resulting success of the fundraise which closed in 29 days raising a little over £200 million. We’d like to take this opportunity to thank existing shareholders and welcome new shareholders. We wish to also thank John Hustler who will not be standing for re-election as Chair at the upcoming AGM. John was Chair of Octopus Titan VCT 2 plc from October 2007 to November 2014 when the five Titan VCTs were merged and has since been the Chair of Titan VCT. John has worked tirelessly to guide Titan over the years and his support and knowledge are much appreciated and will be missed by the team at Octopus.
Over the past 12 months, we’ve enjoyed great success with several of our portfolio companies, which have delivered significant value to Titan and its shareholders. Looking ahead, we are confident that many more have the potential to build on and exceed that level of success. The last year has seen our new investment deployment rate double, with our portfolio now totalling 107 companies. The Octopus Ventures team has also grown, drawing in talented individuals from across our focus areas. We back businesses from a wide range of sectors, at different investment stages, and we think this breadth of scope will provide Titan with the opportunities it needs for continued success.
Portfolio review
The current portfolio encompasses investments in 107 companies (105 unquoted and two quoted, excluding two companies in liquidation).
The progress made by many of the portfolio companies in the last 12 months has been impressive. Within the portfolio, highlights include:
- Amplience offers a headless content management system which powers retailers’ digital channels. It closed a $100 million investment led by Farview and Sixth Street;
- Big Health is a digital medicine company supplying cognitive behavioural therapy (CBT) to help people back to good mental health by providing safe and effective non-drug alternatives for the most common mental health conditions. The company announced that Scotland’s National Health Service will be offering access to Sleepio, Big Health’s product to treat insomnia, and Daylight, which treats anxiety. The company raised $75 million in January 2022;
- Cazoo is the latest venture from Zoopla founder, Alex Chesterman. The company seeks to transform the way 8 million used cars are bought and sold each year in the UK, by putting the entire process online and offering home delivery. Cazoo listed on the New York Stock Exchange in August, valuing the group at $8 billion;
- Elvie, which develops products to improve women’s lives through smarter technology, launched in ten new markets across Europe and Asia in the last 12 months and has increased its product portfolio to five. The company raised $97 million in the year;
- Olio, the food sharing app, raised $43 million in 2021 and has shared 43 million portions of food, with 5.5 million users signed up. The company has successfully expanded into Singapore and Mexico; and
- Quit Genius, the world’s first digital clinic for treating multiple addictions, raised $64 million in December, with revenue growing by 10x over the year. It now partners with more than 100 employer and health plan clients, covering 2.5 million lives. To date, the company has helped more than 750,000 people improve their lives and conquer their addictions.
Ori Biotech
www.oribiotech.com
Enabling widespread patient access to life‑saving cell and gene therapies (CGT).
- >$100m raised in 2021
- CGT is a fast-growing market anticipated to reach $25 billion by 2027
Ori has created technology to transform CGT, increasing patient access to revolutionary treatments. Made possible by advances in molecular biology, CGT can be tailored to patients and opens the door to a potential one‑shot cure. Reprogramming cells or therapies is highly complex, demanding many hours of highly technical and specialised input. Biology, unlike producing computer hardware, is temperamental and hard to control – which makes scaling an enormous challenge. Ori Biotech has built a platform for automated and scalable biomanufacturing of CGT. This marks a crucial step in unlocking the scalability of CGT and stands to increase patient access to these revolutionary and potentially life‑saving treatments.
Octopus investment dates:
Initial investment August 2020 and a follow-on investment in December 2021
Glofox
www.glofox.com
Glofox has developed innovative fitness management software to help growing businesses retain and scale both their brand and revenue.
- €12bn total addressable market
- Glofox operates in 80 countries covering 17 languages and 40 currencies
Glofox’s full, end-to-end solution addresses three key needs for its customers – typically small to medium fitness boutiques. These are: the acquisition and retention of customers; managing complex and fragmentary operations; and meeting members’ experience expectations. The software offers marketing tools to help gyms engage more with their customer base and improve retention, as well as sales and management tools to optimise efficiencies and run effective analytics. It also has a global network of 30 payment partners, and localisation teams to support fitness studios as they rapidly scale in new territories. Fitness is a critical component to a healthy life and future, and Glofox helps gyms deliver it better.
Octopus Investment dates:
Initial investment in May 2019 and a follow‑on investment in August 2021
ManyPets
www.manypets.com
ManyPets (formerly known as Bought By Many) was founded in 2012 to provide a fairer, more transparent and digital-first pet insurance experience.
- MoneyFacts Pet Insurance Provider of the Year 2021 and has a 4.7 out of 5 score on Feefo
- The pet insurance industry is estimated to be worth £24 billion by 2030, compared to £4.3 billion in 2018
It has become one of the fastest-growing insurance businesses in Europe by engaging with key market pain points. The company pursued a customer-led approach to solve the problem of unsatisfactory product design, which disregarded specific customer needs. It also set out to redress a general lack of innovation in the market, using technology to drive its pricing and analytics, and put customer experience at the heart of its focus. In 2021, ManyPets, which operates in the UK and Sweden, also launched in the US, and is now live in 28 States. In the same year, the company raised $350 million and was valued at more than $2 billion.
Octopus investment dates:
Initial investment October 2016 and further follow-on investments including the 2021 Series D fundraise
Top 10
Supporting our portfolio companies
We are pleased to report a net uplift in the value of the portfolio of £309 million since 31 December 2020, excluding additions and disposals. This represents a 38% return on the value of the portfolio at the start of the year. Here, we set out the cost and valuation of the top 10 holdings, which account for over 47% of the value of the portfolio.
1
ManyPets
www.manypets.com
An award-winning insurtech company with a specific focus on providing better pet insurance for everyone.
| Initial investment date: | October 2016 |
| Investment cost: | £9,978,000 |
| Valuation: | £146,915,000 |
| Valuation movement (CY vs PY valuation) | £62,275,000 |
| Last submitted accounts: | 31 March 2021 |
| Turnover: | £35,029,000 |
| Loss before tax: | £(22,328,000) |
| Net assets: | £38,098,000 |
| Valuation methodology | Revenue multiple |
2
Cazoo
www.cazoo.com
Cazoo’s aim is to deliver the best selection, value and experience for used car buyers.
| Initial investment date: | November 2018 |
| Investment cost: | £5,000,000 |
| Valuation: | £76,654,000 |
| Valuation movement (CY vs PY valuation) | £23,821,000 |
| Last submitted accounts: | 31 December 2020 |
| Turnover: | £162,200,000 |
| Loss before tax: | £(92,400,000) |
| Net assets: | £74,700,000 |
| Valuation methodology | Quoted price |
3
Permutive
www.permutive.com
Permutive’s publisher data platform gives its customers an in-the-moment view of everyone on their site.
| Initial investment date: | May 2015 |
| Investment cost: | £18,994,000 |
| Valuation: | £49,543,000 |
| Valuation movement (CY vs PY valuation) | £16,220,000 |
| Last submitted accounts: | Not available1 |
| Turnover: | Not available1 |
| Loss before tax: | Not available1 |
| Net assets: | Not available1 |
| Valuation methodology | Last round |
- These are numbers per latest public filings and latest figures have not been disclosed.
4
Amplience
www.amplience.com
Amplience is a leading Headless Content Management System, which powers retailers’ digital channels.
| Initial investment date: | December 2010 |
| Investment cost: | £13,634,000 |
| Valuation: | £46,657,000 |
| Valuation movement (CY vs PY valuation) | £(13,240,000) |
| Last submitted accounts: | 30 June 2021 |
| Turnover: | £11,737,000 |
| Loss before tax: | £(2,019,000) |
| Net assets: | £(6,840,000) |
| Valuation methodology | Current round |
5
Quit Genius
www.quitgenius.com
A digital health solution for managing substance use disorders.
| Initial investment date: | January 2020 |
| Investment cost: | £12,890,000 |
| Valuation: | £29,891,000 |
| Valuation movement (CY vs PY valuation) | £17,305,000 |
| Last submitted accounts: | Not available1 |
| Turnover: | Not available1 |
| Loss before tax: | Not available1 |
| Net assets: | Not available1 |
| Valuation methodology | Last round |
- These are numbers per latest public filings and latest figures have not been disclosed.
6
Chronext
www.chronext.co.uk
Chronext is an online marketplace for new and used watches.
| Initial investment date: | May 2016 |
| Investment cost: | £7,708,000 |
| Valuation: | £28,313,000 |
| Valuation movement (CY vs PY valuation) | £18,423,000 |
| Last submitted accounts: | Not available1 |
| Turnover: | Not available1 |
| Loss before tax: | Not available1 |
| Net assets: | Not available1 |
| Valuation methodology | Revenue multiple |
- These are numbers per latest public filings and latest figures have not been disclosed.
7
Big Health
www.bighealth.com
A digital medicine company delivering cognitive behavioural therapy to sufferers of mental health problems.
| Initial investment date: | June 2016 |
| Investment cost: | £12,855,000 |
| Valuation: | £26,461,000 |
| Valuation movement (CY vs PY valuation) | £11,443,000 |
| Last submitted accounts: | 31 December 2020 |
| Turnover: | Not available1 |
| Loss before tax: | Not available1 |
| Net assets: | £34,865,000 |
| Valuation methodology | Last round |
- These are numbers per latest public filings and latest figures have not been disclosed.
8
Elliptic
www.elliptic.co
Empowers financial institutions and crypto businesses to manage risk and meet Anti Money Laundering regulatory compliance.
| Initial investment date: | July 2014 |
| Investment cost: | £7,724,000 |
| Valuation: | £22,283,000 |
| Valuation movement (CY vs PY valuation) | £4,467,000 |
| Last submitted accounts: | 31 March 2020 |
| Turnover: | Not available1 |
| Loss before tax: | £(8,606,000) |
| Net assets: | £15,083,000 |
| Valuation methodology | Last round |
- These are numbers per latest public filings and latest figures have not been disclosed.
9
Ometria
www.ometria.com
Mobilises real-time AI and aggregates data to create tailored experiences based on shoppers’ behaviours.
| Initial investment date: | August 2019 |
| Investment cost: | £11,510,000 |
| Valuation: | £21,632,000 |
| Valuation movement (CY vs PY valuation) | £7,527,000 |
| Last submitted group accounts: | 31 December 2020 |
| Consolidated turnover: | £6,912,000 |
| Consolidated loss before tax: | £(5,903,000) |
| Consolidated net assets: | £9,067,000 |
| Valuation methodology | Last round |
10
Elvie
www.elvie.com
Elvie’s mission is to improve women’s lives through smarter technology.
| Initial investment date: | November 2016 |
| Investment cost: | £6,417,000 |
| Valuation: | £20,145,000 |
| Valuation movement (CY vs PY valuation) | £1,567,000 |
| Last submitted group accounts: | 31 December 2020 |
| Consolidated turnover: | £36,527,000 |
| Consolidated loss before tax: | £(16,727,000) |
| Consolidated net assets: | £3,532,000 |
| Valuation methodology | Revenue multiple |
The following companies are not in the top 10 this year but were in the top 10 in 2020: Depop; WaveOptics; Zenith Holding Company; and Trouva. Of these, Depop and WaveOptics were sold. Proceeds from the sale of Calastone in 2020 were distributed from Zenith Holding Company back to Titan in 2021 and so it is no longer a top 10 holding. Trouva’s valuation has fallen due to a decline in its trading performance.
Risks and risk management
The Board assesses the risks faced by Titan and as a board, reviews the mitigating controls and actions and monitors effectiveness of these controls and actions.
Emerging and principal risks, and risk management
Emerging risks
The Board has considered emerging risks. The Board seeks to mitigate emerging risks and those noted below by setting policy, regular review of performance and monitoring progress and compliance. In the mitigation and management of these risks, the Board applies the principles detailed in the Financial Reporting Council’s Guidance on Risk Management, Internal Control and Related Financial and Business Reporting.
The following are some of the potential emerging risks management and the Board are currently monitoring:
- Adverse changes in global macro-economic environment
- High market valuation
- Geo-political protectionism
- Climate change
Principal risks
| Risk | Mitigation | Change |
| Investment performance: | ||
| The focus of Titan’s investments is into unquoted, small and medium‑sized VCT qualifying companies which, by their nature, entail a higher level of risk and shorter cash runway than investments in larger quoted companies. | Octopus has significant experience and a strong track record of investing in early-stage unquoted companies, and appropriate due diligence is undertaken on every new investment. A member of the Octopus Ventures team is typically appointed to the board of an investee company, and regular board reports are prepared by the investee management and examined by the Manager. This arrangement, in conjunction with its portfolio talent team’s active involvement, allows Titan to play a prominent role in a portfolio company’s ongoing development and strategy. This includes the impact of Covid-19, and the current situation in Ukraine, on portfolio companies. The overall risk in the portfolio is mitigated by maintaining a wide spread of holdings in terms of financing stage, age, industry sector and business models. The Titan Board reviews the investment portfolio with the Portfolio Manager on a regular basis. The Portfolio Manager is incentivised to ensure Titan performs well, via a Performance Incentive Fee (charged annually) for exceeding certain performance hurdles. | A reduction overall, reflecting the end of restrictions relating to the Covid-19 pandemic, countered in part by an increase in risk as a result of the situation in Ukraine. |
| Risk | Mitigation | Change |
| VCT qualifying status: | ||
| Titan is required at all times to observe the conditions for the maintenance of approved VCT status. The loss of such approval could lead to Titan and its investors losing access to the various tax benefits associated with VCT status and investment. | Octopus tracks Titan’s qualifying status throughout the year, and reviews this at key points including investment, realisation, and at each monthly reporting date. This status is reported to the Board at each Board meeting. The Titan Board has also engaged external independent advisers to undertake an independent VCT status monitoring role. | No change |
| Risk | Mitigation | Change |
| Loss of key people: | ||
| The loss of key investment staff by the Portfolio Manager could lead to poor fund management and/or performance due to lack of continuity or understanding of Titan. | The Portfolio Manager has a broad team experienced in and focused on early-stage investing. This mitigates the risk of any one individual with the required skill set and knowledge of Venture Capital investing, and the portfolio specifically, leaving. Key investment staff are also incentivised via the performance incentive fee. | No change |
| Risk | Mitigation | Change |
| Operational: | ||
| The Titan Board is reliant on the Portfolio Manager to manage investments effectively, and manage the services of a number of third parties, in particular the registrar, depositary and tax advisers. A failure of the systems or controls at Octopus or third-party providers could lead to an inability to provide accurate reporting and accounting and to ensure adherence to VCT rules. | The Titan Board reviews the system of internal controls, both financial and non-financial, operated by Octopus (to the extent the latter are relevant to Titan’s internal controls). These include controls designed to ensure that Titan’s assets are safeguarded and that proper accounting records are maintained. Octopus has operated effectively throughout the Covid-19 lockdowns with staff working online and mostly based at home. There have been some operational issues with other service providers which are being addressed directly with them. | No change |
| Risk | Mitigation | Change |
| Information security: | ||
| A loss of key data could result in a data breach and fines. The Titan Board is reliant on Octopus and third parties to take appropriate measures to prevent a loss of confidential customer information. | Annual due diligence is conducted on third parties which includes a review of their controls for information security. Octopus has a dedicated information security team and a third party is engaged to provide continual protection in this area. A security framework is in place to help prevent malicious events. | New risk added |
| Risk | Mitigation | Change |
| Economic: | ||
| Events such as an economic recession and movement in interest rates could adversely affect some smaller companies’ valuations, as they may be more vulnerable to changes in trading conditions or the sectors in which they operate. This could result in a reduction in the value of Titan’s assets. Such events include the potential impacts of the Covid-19 pandemic. | Titan invests in a diverse portfolio of companies, across a range of sectors, which helps to mitigate against the impact on any one sector. Titan also maintains adequate liquidity to ensure that it can continue to provide follow‑on investment to those portfolio companies which require it and which is supported by the individual investment case. | A reduction overall, reflecting the end of restrictions relating to the Covid-19 pandemic, countered in part by an increase in risk as a result of the situation in Ukraine. |
| Risk | Mitigation | Change |
| Legislative: | ||
| A change to the VCT regulations could adversely impact Titan by restricting the companies Titan can invest into under its current strategy. Similarly, changes to VCT tax reliefs for investors could make VCTs less attractive and impact Titan’s ability to raise further funds. | The Portfolio Manager engages with HMT and industry bodies to demonstrate the positive benefits of VCTs in terms of growing early-stage companies, creating jobs and increasing tax revenue, and to help shape any change to VCT legislation. The changes to VCT regulations in 2018 largely benefitted Titan as there were increased annual and lifetime investment limits introduced for Knowledge Intensive companies (i.e. those that have a high proportion of Research & Development or innovation spend), and many of the companies in which Titan invests qualify as such companies. The ‘sunset clause’ in 2025 means that the government will need to renew the legislation to allow VCTs to continue operating under the current legislation. | No change |
| Risk | Mitigation | Change |
| Liquidity: | ||
| The risk that Titan’s available cash will not be sufficient to meet its financial obligations. Titan invests into smaller unquoted companies, which are inherently illiquid as there is no readily available market for these shares. Therefore, these may be difficult to realise for their fair market value at short notice. | Titan’s liquidity risk is managed on a continuing basis by Octopus in accordance with policies and procedures agreed by the Board. Titan’s overall liquidity risks are monitored on a quarterly basis by the Board, with frequent budgeting and close monitoring of available cash resources. Titan maintains sufficient investments in cash and readily realisable securities to meet its financial obligations. At 31 December 2021, these investments were valued at £198,373,000 (2020: £227,052,000), which represents 14% (2020: 22%) of the net assets of Titan. | No change |
| Risk | Mitigation | Change |
| Valuation: | ||
| The portfolio investments are valued in accordance with International Private Equity and Venture Capital (IPEV) valuation guidelines. This means companies are valued at fair value. As the portfolio comprises smaller unquoted companies, establishing fair value can be difficult due to the lack of a readily available market for the shares of such companies and the potentially limited number of external reference points. | Valuations of portfolio companies are performed by appropriately experienced staff, with detailed knowledge of both the portfolio company and the market it operates in. These valuations are then subject to review and approval by Octopus’ Valuation Committee, comprised of staff who are independent of Octopus Ventures with relevant knowledge of unquoted company valuations, as well as Titan’s Board of directors. The IPEV guidelines were revised in March 2020 to cater for the Covid-19 pandemic and these were applied as at 30 June 2021 and 31 December 2021. | A reduction overall, reflecting the end of restrictions relating to the Covid-19 pandemic, countered in part by an increase in risk as a result of the situation in Ukraine. |
| Risk | Mitigation | Change |
| Foreign currency exposure: | ||
| Investments held and revenues generated in other currencies may not generate the expected level of returns due to changes in foreign exchange rates. | Octopus and the Board regularly review the exposure to foreign currency movement to ensure the level of risk is appropriately managed. Investments are primarily made in GBP, EUR and USD so exposure is limited to a small number of currencies. On realisation of investments held in foreign currencies, cash is translated to GBP shortly after receiving the proceeds to limit the amount of time exposed to foreign currency fluctuations. | New risk added Reflecting an increased USD exposure, in particular due to the listing of Cazoo and deferred consideration from the WaveOptics exit. |
Viability statement
In accordance with the FRC UK Corporate Governance Code published in 2018 and provision 36 of the AIC Code of Corporate Governance, the Directors have assessed the prospects of Titan over a period of five years, consistent with the expected investment hold period of a VCT investor. A fundraising was launched on 21 October 2020 and closed on 3 March 2021, raising £121 million. An additional fundraising for the tax year ending April 2022 was launched on 21 October 2021 and closed on 18 November 2022 having raised £202 million. Under VCT rules, subscribing investors are required to hold their investment for a five-year period in order to benefit from the associated tax reliefs. The Board regularly considers strategy, including investor demand for Titan’s shares, and a five-year period is considered to be a reasonable time horizon for this.
The Board carried out a robust assessment of the emerging and principal risks facing Titan and its current position. This includes the impact of the Covid-19 pandemic and any other risks which may adversely impact its business model, future performance, solvency or liquidity, and focused on the major factors which affect the economic, regulatory and political environment. Particular consideration was given to Titan’s reliance on, and close working relationship with, the Portfolio Manager. The principal risks faced by Titan and the procedures in place to monitor and mitigate them are set out above.
The Board has carried out robust stress testing of cash flows which included assessing the resilience of portfolio companies, including the requirement for any future financial support and the ability to pay dividends, and buybacks.
The Board has additionally considered the ability of Titan to comply with the ongoing conditions to ensure it maintains its VCT qualifying status under its current investment policy.
Based on this assessment the Board confirms that it has a reasonable expectation that Titan will be able to continue in operation and meet its liabilities as they fall due over the five-year period to 31 December 2026. The Board is mindful of the ongoing risks and will continue to ensure that appropriate safeguards are in place, in addition to monitoring the cash flow forecasts to ensure Titan has sufficient liquidity.
Directors’ responsibilities statement
The Directors are responsible for preparing the Strategic Report, the Directors’ Report, the Directors’ Remuneration Report and the financial statements in accordance with applicable law and regulations. They are also responsible for ensuring that the Annual Report and Accounts include information required by the Listing Rules of the Financial Conduct Authority.
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 (GAAP), including Financial Reporting Standard 102 – ‘The Financial Reporting Standard Applicable in the United Kingdom and Republic of Ireland’ (FRS 102), (United Kingdom accounting standards and applicable law). 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 judgements 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, 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 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.
In so far as each of the Directors is aware:
- there is no relevant audit information of which the Company’s auditor is unaware; and
- the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.
The Directors are responsible for preparing the Annual Report and Accounts in accordance with applicable law and regulations. Having taken advice from the Audit Committee, the Directors are of the opinion that this report as a whole provides the necessary information to assess the Company’s 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.
The Directors confirm that, to the best of their knowledge:
- the financial statements, prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 102, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
- the Annual Report and Accounts (including the Strategic Report), give 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
John Hustler
Chair
21 April 2022
Income statement
| Year to 31 December 2021 | Year to 31 December 2020 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | ||
| Gain on disposal of fixed asset investments | — | 76,520 | 76,520 | — | 3,783 | 3,783 | |
| Gain on valuation of fixed asset investments | — | 232,864 | 232,864 | — | 104,930 | 104,930 | |
| (Loss)/gain on valuation of current asset investments | — | (1,475) | (1,475) | — | 4,352 | 4,352 | |
| Investment income | 500 | — | 500 | 843 | — | 843 | |
| Investment management fee | (1,033) | (19,635) | (20,668) | (764) | (14,508) | (15,272) | |
| Performance fee | — | (63,943) | (63,943) | — | (18,402) | (18,402) | |
| Other expenses | (7,295) | — | (7,295) | (5,070) | — | (5,070) | |
| Foreign exchange translation | — | 54 | 54 | — | 159 | 159 | |
| (Loss)/profit before tax | (7,828) | 224,385 | 216,557 | (4,991) | 80,314 | 75,323 | |
| Tax | — | — | — | — | — | — | |
| (Loss)/profit after tax | (7,828) | 224,385 | 216,557 | (4,991) | 80,314 | 75,323 | |
| (Loss)/earnings per share – basic and diluted | (0.7)p | 20.0p | 19.3p | (0.5)p | 8.3p | 7.8p | |
- 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.
The accompanying notes form an integral part of the financial statements.
Balance sheet
| As at 31 December 2021 | As at 31 December 2020 | ||||
| £’000 | £’000 | £’000 | £’000 | ||
| Fixed asset investments | 1,005,353 | 820,699 | |||
| Current assets: | |||||
| Money market funds | 88,126 | 137,170 | |||
| Corporate bonds | 110,247 | 89,882 | |||
| Applications cash1 | 2,630 | 3,613 | |||
| Cash at bank | 182,514 | 9,348 | |||
| Debtors | 53,443 | 6,178 | |||
| 436,960 | 246,191 | ||||
| Current liabilities | (69,272) | (23,655) | |||
| Net current assets | 367,688 | 222,536 | |||
| Net assets | 1,373,041 | 1,043,235 | |||
| Share capital | 129,850 | 107,502 | |||
| Share premium | 201,163 | 564,308 | |||
| Capital redemption reserve | 9,759 | 6,377 | |||
| Special distributable reserve | 642,873 | 150,007 | |||
| Capital reserve realised | (14,122) | (66,167) | |||
| Capital reserve unrealised | 439,790 | 309,706 | |||
| Revenue reserve | (36,272) | (28,498) | |||
| Total equity shareholders’ funds | 1,373,041 | 1,043,235 | |||
| NAV per share | 105.7p | 97.0p | |||
- Cash received from investors but not yet allotted.
The statements were approved by the Directors and authorised for issue on 21 April 2022 and are signed on their behalf by:
John Hustler
Chair
Statement of changes in equity
| Capital | Special | Capital | Capital | |||||
| Share | Share | redemption | distributable | reserve | reserve | Revenue | ||
| capital | premium | reserve | reserve1 | realised1 | unrealised | reserve1 | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| As at 1 January 2020 | 95,161 | 559,972 | 4,074 | 106,915 | (45,705) | 209,089 | (23,666) | 905,840 |
| Comprehensive income for the year: | ||||||||
| Management fees allocated as capital expenditure | — | — | — | — | (14,508) | — | — | (14,508) |
| Current year gain on disposal of fixed asset investments | — | — | — | — | 3,783 | — | — | 3,783 |
| Gain on fair value of fixed asset investments | — | — | — | — | — | 104,930 | — | 104,930 |
| Gain on fair value of current asset investments | — | — | — | — | — | 4,352 | — | 4,352 |
| Loss after tax | — | — | — | — | — | — | (4,991) | (4,991) |
| Performance fee | — | — | — | — | (18,402) | — | — | (18,402) |
| Total comprehensive income for the year | — | — | — | — | (29,127) | 109,282 | (4,991) | 75,164 |
| Contributions by and distributions to owners: | ||||||||
| Share issue (includes DRIS) | 14,644 | 122,292 | — | — | — | — | — | 136,936 |
| Share issue costs | — | (3,552) | — | — | — | — | — | (3,552) |
| Repurchase of own shares | (2,303) | — | 2,303 | (19,994) | — | — | — | (19,994) |
| Dividends paid (includes DRIS) | — | — | — | (51,318) | — | — | — | (51,318) |
| Total contributions by and distributions to owners | 12,341 | 118,740 | 2,303 | (71,312) | — | — | — | 62,072 |
| Other movements: | ||||||||
| Share premium cancellation | — | (114,404) | — | 114,404 | — | — | — | — |
| Transfer between reserves | — | — | — | — | 6,402 | (6,402) | — | — |
| Prior year fixed asset gains now realised | — | — | — | — | 2,263 | (2,263) | — | — |
| Foreign exchange translation | — | — | — | — | — | — | 159 | 159 |
| Total other movements | — | (114,404) | — | 114,404 | 8,665 | (8,665) | 159 | 159 |
| Balance as at 31 December 2020 | 107,502 | 564,308 | 6,377 | 150,007 | (66,167) | 309,706 | (28,498) | 1,043,235 |
- Reserves are available for distribution, subject to the restrictions.
| Capital | Special | Capital | Capital | |||||
| Share | Share | redemption | distributable | reserve | reserve | Revenue | ||
| capital | premium | reserve | reserve1 | realised1 | unrealised | reserve1 | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| As at 1 January 2021 | 107,502 | 564,308 | 6,377 | 150,007 | (66,167) | 309,706 | (28,498) | 1,043,235 |
| Comprehensive income for the year: | ||||||||
| Management fees allocated as capital expenditure | — | — | — | — | (19,635) | — | — | (19,635) |
| Current year gain on disposal of fixed asset investments | — | — | — | — | 76,520 | — | — | 76,520 |
| Gain on fair value of fixed asset investments | — | — | — | — | — | 232,864 | — | 232,864 |
| Loss on fair value of current asset investments | — | — | — | — | — | (1,475) | — | (1,475) |
| Loss after tax | — | — | — | — | — | — | (7,828) | (7,828) |
| Performance fee | — | — | — | — | (63,943) | — | — | (63,943) |
| Total comprehensive income for the year | — | — | — | — | (7,058) | 231,389 | (7,828) | 216,503 |
| Contributions by and distributions to owners: | ||||||||
| Share issue (includes DRIS) | 25,730 | 264,963 | — | — | — | — | — | 290,693 |
| Share issue costs | — | (6,956) | — | — | — | — | — | (6,956) |
| Repurchase of own shares | (3,382) | — | 3,382 | (34,519) | — | — | — | (34,519) |
| Dividends paid (includes DRIS) | — | — | — | (93,767) | (42,202) | — | — | (135,969) |
| Total contributions by and distributions to owners | 22,348 | 258,007 | 3,382 | (128,286) | (42,202) | — | — | 113,249 |
| Other movements: | ||||||||
| Share premium cancellation | — | (621,152) | — | 621,152 | — | — | — | — |
| Transfer between reserves | — | — | — | — | — | — | — | — |
| Prior year fixed asset gains now realised | — | — | — | — | 101,305 | (101,305) | — | — |
| Foreign exchange translation | — | — | — | — | — | — | 54 | 54 |
| Total other movements | — | (621,152) | — | 621,152 | 101,305 | (101,305) | 54 | 54 |
| Balance as at 31 December 2021 | 129,850 | 201,163 | 9,759 | 642,873 | (14,122) | 439,790 | (36,272) | 1,373,041 |
- Reserves are available for distribution, subject to the restrictions tabled.
Cash flow statement
| Year to 31 December | Year to 31 December | ||
| 2021 | 2020 | ||
| £’000 | £’000 | ||
| Reconciliation of profit to cash flows from operating activities | |||
| Profit before tax | 216,557 | 75,323 | |
| Increase in debtors | (28) | (3,193) | |
| Increase in creditors | 46,600 | 490 | |
| Loss/(gain) on valuation of current assets | 1,475 | (4,352) | |
| Gain on disposal of fixed asset investments | (76,520) | (3,783) | |
| Gain on valuation of fixed asset investments | (232,864) | (104,930) | |
| Outflow from operating activities | (44,780) | (40,445) | |
| Cash flows from investing activities | |||
| Purchase of current asset investments | (21,840) | (5,205) | |
| Purchase of fixed asset investments | (142,831) | (95,792) | |
| Sale of fixed asset investments | 220,324 | 23,915 | |
| Inflow/(outflow) from investing activities | 55,653 | (77,082) | |
| Cash flows from financing activities | |||
| Movement in applications account | (983) | (1,952) | |
| Dividends paid (net of DRIS) | (101,976) | (46,037) | |
| Purchase of own shares | (34,519) | (19,994) | |
| Share issues | 256,700 | 131,655 | |
| Share issue costs | (6,956) | (3,552) | |
| Inflow from financing activities | 112,266 | 60,120 | |
| Increase/(decrease) in cash and cash equivalents | 123,139 | (57,407) | |
| Opening cash and cash equivalents | 150,131 | 207,538 | |
| Closing cash and cash equivalents | 273,270 | 150,131 | |
| Cash and cash equivalents comprise | |||
| Cash at bank | 182,514 | 9,348 | |
| Applications cash | 2,630 | 3,613 | |
| Money market funds | 88,126 | 137,170 | |
| Closing cash and cash equivalents | 273,270 | 150,131 |
Notes to the financial statements
1. Principal accounting policies
Titan is a Public Limited Company (plc) incorporated in England and Wales and its registered office is at 6th Floor, 33 Holborn, London EC1N 2HT.
Titan has been approved as a Venture Capital Trust by HMRC under Section 259 of the Income Taxes Act 2007. The shares of Titan were first admitted to the Official List of the UK Listing Authority and trading on the London Stock Exchange on 28 December 2007 and can be found under the TIDM code OTV2. Titan is premium listed.
The principal activity of Titan is to invest in a diversified portfolio of UK smaller companies in order to generate capital growth over the long term as well as an attractive tax-free dividend stream.
The financial statements are presented in sterling (£) to the nearest £’000. The functional currency is also sterling (£).
Basis of preparation
The financial statements have been prepared on a going concern basis under the historical cost convention, except for the measurement at fair value of certain financial instruments, and in accordance with UK Generally Accepted Accounting Practice (GAAP), including Financial Reporting Standard 102 – ‘The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland’ (‘FRS 102’), and with the Companies Act 2006 and the Statement of Recommended Practice (SORP) ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts (April 2021)’.
Subsidiaries
Zenith Holding Company is a subsidiary of Titan, but owing to the exemption permitted under FRS 102 to not have to consolidate investment companies held as part of an investment portfolio (Section 9 of FRS 102, paragraphs 9.9(b) and 9.9B), Titan has not consolidated the assets and liabilities of Zenith Holding Company.
2. Investment income
Accounting policy
Investment income includes interest earned on money market funds. Dividend income is shown net of any related tax credit.
Dividends receivable are brought into account when Titan’s right to receive payment is established and there is no reasonable doubt that payment will be received. Fixed returns on debt and money market funds are recognised so as to reflect the effective interest rate, provided there is no reasonable doubt that payment will be received in due course.
Disclosure
| Year to | Year to | |
| 31 December | 31 December | |
| 2021 | 2020 | |
| £’000 | £’000 | |
| Money market funds | 3 | 476 |
| Loan note interest receivable | 497 | 367 |
| Total income | 500 | 843 |
3. Investment management fees
Accounting policy
For the purposes of the revenue and capital columns in the income statement, the management fee has been allocated 5% to revenue and 95% to capital, in line with the Board’s expected long-term return in the form of income and capital gains respectively from Titan’s investment portfolio.
Disclosure
| Year to 31 December 2021 | Year to 31 December 2020 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| Investment | ||||||
| management fee | 1,033 | 19,635 | 20,668 | 764 | 14,508 | 15,272 |
| Performance fee | — | 63,943 | 63,943 | — | 18,402 | 18,402 |
| Total | 1,033 | 83,578 | 84,611 | 764 | 32,910 | 33,674 |
The performance fee has been wholly attributed to capital.
The Portfolio Manager provides investment management services through agreements with Octopus AIF Management Limited and Titan. It also provides accounting and administration services to Titan under an administration agreement. No compensation is payable if the agreement is terminated by either party, if the required notice period is given. The fee payable, should insufficient notice be given, will be equal to the fee that would have been paid should continuous service be provided, or the required notice period was given. The basis upon which the management fee is calculated is disclosed within the Annual Report and financial statements.
4. Other expenses
Accounting policy
Other expenses are accounted for on an accruals basis and are charged wholly to revenue.
The transaction costs incurred when purchasing or selling assets are written off to the Income statement in the period that they occur.
| Year to | Year to | |
| 31 December | 31 December | |
| 2021 | 2020 | |
| £’000 | £’000 | |
| Ongoing adviser charges and trail commission | 3,202 | 2,210 |
| Accounting and administration services | 1,723 | 1,674 |
| Impairment of accrued loan note interest receivable | 572 | — |
| Listing fees | 447 | 94 |
| Depositary fees | 278 | 240 |
| Registrar’s fees | 188 | 120 |
| Directors’ remuneration1 | 179 | 155 |
| D&O insurance | 143 | 83 |
| Audit fees | 104 | 85 |
| Other fees | 459 | 409 |
| Total | 7,295 | 5,070 |
1. Includes employers’ NI.
Total ongoing charges are capped at 2.5% of net assets. For the year to 31 December 2021 the ongoing charges were 2.0% of net assets (2020: 1.9%). This is calculated by summing the expenses incurred in the period (excluding ongoing IFA charges and non-recurring expenses) divided by the average NAV throughout the period.
5. Tax on ordinary activities
Accounting policy
Corporation tax payable is applied to profits chargeable to corporation tax, if any, at the current rate. The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue return on the ‘marginal’ basis as recommended in the SORP.
Deferred tax is recognised in respect of all timing differences at the reporting date. Timing differences are differences between taxable profits and total income as stated in the financial statements that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements.
Disclosure
The corporation tax charge for the period was £nil (2020: £nil).
| Year to | Year to | |
| 31 December | 31 December | |
| 2021 | 2020 | |
| £’000 | £’000 | |
| Profit on ordinary activities before tax | 216,557 | 75,325 |
| Current tax at 19% (2020: 19%) | 41,146 | 14,312 |
| Effects of: | ||
| Non‑taxable income | (11) | (16) |
| Non‑taxable capital gains | (58,503) | (21,483) |
| Non‑deductible expenses | 47 | 38 |
| Zenith Holding Company distribution1 | 4,750 | — |
| Excess management expenses on which deferred tax not recognised | 16,540 | 7,149 |
| Tax rate differences2 | (3,969) | — |
| Total current tax charge | — | — |
2. £25 million was distributed from Zenith Holding Company to Titan following the sale of Calastone, which is taxable income for Titan.
3. Tax rate difference due to tax charge for the year being calculated at 19% and excess management expenses on which deferred tax is not recognised being calculated at 25%.
Unrelieved tax losses of £164,870,000 (2020: £98,709,000) are estimated to be carried forward at 31 December 2021 (subject to completion of Titan’s tax return) and are available for offset against future taxable income, subject to agreement with HMRC. Titan has not recognised the deferred tax asset of £41,218,000 (2020: £18,755,000) in respect of these tax losses because there is insufficient forecast taxable income in excess of deductible expenses to utilise these losses carried forward.
Approved VCTs are exempt from tax on capital gains. As the Directors intend for Titan to continue to maintain its approval as a VCT through its affairs, no current deferred tax has been recognised in respect of any capital gains or losses arising on the revaluation or disposal of investment.
6. Dividends
Accounting policy
Dividends payable are recognised as distributions in the financial statements when Titan’s liability to make the payment has been established. This liability is established on the record date, the date on which those shareholders on the share register are entitled to the dividend.
Disclosure
| Year to | Year to | |
| 31 December | 31 December | |
| 2021 | 2020 | |
| £’000 | £’000 | |
| Dividends paid in the year | ||
| Previous year’s second interim dividend – 3p (2020: 3.0p) | 33,629 | 30,494 |
| Current period’s interim dividend – 8p (2020: 2.0p) | 102,340 | 20,824 |
| 135,969 | 51,318 | |
| Dividends in respect of the year | ||
| Interim dividend paid – 8p (2020: 2.0p) | 102,340 | 20,824 |
| Second interim dividend – 3p (2020: 3.0p) | 38,955 | 33,629 |
| 141,295 | 54,453 |
The figures above include dividends elected to be reinvested through DRIS.
The second interim dividend of 3p for the period ending 31 December 2021 will be paid on 17 May 2022 to shareholders on the register on 29 April 2022.
7. Earnings per share
| Year to 31 December 2021 | Year to 31 December 2020 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| (Loss)/profit attributable to Ordinary shareholders (£’000) | (7,828) | 224,385 | 216,557 | (4,991) | 80,314 | 75,323 |
| (Loss)/profit per Ordinary share (p) | (0.7)p | 20.0p | 19.3p | (0.5)p | 8.3p | 7.8p |
The total earnings per share is based on 1,122,053,322 (2020: 965,043,861) Ordinary shares, being the weighted average number of Ordinary shares in issue during the period.
There are no potentially dilutive capital instruments in issue and so no diluted return per share figures are relevant. The basic and diluted earnings per share are therefore identical.
8. Net Asset Value per share
| 31 December | 31 December | |
| 2021 | 2020 | |
| Ordinary shares | Ordinary shares | |
| Net assets (£) | 1,373,040,000 | 1,043,235,000 |
| Shares in issue | 1,298,498,396 | 1,075,024,098 |
| NAV per share (p) | 105.7 | 97.0 |
9. Related party transactions
Titan owns Zenith Holding Company Limited, which owns a share in Zenith LP, a fund managed by Octopus.
Several members of the Octopus investment team hold non-executive directorships as part of their monitoring roles in Titan’s portfolio companies, but they have no controlling interests in those companies.
Mr Cooper, a Non-Executive Director of Titan, is also Chair of Octopus Capital Ltd and owns shares in Octopus Capital Ltd. The Directors received the following dividends from Titan:
| Year to | Year to | |
| 31 December | 31 December | |
| 2021 | 2020 | |
| £ | £ | |
| John Hustler (Chair) | 11,983 | 4,635 |
| Matt Cooper | 207,754 | 83,707 |
| Jane O’Riordan | 11,347 | 3,926 |
| Mark Hawkesworth | 10,659 | 4,845 |
| Tom Leader | 2,148 | 535 |
| Lord Rockley | 1,427 | — |
| Gaenor Bagley | 713 | — |
10. 2021 financial information
The figures and financial information for the year ended 31 December 2021 are extracted from the Company’s annual financial statements for the period and do not constitute statutory accounts. The Company’s annual financial statements for the year to 31 December 2021 have been audited but have not yet been delivered to the Registrar of Companies. The Auditors’ report on the 2021 annual financial statements was unqualified, did not include a reference to any matter to which the auditors drew attention without qualifying the report, and did not contain any statements under Sections 498(2) or 498(3) of the Companies Act 2006.
11. 2020 financial information
The figures and financial information for the year ended 31 December 2020 are compiled from an extract of the published financial statements for the period and do not constitute statutory accounts. Those financial statements have been delivered to the Registrar of Companies and included the Auditors’ report which was unqualified, did not include a reference to any matter to which the auditors drew attention without qualifying the report, and did not contain any statements under Sections 498(2) or 498(3) of the Companies Act 2006.
12. Annual Report and financial statements
The Annual Report and financial statements will be posted to shareholders in early May and will be available on the Company’s website, octopustitanvct.com. The Notice of Annual General Meeting is contained within the Annual Report.
13. General information
Registered in England & Wales. Company No. 06397765
LEI: 213800A671KGG6PVYW75
14. Directors
John Hustler (Chair), Jane O’Riordan, Matt Cooper, Tom Leader, Lord Rockley and Gaenor Bagley.
15. Secretary and registered office
Octopus Company Secretarial Services Limited
33 Holborn, London EC1N 2HT
