Recent results
On 19March we announced the unaudited NAV for the year to 31 December 2020 which can be found here. The total return for the year to 31 December 2020 is 7.1%. The recent published results and Chairman’s statement can be found here. The report includes more detailed information on the portfolio, as well as Octopus’ and the Board’s view on the outlook for the VCT.
| Year to 31 December | 2016 | 2017 | 2018 | 2019 | 2020 |
| Total Return 1 | 4.1% | 3.7% | 1.7% | 7.6% | 7.1% |
| Dividend Yield 2 | 8.8% | 5.1% | 5.2% | 5.4% | 5.3% |
| Total Value 3 | 158.9p | 162.5p | 164.1p | 171.2p | 178.0p |
Coronavirus
The roll-out of the vaccine will soon begin to bite and, while the finishing line remains uncertainly distant, the long-term view is positive both from a founder and buyer perspective. As a fund that invests for the medium/long term, greater certainty and visibility is a positive. A return to normality will of course be best for the portfolio overall, but there is and has been massive entrepreneurial innovation almost everywhere we look. Digital health was already growing before the pandemic, but the pace of change and adoption has accelerated rapidly in the last twelve months and this will undoubtedly continue. E-commerce is another area that’s booming, with some sectors experiencing a decade of growth in a few months. This is a trend that has benefited the likes of portfolio company Depop, an online fashion market; Allplants, who make plant-based ready meals available to buy online and also Patch, an online plant retailer.
We see the significant and positive impact that our portfolio has had on the world during this challenging time. OLIO, for example, is a food sharing platform that aims to help solve the problem of food waste by connecting neighbours and local businesses with each other and local businesses so that surplus food can be shared and not thrown away. Within 26 hours of school closures being announced, the OLIO team had set up the #cook4kids initiative to provide meals for children who would otherwise go without.
Entrepreneurs are by nature quick to turn adversity into opportunity and we’ve seen enterprising management teams reap rewards. Streetbees, an app that tracks consumer attitudes to brands, found that when the pandemic hit, brands needed tools to find out about consumer attitudes while they are stuck at home. In October they announced a $30 million Series B round, attracting further investment from new investors to accelerate its survey platform.
Some companies in our portfolio have of course been more exposed to the difficult trading environment resulting from the pandemic, particularly those operating within the travel and leisure sectors. However, we do believe that a number of these businesses have the potential to overcome the issues they face and return to their ambitious growth plans. The acceleration of fundamental changes in the ways we live and work have only fed the ambitions of the most talented entrepreneurs. Cazoo, founded by Alex Chesterman (also the founder of Zoopla, a previous Titan investment), continues to pioneer the shift to online car buying in the UK. It has rapidly become one of the fastest growing UK businesses, generating revenues of over £150 million in its first year, having grown to a team of over 800 people and achieving a valuation of over £2 billion.
Team update
Titan’s investment strategy aims to back the next generation of pioneering entrepreneurs. Despite lockdown we have expanded our investment team by 45% with 9 new hires. In autumn we launched a new Consumer-focused investment team to sit alongside the Future of Health, Future of Money and Deep Tech pods. The new Consumer pod will provide a home for those startups that are typically consumer-facing. As an investment team, we have over a decade of experience backing consumer businesses and a deep knowledge of scaling to exit. Historic examples include Graze to Unilever, Tails.com to Nestle and listing Zoopla on the LSE. 2020 saw a global shift online, driven by Covid, along with still emerging, but far-reaching changes in consumer behavior. We believe 2021 will be the right time to back those pioneers ambitious enough to meet the new reality head-on and create the next generation of world-beating consumer-facing companies.
Deployment
Our levels of deployment are back up to pre-covid levels and we are on track to meet our deployment target. There have been some exciting new additions to the portfolio since our last update and a healthy pipeline of companies who we have signed term sheets with and are working through to completion.
Recent investments include:
- Altitude Angel: Drones have the potential to radically transform all sorts of industries. This team is on a mission to make it a reality.
- Whirli: This company’s vision for the future is a sharing marketplace for toys.
- Orbex: Space has become the provision of billionaires but Orbex is finding ways to put tech into orbit more cheaply and more sustainably.
- Katkin: Using technology to create personalised food for cats based on a range of inputs.
Further to the July 2020 update, we continue to place additional scrutiny on new investment opportunities through all stages of the investment process. These companies must be operating in a market that we believe is robust enough to thrive or withstand the ongoing effects of the coronavirus pandemic.
Realising our investment
In October we exited our investment in Calastone after a majority stake in the fund’s network was acquired by The Carlyle Group and the deal closed in December. Calastone was one of the first investments we made more than a decade ago, a fantastic example of VCT’s ability to provide patient capital, without which UK success stories like this might not exist.
Conclusion
In summary, the coronavirus pandemic continues to impact the Titan portfolio companies, positively and negatively. Across the portfolio, short term challenges have been turned into medium to long term advantages. We continue to work closely with all companies and are confident that many will emerge stronger when the effects of the pandemic abate.
Despite the pandemic we see all the signs of the next generation of tech giants emerging this side of the Atlantic. Europe has reached an entrepreneurial tipping point. There is now a fantastic mix of research and innovation, talent, experience, domestic and international venture capital. With this has come the belief and ambition to build European tech businesses worth hundreds of billions.
Reminder of the key risks
The value of investments discussed, and any income from them, can fall as well as rise. Investors may not get back the full amount they invest.
Tax treatment depends on an investor’s personal circumstances and may change in the future.
Tax reliefs depend on the VCT maintaining it’s VCT-qualifying status.
VCT shares could fall or rise in value more than other shares listed on the main market of the London Stock Exchange. They may also be harder to sell.
This advertisement is not a prospectus. Investors should only subscribe for shares based on information in the prospectus and Key Information Document (KID), which can be obtained from octopusinvestments.com.