TIDMMIX
RNS Number : 3845V
Mobeus Income & Growth VCT PLC
04 April 2023
MOBEUS INCOME & GROWTH VCT PLC
LEI: 213800HKOSEVWS7YPH79
Annual Report & Financial Statements for the Year Ended 31
December 2022
Results Announcement
The Company has today published on its website Mobeus Income
& Growth VCT plc the Annual Report and Financial Statements for
the year ended 31 December 2022.
The highlights Include:
As at 31 December 2022:
Net assets: GBP100.32 million
Net asset value ("NAV") per share: 64.01 pence
Net asset value ("NAV") total return(1) per share was (15.8)%(2)
.
Share price total return(1) per share was (8.8)%(3) .
Dividends paid and declared in respect of the financial year
totalled 8.00 pence per share. Cumulative dividends paid to date
since inception in 2004 stand at 156.80 pence per share.
GBP4.71 million was invested into four new growth capital
investments and six existing portfolio companies during the
year.
Net unrealised losses were GBP(19.52) million in the year.
The Company realised investments totalling GBP11.27 million of
cash proceeds and generated net realised gains in the year of
GBP0.96 million.
(1) Definitions of key terms and alternative performance
measures shown above and throughout this report are shown in the
Glossary of Terms.
(2) Further details on the NAV total return are shown in the
Performance and Key Performance Indicators section of the Strategic
Report.
(3) The difference in NAV and share price total returns arises
principally due to the timing of NAV announcements.
Strategic Report
Chairman's Statement
I am pleased to present the annual results for the Mobeus Income
& Growth VCT plc for the year ended 31 December 2022.
Overview
The Company's financial year took place against a backdrop of
significant political and economic disruption. The end of 2021
represented a high point for many technology and growth markets
which were subsequently impacted by global events such as the
Russian invasion of Ukraine, political turmoil in the UK and across
Europe as well as rising inflation and the associated increase in
interest rates. All of this has led to increased volatility and a
substantial downward re-rating of growth stocks across global
markets.
It appears that we are learning to live with higher inflation
and the Russian/Ukraine war as these have now morphed from one-off
shocks to become daily reality. Since the year-end, inflation has
moderated somewhat and, against predictions, the UK economy also
narrowly avoided recession. The forecast for 2023 however is that
the UK will still probably enter recession, although it may be
somewhat less severe than had been expected. This will likely
result in additional challenges for your portfolio companies,
particularly in respect of inflation and dampened customer demand.
Your Company is well prepared for most scenarios with its strong
liquidity available to support the portfolio and through extensive
planning and preparation by Gresham House with each of the
portfolio companies' management teams. The Company has continued to
provide finance to new and existing investee companies and
delivered two notable exits during the year in the form of Media
Business Insight (MBI) and Equip Outdoor Technologies (EOTH). The
recent equity disposal of EOTH in November was a particular high
point as we anticipate a quieter exit environment during 2023 than
in previous years.
The Board was pleased to learn of the commitment from the UK
Government to extend the VCT 'sunset clause' beyond the end date of
5 April 2025, although Shareholders should note the VCT industry
has seen no further detail provided to date and any extension will
most likely require parliamentary approval. This clause was due to
expire in 2025 and would have meant that investor income tax relief
would have no longer been available on new VCT subscriptions.
Performance
For the year ended 31 December 2022, the Company experienced a
negative NAV total return per share of (15.8)% (2021: +42.2%) and a
negative share price total return of (8.8)% (2021: +47.8%). This
difference in difference in NAV and share price total returns
arises principally due to the timing of NAV announcements and is
explained more fully under Performance in the Strategic Report.
The reduction in shareholder value over the financial year
resulted from falls in the valuation of the portfolio. This was
driven initially by lower benchmark market comparables and, more
recently, also by softening trading performance of investee
companies. This timing differential is due to markets very quickly
factoring in the impact of inflation and higher interest rates on
consumer spending and business investment. The full extent of the
impact of these on portfolio company trading will only emerge over
time.
At the year-end, the Company was ranked 1st over both five and
ten-year periods (out of 37 and 31 Generalist VCTs respectively) in
the Association of Investment Companies' analysis of NAV Total
Return (assuming dividends are reinvested). Shareholders should
note that the AIC's rankings are based on the latest available
published NAVs and therefore do not fully reflect the NAV per share
decrease up to 31 December 2022. For further details on the
performance of the Company, please refer to the Strategic
Report.
Dividends
The Board endeavours to meet the Company's annual dividend
target of at least 4.00 pence per share and provide an attractive
income stream to Shareholders. The Board was pleased to have
announced a second interim dividend of 4.00 pence per share, which
was paid on 7 November 2022 to Shareholders on the register on 16
September 2022.
This second interim dividend, together with a first interim
dividend of 4.00 pence per share paid on 15 July 2022, to
Shareholders on the register on 10 June 2022, brings dividends paid
and proposed in respect of the financial year ended 31 December
2022 to 8.00 pence per share. To date, cumulative dividends paid
since inception are 156.80 pence per share.
As reported in previous years, the continuing move of the
portfolio towards younger growth capital investments coupled with
the realisations of older, more mature companies that have provided
a good income yield, are likely to make dividends harder to achieve
from income and capital returns generated in any given year. Thus,
the Board continues to monitor the sustainability of the annual
dividend target. Shareholders should also note that there may
continue to be circumstances where the Company is required to pay
dividends in excess of income and capital gains in order to
maintain its regulatory status as a VCT, for example, to stay above
the minimum percentage of assets required to be held in qualifying
investments. Such dividends paid in excess of net income and
capital gains achieved will cause the Company's NAV per share to
reduce by a corresponding amount.
Following a query at the Annual General Meeting held in May
2022, the Board would like to inform Shareholders that it
periodically considers the potential for the Company to operate a
Dividend Investment Scheme. In line with previous considerations,
the Board has concluded that the costs still outweigh the potential
benefit to Shareholders and to the Company.
Investment Portfolio
The portfolio movements across the year were as follows:
2022 2021
GBPm GBPm
Opening portfolio value 79.81 51.14
New and further investments 4.71 7.54
Disposal proceeds (11.27) (15.23)
------- -------
Net realised gains 0.96 5.45
Valuation movements (19.52) 30.91
------- -------
Net investment portfolio (losses)/gains (18.56) 36.36
------- -------
Portfolio value at 31 December 54.69 79.81
------- -------
In the current changing environment, a number of investee
companies experienced a decline in consumer confidence with a
resultant impact on trading. There was a fall of GBP18.56 million
in the overall value of the portfolio across the year to 31
December 2022 (2021: increase of GBP36.36 million), or a fall of
(23.2)% on a like-for-like basis compared to the value of the
portfolio at the start of the year. Notably, almost half of the
fall of GBP18.56 million above relates to Virgin Wines which
declined by GBP8.71 million. Virgin is an AIM-listed investment,
which has suffered from the negative sentiment of its sector, in
spite of broadly positive news flows from the company itself and
relative outperformance versus its peers.
The negative NAV total return for the year principally comprised
unrealised falls in the value of investments still held of GBP19.52
million (primarily Virgin Wines, MyTutor and Buster & Punch)
partially mitigated by an uplift of Tharstern together with exit
proceeds from EOTH and MBI which contributed to net realised gains
of GBP0.96 million.
During the year, the Company invested a total of GBP4.71 million
into four new and six existing portfolio companies (2021: GBP7.54
million; four new, eight existing). New investments totalling
GBP2.44 million were made into:
Proximity Insight retail technology software;
Bidnamic a marketing technology business;
FocalPoint a GPS enhancement software supplier; and
Orri an intensive day care provider for adults with eating
disorders
Additional funding totalling GBP2.27 million was provided across
six existing portfolio companies:
Caledonian Leisure: a provider of UK leisure and experience breaks;
Northern Bloc: a dairy and allergen-free ice cream brand;
Rotageek: a workforce management software system;
Andersen EV: a provider of premium EV chargers;
Vivacity : an AI and Urban Traffic Control business; and
Bleach London: a hair colourants brand
The Company generated a total of GBP10.66 million in proceeds
from full and partial realisations alongside loan repayments and
other capital receipts of GBP0.61 million. The Company therefore
generated total proceeds of GBP11.27 million in the year to 31
December 2022. More detail on these realisations is provided.
In June 2022, the Company realised its investment in MBI
generating proceeds of GBP4.83 million from the sale (including
deferred proceeds and loan repayments made earlier in the year)
resulting in a realised gain in the year of GBP0.54 million. This
exit contributed to returns received over the life of the
investment amounting to GBP7.36 million, a 2.2x multiple of cost
and an IRR of 13.8%.
In October 2022, Andersen EV, the electric charger provider, was
compelled to enter into administration as a result of a substantial
deterioration in its trading conditions which resulted in a
realised loss of GBP(0.61) million being recognised during the
year. This was particularly disappointing as the Company, alongside
the other Mobeus VCTs, made a follow on investment into the company
in May 2022. The company had secured some impressive clients and
funding was provided to drive product development in a premium
brand which operated in the emerging electric car charging market.
However, over the summer months, a combination of global supply
issues, inflationary cost increases and the removal of Government
consumer support for the purchase of EV chargers quickly impacted
its ability to continue trading and so necessitated the appointment
of administrators. On 22 December 2022, Parsley Box Group PLC
delisted from the AIM market and the shares were cancelled. It has
subsequently re-registered as a private company.
The end of the year brought the pleasing exit of the equity in
EOTH, trading as Rab and Lowe Alpine, with amounts received on
completion totalling GBP6.89 million including preference share
dividends, generating a realised gain in the year of GBP0.49
million. Total proceeds received over the life of this investment
are GBP8.96 million to date, a 6.9x multiple of cost and an IRR of
23.2%. The Company has retained its interest yielding loan stock to
continue to generate income in the future.
Deferred proceeds from Red Paddle and Vectair were also received
in the year; both investments were realised in a previous year
generating realised gains totalling GBP0.55 million.
During these uncertain times, the management of the portfolio is
absolutely critical and the Investment Adviser is, and has been,
focused on deploying its Talent Management team to support its
investments. We continue to expect follow-on investments to remain
a significant feature of growth capital investments as they seek to
achieve scale and move to profitability. Follow-on investment
requests are subject to the same scrutiny as new deals and both
rely on certain criteria being met, including the HMRC Financial
Health Test.
Shareholders should be aware that this is an effective
tightening of the interpretation of HMRC policy and practice in a
technical aspect of the VCT financing rules, now resulting in the
restriction of potential follow-on investments to support certain
companies, where more than half their subscribed share capital has
been lost. In a small number of cases, this may result in the
Company not being able to make follow-on investments, even where a
compelling business case exists, which in turn could impact the
prospects of the portfolio company. The Board continues to monitor
developments in the interpretation of this area of legislation
carefully.
Since the year-end, the Company has invested GBP0.89 million
into two new investment companies, Connect Earth and Cognassist, in
March 2023. Also following the year-end, again in March 2023, the
sale of the Company's total holding in Tharstern Group Limited was
completed achieving a 2.6x return against cost over the life of the
investment.
Revenue account
The results for the year are set out in the Income Statement and
show a revenue return (after tax) of 1.03 pence per share (2021:
0.54 pence per share). The revenue return for the year of GBP1.42
million has increased from last year's comparable figure of GBP0.68
million. This is primarily the result of higher dividends received
from EOTH as well as loan interest that was not previously
recognised received upon the sale of MBI.
Liquidity & Fundraising
Cash and cash equivalents held by the Company as at 31 December
2022 amounted to GBP45.72 million, or 45.6% of net assets. The
Board continues to monitor credit risk in respect of its cash and
near cash resources and to prioritise the security and protection
of the Company's capital.
In January 2022, the Company completed a fundraise of GBP10
million for the 2021/2022 tax year which was fully subscribed in
less than 24 hours. This level of demand was pleasing, but the
Board was aware that a number of investors were left disappointed
having not been able to subscribe. Later in the year, on
considering the future cash requirements of the Company and the
potential demand for the Company's shares, the Board approved a
further fundraise for the 2022/23 tax year. Having provided a
period of time between the launch of the prospectus and acceptance
of applications, the Board was pleased that the initial amount of
GBP14m (as well as an over-allotment facility of a further GBP8m),
launched early in October 2022, was fully subscribed by 5 December
2022. Shares were allotted in November 2022 and February 2023 and
your Company extends a warm welcome to an equal mix of both new and
existing shareholders.
The fundraising launched in October 2022 was to ensure that the
Company retained adequate levels of liquidity to continue to take
advantage of new investment opportunities and fund further
expansion of the businesses in its investment portfolio; seeking
the delivery of attractive returns for its Shareholders, including
the payment of dividends; and buying back its shares from those
Shareholders who may wish to sell shares. It is not the intention
of the Board to conduct another fundraise in 2023.
Further details of the Company's investment activity and the
performance of the portfolio are contained in the Investment
Adviser's Review and the Investment Portfolio Summary of the Annual
Report.
Share buybacks
During the year, the Company bought back and cancelled 1,663,597
of its own shares (2021: 1,259,139), representing 1.1% of the
shares in issue at the beginning of the year (2021: 1.0%), at a
total cost of GBP1.07 million, inclusive of expenses (2021: GBP0.92
million). It is the Company's policy to cancel all shares bought
back in this way. The Board regularly reviews its buyback policy
and currently seeks to maintain the discount at which the Company's
shares trade at no more than 5% below the latest published NAV.
Shareholder Communications & Annual General Meeting
May I remind you that the Company has its own website which is
available at: www.migvct.co.uk .
Following the well-received virtual Shareholder Event held on 25
February 2022, the Investment Adviser held another successful
virtual Shareholder Event with a live Q&A session on 23 March
2023 with 280 attendees.
Your Board is pleased to be able to hold the next Annual General
Meeting ("AGM") of the Company in person at 1.00 pm on Wednesday,
24 May 2023 at the offices of the Company's solicitors, Shoosmiths
LLP, 1 Bow Churchyard, London EC4M 9DQ. A joint presentation with
Mobeus Income & Growth 4 VCT plc Shareholders by the Investment
Adviser will take place at 1.30 pm and a light lunch will be
available.
A webcast will also be available at the same time for those
Shareholders who cannot attend in person. However, please note that
you will not be able to vote via this method and you are encouraged
to return your proxy form before the deadline of 22 May 2023.
Information setting out how to join the meeting by virtual means
will be shown on the Company's website. For further details, please
see the Notice of the Meeting which can be found at the end of the
Annual Report & Financial Statements.
Fraud Warning
Shareholders continue to be contacted in connection with
sophisticated but fraudulent financial scams which purport to come
from or to be authorised by the Company. This is often by a phone
call or an email usually originating from outside of the UK,
claiming or appearing to be from a corporate finance firm offering
to buy your shares at an inflated price.
The Board strongly recommends Shareholders take time to read the
Company's Fraud warning section, including details of who to
contact, contained within the Information for Shareholders section
of the Annual Report.
Environmental, Social and Governance ("ESG")
The Board and the Investment Adviser believe that the
consideration of environmental, social and corporate governance
("ESG") factors throughout the investment cycle will contribute
towards enhanced Shareholder value.
Gresham House has a team which is focused on sustainability and
the Board views this as an opportunity to enhance the Company's
existing protocols and procedures through the adoption of the
highest industry standards.
The future FCA reporting requirements consistent with the Task
Force on Climate-related Financial Disclosures, which commenced on
1 January 2021, do not currently apply to the Company but will be
kept under review, the Board being mindful of any recommended
changes.
Consumer Duty
The Financial Conduct Authority (FCA) has introduced the concept
of Consumer Duty, the rules and principles of which come into
effect during the course of 2023. Consumer Duty is an advance on
the existing concept of 'treating customers fairly' and looks to
ensure good outcomes for purchasers of investment products.
As a quoted equity, VCTs and other investment trusts are not
themselves subject to Consumer Duty. But the investment adviser to
the Company, Gresham House, is in their role as promoter of the
VCTs, as are your financial adviser or any investment platform you
may use, if they are FCA regulated.
It is encumbent on all parties to uphold the principles behind
Consumer Duty and to that end we are working with the Investment
Adviser to review what information we should provide to assist
consumers and their advisers to discharge their obligations under
Consumer Duty.
Outlook
The geopolitical and economic context for the next year is
liable to be challenging although this can also provide an
opportunity for the Company to make high quality investments and
build strategic stakes in businesses with great potential for the
future. Notwithstanding the successful exit of EOTH in November,
the exit environment will most likely be subdued in comparison to
recent years. However, this is not seen as a significant issue
given that the Company is not time-limited. The combined impact of
inflation, interest rates and restrictions in Government spending
can be expected to impact both consumer and business confidence. We
therefore anticipate that further stresses will become evident
across the UK business population over the forthcoming year. We
expect that all sectors will be vulnerable, although the Company
has a reasonably large and diverse portfolio, managed by a
professional and capable investment team, which mitigates the
challenges that lie ahead.
I would like to take this opportunity once again to thank all
Shareholders for their continued support.
Clive Boothman
Chairman
4 April 2023
Investment Adviser's Report
Portfolio Review
Many quoted market values declined significantly in the year to
31 December 2022 and the current economic conditions continue to
create challenging circumstances. UK Business has seen both demand
and operating margins come under pressure in the face of widely
reported increases in inflation, interest rates and the associated
threat of recession. The impact of this is now being seen on
consumer confidence and business investment.
Portfolio value change in the early half of 2022 was therefore
characterised by declining market multiples with relatively stable
company level trading performance carried over in part from the
momentum gained during 2021. However, in the latter months of 2022
and into 2023, the situation has reversed. Markets and multiples
appear to be stabilising while value change has been driven by the
challenging economic conditions which have started to feed through
to portfolio company trading performance. The Company's investment
values have been insulated partially from market movements by the
preferred investment structures employed in many of the portfolio
companies. These act to moderate valuation swings and the net
result is a more modest decline in portfolio value.
Whilst inflation is moderating following the rises in base
rates, it is still at a very high level and therefore a recession
is expected in the UK during 2023 - albeit recent comment suggests
this may be shallower and shorter than originally feared. There are
also early signs that supply chains are returning to normality,
that the labour shortage is easing and that there are pockets of
positive market sentiment. The outlook is therefore mixed, and the
emphasis is thus on robust funding structures and on being prepared
for all eventualities. The Gresham House non-executive directors
who sit on each portfolio company board have responded by working
with their boards to ensure that appropriate scenario planning has
been done to achieve the best results during these uncertain times.
There is also now a greater focus on cash management and capital
efficiency. With ample liquidity following the recent fund raise,
the Company is also well placed to support portfolio companies with
follow-on funding where it is appropriate and can be done on
attractive terms.
There are some specific highs in the portfolio such as
Preservica which continues to see strong trading and is
out-performing budget. The partial exit from EOTH was also an
excellent result after a long running process which had to
negotiate numerous economic and geo-political hurdles. By contrast,
there were also some significant falls. The largest was at Virgin
Wines, where market sentiment shifted heavily against the whole
sector despite Virgin itself outperforming its peers. MyTutor was
also impacted by declining sector multiples combined with slower
than anticipated growth over the year.
The portfolio movements in the year are summarised as
follows:
2022 2021
GBPm GBPm
Opening portfolio value 79.81 51.14
-------- --------
New and follow-on investments 4.71 7.54
-------- --------
Disposal proceeds (11.27) (15.23)
-------- --------
Net investment portfolio movement in the
year (18.56) 36.36
-------- --------
Portfolio value at 31 December 54.69 79.81
-------- --------
The Company made four new growth capital investments during the
year totalling GBP2.44 million:
Proximity Insight - GBP0.73 million. Retail technology software;
Bidnamic - GBP0.58 million. Marketing technology business;
FocalPoint - GBP0.60 million. A GPS enhancement software provider; and
Orri Limited - GBP0.53 million. An intensive day care provider
for adults with eating disorders.
These investments were made by all six VCTs managed by Gresham
House, including the two Baronsmead VCTs.
During the year, the Company also made follow-on investments
into six portfolio companies totalling GBP2.27 million, a breakdown
of which is included later in this review.
Two good exits were achieved during the year at MBI and EOTH. On
MBI, the Company received a total of GBP4.83 million in proceeds
during the year generating a realised gain of GBP0.54 million. For
EOTH the Company received a total of GBP5.83 million in proceeds
during the year producing a realised gain of GBP0.49 million and
the interest yielding loan stock was also retained. These were both
extremely successful investments which, over their lifetime,
produced returns of 2.2x and 6.9x as a multiple of the original
investment cost.
As alongside these successes, it was disappointing that Andersen
EV went into administration towards the end of the year despite
securing some large clients such as Porsche and JLR. Andersen
encountered very challenging trading conditions with substantially
reduced demand, supply chain issues, cost pressures and the removal
of government consumer support for the purchase of EV chargers. A
realised loss of GBP0.61 million was recognised during the
financial year as a result.
The investment and divestment activity during the year has
further increased the proportion of the portfolio comprised of
investments made since the 2015 VCT rule change to 80.3% by value
at the year-end (31 December 2021: 63.6%).
The portfolio's valuation changes in the year are summarised as
follows:
2022 2021
Investment Portfolio Capital Movement GBPm GBPm
-------
Increase in the value of unrealised investments 0.98 32.82
Decrease in the value of unrealised investments (20.50) (1.91)
---------------------------------------------------- ------- ------
Net (decrease)/increase in the value of unrealised
investments (19.52) 30.91
---------------------------------------------------- ------- ------
Realised gains 1.57 5.53
Realised losses (0.61) (0.08)
---------------------------------------------------- ------- ------
Net realised gains in the year 0.96 5.45
---------------------------------------------------- ------- ------
Net investment portfolio movement in the year (18.56) 36.36
---------------------------------------------------- ------- ------
New Investments during the year
The Company made four new investments totalling GBP2.44 million
during the year, as detailed below:
Date of Investment Amount of new
Company Business Investment (GBPm)
Proximity Insight Retail software February 2022 0.73
----------------------- -------------------- ----------------------------- ------------------
Proximity Insight (proximityinsight.com) is a retail technology
business that offers a 'Super-App' that is used by the
customer-facing teams of brands and retailers to engage, inspire
and transact with customers. Headquartered in London with offices
in New York and Sydney, Proximity Insight has a global client base
that includes over 20 brands, boutiques and department stores in
fashion, beauty, jewellery, electronics and homewares. These
clients use Proximity Insight's platform to blur the lines between
physical and digital retail, enhancing the customer experience and
improving the lifetime value of their customers by upwards of 35%.
The business grew annual recurring revenue by 117% to GBP2.2
million in 2021, and the investment will support Proximity
Insight's continued product development and international
growth.
Marketing technology
Bidnamic business May 2022 0.58
--------------
Lads Store Limited, trading as "Bidnamic" (bidnamic.com) is a
marketing technology business that offers a SaaS platform for
online retailers to manage their search engine marketing spend. The
technology was all developed internally and uses bespoke machine
learning algorithms to automate the management and optimisation of
online retailers' Google shopping spend. The ARR of the business
has grown substantially over the last two years and this is
projected to continue. The investment round will be used to further
to enhance the product's capabilities and drive continued ARR
growth through expanding the sales & marketing team and
building a presence in North America.
GPS enhancement September
FocalPoint software provider 2022 0.60
---------------- -----------------
Focal Point Positioning Limited (focalpointpositioning.com) is a
deep tech business with a growing IP and software portfolio. Its
proprietary technology applies advanced physics and machine
learning dramatically to improve the satellite-based location
sensitivity, accuracy, and security of devices such as smartphones,
wearables and vehicles and reduce costs.
Specialists in
eating disorder September
Orri support 2022 0.53
---------- ----------------
Orri Limited (orri-uk.com) is an intensive day care provider for
adults with eating disorders. Orri provides an alternative to
expensive residential in-patient treatment and lighter-touch
outpatient services by providing highly structured day and half day
sessions either online or in-person at its clinic on Hallam Street,
London. Orri opened its current clinic in London in February 2019
which provides a homely environment in a converted 4-storey house
but which is operating at capacity. The plan sees a larger site
being leased nearby with Hallam Street being used to provide a
step-down outpatient service.
Further investments during the year
A total of GBP2.27 million was invested into six existing
portfolio companies during the year, as detailed below:
UK Leisure and January / February
Caledonian Leisure experience breaks 2022 0.27
------------------------ --------------------------
Caledonian Leisure works with accommodation providers, coach
businesses and other experienced providers (such as entertainment
destinations and theme parks) to deliver UK-based leisure and
experience breaks to its customers. It comprises two brands,
Caledonian Travel (caledoniantravel.com) and UK Breakaways
(ukbreakaways.com). The domestic leisure and experience travel
market was devastated by the COVID-19 pandemic, but the company was
well-placed to expand as lockdown and travel restrictions eased. A
series of planned investment tranches has helped the company
prepare for and capitalise on the strong demand for UK staycation
holidays.
Dairy and allergen-
free ice cream
Northern Bloc producer April 2022 0.17
------------------- ---------------
Northern Bloc Ice Cream (northern-bloc.com) is an established
food brand in the emerging and rapidly growing vegan market. By
focusing on chef quality and natural ingredients, Northern Bloc has
carved out an early mover position in the dairy and allergen-free
ice cream sector. The company's focus on plant-based alternatives
has strong environmental credentials as well as it being the first
ice cream brand to move wholly into sustainable packaging.
Following the initial investment in December 2020, Northern Bloc
has grown and strengthened its prospects against a challenging
market backdrop. This further investment provides additional
working capital and funds a new production facility to increase its
resilience, flexibility and margins in the future.
Andersen EV Premium EV chargers May 2022 0.34
----------------- --------------
Muller EV Limited (trading as Andersen EV) (andersen-ev.com) was
a design-led manufacturer of premium electric vehicle (EV)
chargers. Incorporated in 2016, this business secured high profile
partnerships with household brands, establishing an attractive
niche position in charging points for the high-end EV market. This
follow-on funding was to further support its premium brand and
product positioning whilst ensuring all new and existing products
met the most recent and highest safety and compliance standards.
Unfortunately, external factors caused its market and trading
prospects to worsen rapidly, including substantially reduced
demand, global supply chain issues, inflation and the removal of
government consumer support for the purchase of EV chargers. The
company therefore entered administration before the year end.
Workforce management
RotaGeek software June 2022 0.28
---------------- --------------
RotaGeek (rotageek.com) is a provider of cloud-based enterprise
software to help larger retail, leisure and healthcare
organisations to schedule staff effectively. RotaGeek has proven
its ability to solve the scheduling issue for large retail clients
competing due to the strength of its technologically advanced
proposition. The company has made significant commercial progress
since the VCTs first investment nearly doubling Annual Recurring
Revenues (ARR). This investment aims to help boost ARR and enable
the company to take advantage of further large client
opportunities.
Provider of artificial
intelligence & urban
Vivacity traffic July 2022 0.78
--------- -------------
Vivacity (vivacitylabs.com) develops camera sensors with
on-board video analytics software that enables real-time anonymised
data gathering of road transport system usage. It offers city
transport authorities the ability to manage their road
infrastructure more effectively, enabling more efficient monitoring
of congestion and pollution levels as well as planning for other
issues, such as the changing nature of road usage (e.g. the
increasing number of cyclists). The technology and software
represent a significant leap forward for local planning authorities
which have traditionally relied upon manual data collection
methods. This new investment will help boost the company's revenues
through development of new functionality to enhance its product
suite which can also be installed into the existing asset base.
Hair Colourants
Bleach brand August 2022 0.43
------------ -----------------
Bleach London Holdings ("Bleach") (bleachlondon.com) is an
established brand which develops and markets a range of innovative
haircare and colouring products. Bleach is regarded as a leading
authority in the hair colourant market having opened one of the
world's first salons focused on colouring and subsequently launched
its first range of products in 2013. This further investment was
part of a wider GBP5.5 million investment round alongside existing
shareholders and a strategic partner. The funds will be used to
drive further expansion into the strategically important North
American market and to consolidate the brand's position in the
UK.
Portfolio valuation movements
Across the portfolio, comparable market multiples that are used
as the basis of valuation have declined over the year, some by over
30%, but the levels at the year-end reflect a degree of
stabilisation over the final quarter. Together with several
downward revisions to trading forecasts in the latter half of the
year, this has driven a general decline in investee company values.
As noted, the preference investment structures used in many of the
portfolio companies serve to moderate the impact of such company
value movements on VCT value. The need to protect and develop value
going forwards in such an uncertain environment underlines the need
for portfolio readiness and planning, robust funding and close
monitoring by the Gresham House team.
The main reductions within total valuation decreases of
GBP(20.50) million, were:
-- Virgin Wines GBP(8.71) million
-- MyTutor GBP(2.03) million
-- Buster and Punch GBP(1.64) million
-- Wetsuit Outlet GBP(1.36) million
-- Active Navigation GBP(1.30) million
Virgin Wines has suffered from negative sentiment across its
sector despite outperforming its peers. More recently, it also
experienced some short term operational difficulties particularly
in the last quarter of 2022. MyTutor's growth has slowed post COVID
coupled with a decline in market multiples. Buster and Punch and
Wetsuit Outlet are both consumer facing businesses that have
experienced challenging trading conditions which resulted in profit
downgrades. ActiveNav has developed a new business line which has
gained significant traction and offers potential but the core
business has grown more slowly than planned which has led to an
overall reduction in its valuation.
The uplifts within the total valuation increase of GBP0.98
million were:
-- Tharstern GBP0.55 million
-- Orri GBP0.26 million
-- Preservica GBP0.17 million
Tharstern has continued to deliver strong trading performance.
Following the year-end, in March 2023, the Company completed a
successful sale of Tharstern generating a 2.6x return. Preservica
continues to build its high retention, long contract term
Software-as-a-Service ("SaaS") business, improving recurring
revenues year on year. Orri is performing as planned and the
valuation uplift simply reflects the first time recognition of the
preferential investment structure.
Growth capital investing involves companies which often have not
achieved profitability and as a result, have to be measured on
other metrics. The table below shows the proportion of the
portfolio that is represented by pre-profit companies (often valued
by reference to revenue multiple), compared with more mature,
established companies with a history of profitability and which are
therefore valued on an earnings multiple:
Valuation methodology 2022 2022 2021 2021
GBPm % of total GBPm % of total
investments investments
Revenue multiple 38.60 70.6% 41.28 51.7%
------- -------------- ------- --------------
Earnings multiple 10.90 19.9% 25.67 32.3%
------- -------------- ------- --------------
Average Price 3.32 6.1% 12.52 15.7%
------- -------------- ------- --------------
Recent investment price (reviewed
for impairment) 0.60 1.1% 0.27 0.3%
------- -------------- ------- --------------
Other 1.27 2.3% 0.07 0.1%
------- -------------- ------- --------------
Total 54.69 100% 79.81 100%
------- -------------- ------- --------------
Portfolio Realisations during the year
The Company realised two investments, one of which was a partial
realisation, as detailed below:
Total cash proceeds
over the life
of the investment/
Period of Multiple over
Company Business Investment cost
------------ -------------------- ----------------- -------------------
Publishing and January 2015 GBP7.36 million
MBI events business to June 2022 2.2x cost
------------ -------------------- ----------------- -------------------
The Company realised its whole investment in MBI for GBP4.83
million (realised gain in the year: GBP0.54 million) including
deferred proceeds received since completion. Total proceeds
received over the life of the investment were GBP7.36 million
compared to an original investment cost of GBP3.28 million,
representing a multiple on cost of 2.2x and an IRR of 13.8%.
Branded clothing October 2011
(Rab and Lowe to November GBP 8.96 million
EOTH Alpine) 2022 6.9x cost
---- ----------------
The Company realised its equity investment in EOTH for GBP6.89
million (realised gain in the year: GBP0.49 million) including
preference dividends. Total proceeds received over the life of the
investment were GBP8.96 million compared to an original investment
cost of GBP1.30 million, representing a multiple on cost of 6.9x
and an IRR of 23.2%. The Company has retained its interest yielding
loan stock investment. Once repaid, this should increase the
multiple on cost to 7.9x.
Loan stock repayments and other gains/(losses) during the
year
The Company also received loan repayments totalling GBP0.07 from
Jablite Holdings Limited.
In addition, deferred consideration totalling GBP0.55 million in
realised gains was received in respect of investments realised in a
previous year. Conversely, as discussed earlier, Muller EV (trading
as Andersen EV) generated a realised loss in the year of GBP(0.61)
million.
Portfolio income and yield
In the year under review, the Company received the following
amounts in loan interest and dividend income:
2022 2021
Investment Portfolio Yield GBPm GBPm
-----
Interest received in the year 0.91 1.26
Dividends received in the year 1.24 0.45
---------------------------------------------------- ----- -----
Total portfolio income in the year(1) 2.15 1.71
---------------------------------------------------- ----- -----
Portfolio Value at 31 December 54.69 79.81
---------------------------------------------------- ----- -----
Portfolio Income Yield (Income as a % of Portfolio
value at 31 December) 3.9% 2.1%
---------------------------------------------------- ----- -----
(1) Total portfolio income in the year is generated solely from
investee companies within the portfolio.
New investment made after the year-end
GBP0.89 million was invested into two new investments after the
year-end, as detailed below:
Amount of new
Company Business Date of investment Investment (GBPm)
------------------- ------------------- --------------------------
Environmental
Connect Earth data provider March 2023 0.30
------------------- ------------------- -------------------------- ----------------------
Founded in 2021, Connect Earth is a London-based environmental
data company that democratises easy access to sustainability data.
With its carbon tracking API technology, Connect Earth supports
financial institutions in offering their customers transparent
insights into the climate impact of their daily spending and
investment decisions. Connect Earth's defensible and scalable
product platform suite has the potential to be a future market
winner in the nascent but rapidly growing carbon emission data
market, for example, by enabling banks to provide end retail and
business customers with carbon footprint insights of their
spending. This funding round is designed to facilitate the delivery
of the technology and product roadmap to broaden the commercial
reach of a proven product.
Education and
neuro-inclusion
Cognassist solutions March 2023 0.59
---------------- -----------------
Cognassist (cognassist.com) is an education and neuro-inclusion
solutions company that provides a Software-as-a-Service (SaaS)
platform focussed on identifying and supporting individuals with
hidden learning needs. The business is underpinned by extensive
scientific research and a vast cognitive dataset. Founded in 2019
by Chris Quickfall, Cognassist has scaled its underlying business
within the education market, enabling apprentices to unlock
government funding and helping diverse minds to thrive. This
investment will empower Cognassist to continue its growth within
the education market and penetrate the enterprise market, where
demand for neuro-inclusive solutions to adequately support
employees is rapidly emerging.
Realisations after the year-end
Total cash proceeds
over the life
of the investment
Period of / Multiple over
Company Business investment cost
-------------- --------------------------- --------------------
Software based
management information July 2014 GBP3.79 million
Tharstern systems to March 2023 2.6x cost
-------------- --------------------------- -------------------- -----------------------
The Company realised its investment in Tharstern Group for
GBP2.70 million. Total proceeds received over the life of the
investment were GBP3.79 million compared to an original cost of
GBP1.46 million, representing a multiple on cost of 2.6x and an IRR
of 15.0%.
Environmental, Social and Governance considerations
The Board and the Investment Adviser believe that the
consideration of environmental, social and corporate governance
("ESG") factors throughout the investment cycle should contribute
towards enhanced Shareholder value.
The Investment Adviser has a team which is focused on
sustainability as well as the Investment Adviser's Sustainability
Committee who provide oversight and accountability for the
Investment Adviser's approach to sustainability across its
operations and investment practices. This is viewed as an
opportunity to enhance the Company's existing protocols and
procedures through the adoption of the highest industry standards.
Each investment executive is responsible for setting and achieving
their own individual ESG objectives in support of the wider
overarching ESG goals of the Investment Adviser. The Investment
Adviser's Private Equity division has its own Sustainable
Investment Policy, in which it commits to:
-- Ensure its team understands the imperative for effective ESG
management and is equipped to carry this out through management
support and training.
-- Conduct regular monitoring of ESG risks, opportunities and
performance in its investments.
-- Incorporate ESG into its monitoring processes.
Outlook
With inflation, political uncertainty and the threat of
recession impacting consumer confidence and business investment,
the number of UK businesses experiencing financial stress is set to
increase. This will impact all sectors and businesses to varying
degrees and may present attractive opportunities for a selective
investor with the advantage of being able to take a longer term
view, such as your Company. However, the economic backdrop will
also impact our existing portfolio companies and would present a
challenge to less experienced management teams and their advisers.
Markets are volatile and uncertain and business planning is acutely
difficult. As such, the experience of seasoned investment managers
will be increasingly important in the coming year as they seek to
support their portfolio management teams in navigating through some
particularly challenging short-term trading conditions. In this
respect, Gresham House feels well placed in having one of the
largest and most experienced portfolio teams in the industry with
an average of over 18 years relevant industry experience. The
Company has ample liquidity to provide further support to its
portfolio businesses through this period and is keen to make such
investments where there is a commercial case to do so over the
medium to long-term.
Gresham House Asset Management Limited
Investment Adviser
4 April 2023
Annual General Meeting
The AGM will be held on Wednesday, 24 May 2023 at the offices of
Shoosmiths LLP, 1 Bow Churchyard, London EC4M 9DQ and will also be
webcast for those Shareholders who are unable to attend in person.
Details of how to join the meeting by virtual means will be shown
on the Company's website. Shareholders joining virtually should
note you will not be able to vote at the meeting and therefore you
are encouraged to lodge your proxy form. For further details,
please see the Notice of the Meeting which can be found at the end
of the Annual Report & Financial Statements.
Further Information
The Annual Report and Accounts for the year ended 31 December
2022 will be available shortly on Mobeus Income & Growth VCT
plc .
It will also be submitted shortly in full unedited text to the
Financial Conduct Authority's National Storage Mechanism and will
be available for inspection at
data.fca.org.uk/#/nsm/nationalstoragemechanism in accordance with
DTR 6.3.5(1A) of the Financial Conduct Authority's Disclosure
Guidance and Transparency Rules.
Contact:
Gresham House Asset Management Limited
Company Secretary
mobeusvcts@greshamhouse.com
+44 20 7382 0999
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END
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