MIX Mobeus Income & Growth Vct Plc

The difficult UK and worldwide economic conditions are creating challenging circumstances for our growth companies although some stability is now being seen in market multiples compared to the previous year. Inflation is proving more stubborn than hoped and has since ticked up again since the year-end in the US, UK and eurozone fuelled by wage settlements, oil prices and supply chain issues stemming from geo-political tensions in the Gulf. Such macro-economic conditions have not been faced by management teams in a generation, however Gresham House's experienced non-executive directors and consultants continue to support the portfolio's companies during these turbulent times.

Strong cash management and capital efficiency is the key focus for our portfolio directors' management teams. With ample liquidity following the fundraises in 2022/23, the Company is very well placed to support portfolio companies with follow-on funding where it is appropriate and can be structured on attractive terms. Strong liquidity also benefits the new investment environment for the Company which, in our view, is strong as we are seeing several interesting investment propositions, albeit mainly in competition with other VCTs who face similar deployment challenges in a market which is generally accepted to be c. 35% down as regards new investment opportunities.

Trading conditions for the portfolio remain tough across most sectors as both companies and consumers continue to restrain their spending. Certain sectors remain under particular pressure, be it end product or as part of the supply chain. In terms of portfolio assets, this is seen mainly in areas such as products (e.g. Wetsuit Outlet, Buster & Punch) and software and services (e.g. Bidnamic, Proximity) in so far as they relate to the consumer sector. The direct impact of high interest rates on the Company's portfolio is appropriately limited because most portfolio companies do not have any significant third-party debt. The outlook is therefore mixed, with the emphasis on robust funding structures and preparation for all circumstances.

                The current environment poses particular challenges for the smallest companies who are attempting to prove nascent business models. Against this backdrop, most of the recent cohort of earlier stage investments are behind original investment case but continue to make slow but steady progress. They are steadily building out their pipelines and capability as they balance investment with the rate of commercial development. After several quarters of slippage, it is pleasing to see several of this group starting to secure cornerstone contracts. At this stage of their development Gresham House is still hopeful that the majority will deliver the relevant commercial proof points, albeit it will take longer and probably require additional capital earlier than had originally been envisioned. In our view, this is not necessarily a bad thing in terms of deployment and amassing more significant stakes on potentially more advantageous terms. Though there may be some pain points to work through, with this should come enhanced influence and control.

        The portfolio movements in the year are summarised as follows:

Despite concerns about the wider trading environment, the portfolio's largest investments have experienced some strong revenue growth, which has underpinned a positive return over the second half of the Company's financial year. Preservica continues to see strong trading and is outperforming its budget, giving a material uplift in its valuation. MPB Group continues to grow its revenue line and there are potentially material developments expected at Active Navigation. Veritek Global, an historic MBO investment, has started to see material traction having pivoted its business model in recent years.

During the year, the Tharstern exit gave a return of 2.6x and an IRR of 15.0%. The successful exit of Master Removers Group after the year-end will also provide up to a 3.4x multiple of cost and an IRR of over 26% over the life of the investment. Unless there is a change in market dynamics, it is likely that portfolio companies will be held for longer periods although looking forward, there are a number of assets starting to plan for exit in 2024/25. Gresham House believes that these are realistic prospects which could deliver significant realised value to the Company.

By contrast however, there were also some larger portfolio value falls such as MyTutor, Bleach, and Wetsuit Outlet which continue to experience challenging trading conditions. The portfolio companies are now more focussed on establishing a path to profitability. AIM-listed Virgin Wines continues to be at the behest of market movements despite releasing results in line with expectations. Disappointingly, after experiencing very difficult trading conditions, Tapas Revolution entered administration during the year with no expected recovery for the Company.

The Company made eight new growth capital investments during the year totalling £4.79 million and four follow-on investments totalling £0.93 million. Further details of these investments are on the next pages. After the year-end, further follow-on investments were made into MyTutor and Orri and a new investment was made into SciLeads.

                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 86% by value at the year-end (31 December 2023: 80.3%).

        The portfolio's valuation changes in the year are summarised as follows:

New Investments during the year

The Company made eight new investments totalling £4.79 million during the year, as detailed below:

Founded in 2021, Connect Earth (https://connect.earth/) is a London-based environmental data company that seeks to facilitate 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 development as well as international growth.

Cognassist (https://cognassist.com/) is an education and neuro-inclusion solutions company that provides a Software-as-a- Service (SaaS) platform focused on identifying and supporting individuals with hidden learning needs. The business is underpinned by extensive scientific research and an extensive cognitive dataset. Cognassist has scaled its underlying business within the education market. This investment will empower Cognassist to continue its growth within education and penetrate the enterprise market, where demand for neuro-inclusive employee support solutions is rapidly emerging.

Founded in 2020, Amsterdam-based Dayrize (https://dayrize.io/) has developed a rapid sustainability impact assessment tool that delivers product-level insights for consumer goods brands and retailers, enabling them to be leaders in sustainability. Its proprietary software platform and methodology bring together an array of data sources to provide a single holistic product-level sustainability score that is comparable across product categories in under two seconds. This funding round is to drive product development and develop its market strategy to build on an opportunity to emerge as a market leader in the industry.

Based in Leeds, Mable (https://www.mabletherapy.com/) is the UK's leading digital health platform for speech therapy and counselling for children and young adults. All sessions are undertaken live with qualified paediatric therapists, and Mable uses gamification (games, activities and other interactive resources) to provide improved therapeutic outcomes in a child-friendly environment. This is a significant and growing area of need, with 1.4 million children in the UK with long-term speech, language or communication needs - Mable has the potential to transform the lives of children in their crucial early stages of development. The funding will be used to accelerate growth in existing B2C and B2B customer groups as well as capitalising on new, potentially significant, routes to market.

Branchspace (https://www.branchspace.com/) is a well-established specialist digital retailing consultancy and software provider to the aviation and travel industry. Branchspace's offering helps customers to transform their technology architecture to unlock best-in-class digital retailing capabilities, driving distribution efficiencies and an improved customer experience. Across two complementary service offerings, Branchspace can effectively cover the entire airline tech stack and has carved a defensible position as sector experts, serving clients including IAG, Lufthansa and Etihad. This funding round will seek to accelerate product development, increasing the customer reach of their SaaS offering to establish itself as the leading choice for airline digital retailing solutions.

Ozone Financial Technology Limited (https://ozoneapi.com) is a software developer providing banks and financial institutions with a low cost, out-of-the-box solution enabling them to deliver open APIs which comply with open banking and finance standards globally. The software goes beyond compliance and enables customers to monetise open banking and finance opportunities which are growing significantly following regulatory & market development. This funding is the first equity investment into Ozone and enables the team to invest into their product and go-to-market teams as they look to capitalise on the large and fast-growing global market.

Azarc.io (https://azarc.io) specialises in business process automation using distributed ledger technology. Its Verathread® product has been applied to automating cross-border customs clearances, albeit it has wider supply chain applications. Founded in 2021, Azarc successfully secured British Telecom as a customer and a long-term strategic partner in the UK and aims to improve inefficiencies over traditional paper-based customs clearances for import and export trade. This investment will support the company's growth trajectory with BT and expedite its expansion into international import/export hubs through new partnerships.

Huddl Mobility Limited (trading as CitySwift) (https://cityswift.com) is a software business that works with bus operators and local authorities to aggregate, cleanse and access insight from complex data sources from across their networks, enabling them to optimise schedules and unlock revenue generating or cost reduction opportunities. This investment will be used to accelerate new customer acquisition and unlock significant opportunities within the existing customer base - CitySwift already works with major bus operators and local transport authorities including National Express, Stagecoach and Transport for Wales.

        Further investments during the year

                A total of £0.93 million was invested into four existing portfolio companies during the year, as detailed below:

Legatics (https://www.legatics.com/) transforms legal transactions by enabling deal teams to collaborate and close deals in an interactive online environment. Designed by lawyers to improve legacy working methods and solve practical transactional issues, the legal transaction management platform increases collaboration, efficiency and transparency. As a result, Legatics has been used by around 1,500 companies, and has been procured by more than half of the top global banking and finance law firms, with collaborations having been hosted in over 60 countries. This funding round will provide headroom to further accelerate growth in sales via marketing as well as increasing product development.

Orri Limited (https://www.orri-uk.com/) is an intensive daycare 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, together with outpatient services. Orri currently operates two sites in central London.

RotaGeek (https://www.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. Since investment it has also diversified and started to prove its applicability in other verticals such as healthcare and hospitality. This investment will help the company focus on operational delivery and continue sales and client contract win momentum.

Focal Point Positioning Limited (https://focalpointpositioning.com/) is a deeptech business with a growing IP and software portfolio. Its proprietary technology applies advanced physics and machine learning to dramatically improve the satellite-based location sensitivity, accuracy, and security of devices such as smartphones, wearables, and vehicles and reduce costs. The further investment was agreed at the time of the original funding in September 2022.

Valuation changes of portfolio investments still held

The total valuation increases were: £11.40 million, with the main increases being:

Preservica: £4.99 million

MPB Group: £2.18 million

Active Navigation: £0.78 million

Veritek Global: £0.76 million

Preservica continues to perform well and is improving recurring revenues. MPB's revenue growth continues alongside demand for its platform. Active Navigation is gaining traction for its incident response offering. Veritek has pivoted its business model and is now generating material growth in its revenues.

The main reductions within total valuation decreases of £5.37 million were:

MyTutor: £(1.60) million

Virgin Wines: £(1.05) million

Bleach London: £(1.04) million

Wetsuit Outlet: £(0.56) million

MyTutor has been impacted by declining sector multiples combined with slower than anticipated growth over the year. Virgin Wines has been impacted by a disappointing market reaction to as expected trading results. Bleach is trading behind budget, but has recently received third party funding to support its cash position. Wetsuit Outlet is being materially impacted by the decline in consumer spending.

The Company's investment values have been partially insulated from market movements and lower revenue growth by the preferred investment structures utilised in the financing of many of the portfolio companies. This acts to moderate valuation swings and the net result can be more modest falls when portfolio values decline.

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:

Other gains/(losses) during the year

The Company realised a £0.62 million gain from the exit of Tharstern Group. Two companies were written down to nil. These were SEC Group Limited (formerly RDL Corporation Limited), resulting from a restructuring and Spanish Restaurant Group which entered administration during the year.

Portfolio Realisations during the year

The Company completed one exit during the year, as detailed below:

The Company realised its investment in Tharstern Group for £2.70 million (realised gain in period: £0.62 million). Total proceeds received over the life of the investment were £3.79 million compared to an original cost of £1.46 million, representing a multiple on cost of 2.6x and an IRR of 15.0%.

Portfolio income and yield

In the year under review, the Company received the following amounts in loan interest and income:

Investments after the year-end

The Company made one new investment and two follow-on investments, as detailed below:

New:

SciLeads Limited (https://scileads.com) Based in Belfast, SciLeads is a data and lead generation platform operating within life science verticals, allowing customers to identify, track and convert potential leads. SciLeads has grown ARR to £4.4mn (+50% this year) and this investment will be used to accelerate new customer acquisition and professionalise the product and customer success functions to unlock up and cross-sell opportunities within the existing customer base.

Further:

Orri Limited (https://www.orri-uk.com/) is an intensive daycare 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, together with outpatient services. Orri currently operates two sites in central London.

MyTutorweb (trading as MyTutor) (https://www.mytutor.co.uk/) is a digital marketplace that connects school age pupils who are seeking private online tutoring with university students. The business is satisfying a growing demand from both schools and parents to improve pupils' exam results. This further investment, alongside other existing shareholders and Australian strategic co-investor, SEEK, aims to build and reinforce its position as a UK category leader in the online education market. This additional funding will give the business extra headroom to support its more focused product and growth strategy.

Realisations after the year-end

The Company sold its investment in Master Removers Group (2019) Limited ("MRG") to Elanders AB and alongside this, sold its shares in MRG's domestic removals business to management. The Company received £3.49 million from the sale. Further sale and contingent proceeds of up to £0.66 million are receivable at a later date under the terms of the transaction. Total proceeds received to date over the life of the investment are £6.63 million compared to an original investment cost of £1.69 million, representing a multiple on cost of 3.3x and an IRR of 26.2%. This may increase to 3.4x as further proceeds are received.

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. More ESG information can be found in the Chair's Statement and the Directors Report in the Annual Report.

The Investment Adviser has a dedicated team which is focused on sustainability as well as the Investment Adviser's Sustainability Executive 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.

·    Incorporate ESG into the monitoring processes of the unquoted portfolio companies.

·    Engage with the dedicated sustainable investment team and conduct regular monitoring of ESG risks, sustainability initiatives and performance in its investments.

Further detail on ESG can be found in the Chair's statement above and in the Director's Report in the Annual Report.

Outlook

As geo-political tensions persist into 2024, much of the world prepares for elections and the "higher for longer" mantra is again being applied to interest rates, 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

12 April 2024

Annual General Meeting

The AGM will be held at 1.00 pm on Monday, 20 May 2024 on the 2^nd floor, Central Point, 35 Beech Street, London EC2Y 8AD 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 2023 will be available shortly on the Company's website: www.migvct.co.uk

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