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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Income & Growth Vct (the) Plc | LSE:IGV | London | Ordinary Share | GB00B29BN198 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 70.00 | 68.50 | 71.50 | 70.00 | 70.00 | 70.00 | 39 | 08:00:07 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Offices-holdng Companies,nec | 8.63M | 5.49M | 0.0348 | 20.11 | 110.27M |
TIDMIGV
RNS Number : 2907K
Income & Growth VCT (The) PLC
12 December 2018
Hot Features
Premium
THE INCOME & GROWTH VCT PLC
ANNUAL FINANCIAL RESULTS OF THE COMPANY FOR THE YEARED 30 SEPTEMBER
2018
The Income & Growth VCT plc (the "Company") today announces the final
results for the year ended 30 September 2018.
You may, in due course, view the Annual Report & Financial Statements,
comprising the statutory accounts of the Company by visiting www.incomeandgrowthvct.co.uk.
FINANCIAL HIGHLIGHTS
As at 30 September 2018:
Net assets: GBP82.58 million
Net asset value ("NAV") per share: 78.32 pence
* Net asset value ("NAV") total return per share was
3.2%.
* Share price total return per share was 2.7%.
* Dividends paid and proposed in respect of the year
total 6.00 pence per share. The proposed final
dividend of 3.50 pence per share, if approved, will
bring cumulative dividends paid to shareholders in
respect of the past five years to 67.00 pence per
share.
* The Company realised investments totalling GBP6.58
million of cash proceeds and generated net realised
gains over original investment cost of GBP1.60
million.
* GBP6.21 million was invested into four new companies
and five follow-on investments.
PERFORMANCE SUMMARY
The table below shows the recent past performance of the Company's
existing class of shares for each of the last five years.
Reporting Net NAV Share Cumulative Cumulative total Dividends
date assets per price(1) dividends return per share paid and
share paid per to shareholders(2) proposed
share per share
in
respect
of each
year
As at (NAV (Share
30 basis) price
September basis)
------- ------- --------- ---------- ------- ---------
(GBPm) (p) (p) (p) (p) (p) (p)
------- ------- --------- ---------- ------- --------- ---------
2018 82.58 78.32 69.50 108.00 186.32 177.50 6.00 (4)
------- ------- --------- ---------- ------- --------- ---------
2017 64.35 81.24 73.00 102.50 183.74 175.50 21.00
------- ------- --------- ---------- ------- --------- ---------
2016 70.84 98.51 88.80 80.50 179.01 169.30 10.00
------- ------- --------- ---------- ------- --------- ---------
2015 75.20 106.38 93.50 68.50 174.88 162.00 12.00
------- ------- --------- ---------- ------- --------- ---------
2014 69.31 114.60 103.50(3) 50.50 165.10 154.00 18.00
------- ------- --------- ---------- ------- --------- ---------
(1) Source: Panmure Gordon & Co. (mid-market price).
(2) Cumulative total return per share comprises the NAV per share (NAV
basis) or the mid-market price per share (share price basis) plus
cumulative dividends paid since the launch of the current share
class.
(3) The share price at 30 September 2014 has been adjusted to add back
the dividend of 8.00 pence per share paid on 30 October 2014, as
the listed share price was quoted ex this dividend at the year end.
(4) Dividends paid and proposed per share in respect of 2018 include
the final dividend of 3.50 pence referred to above, which is subject
to shareholder approval at the Annual General Meeting.
CHAIRMAN'S STATEMENT
I am pleased to present the Annual Report of the Company for the financial
year ended 30 September 2018.
Overview
This has been another year of solid performance by the Company in
which returns to shareholders have again been positive. During the
year, the Company made investments into four new companies, provided
follow-on investments to five existing portfolio companies and realised
its investment in four portfolio companies. After the year end, one
new and three follow-on investment were also made. Further details
of this investment activity can be found under the 'Investment portfolio"
section of my Statement below and in the Investment Adviser's Review
in the Annual Report.
Fourteen new growth capital investments have now been completed by
the Company in accordance with its investment policy, in response
to the VCT legislation introduced by the Finance (No. 2) Act 2015.
During the year, additional changes to VCT legislation were enacted,
further details of which are included within the Annual Report and
under the 'Industry and regulatory developments' section of my Statement
below.
The Investment Adviser continues to report an interesting pipeline
of growth capital opportunities. Meanwhile, the existing MBO focused
portfolio constructed under the previous VCT rules continues to provide
a healthy yield.
As mentioned in my half-year statement, we are delighted with the
strong support from investors for our recent fundraising, which closed
fully subscribed in March. The Board appreciates the continued support
from existing shareholders and at the same time welcomes new shareholders.
Performance
The Company's NAV total return per share was 3.2% for the year ended
30 September 2018 (2017: 4.8%), after taking into account the dividends
paid during the year. This NAV return for the year was primarily attributable
to loan interest income in excess of costs resulting in a positive
income return. The increase was also driven by the sale of the Company's
investment in Gro-Group together with a net uplift in the value of
the existing portfolio. Other portfolio movements are explained further
under 'Investment Portfolio'.
As a result of this year's performance, the cumulative NAV total return
per share (being the closing net asset value plus total dividends
paid to date since launch) increased in the year by 1.4% (2017: 2.6%)
from 183.74 pence to 186.32 pence.
Using the benchmark of cumulative NAV total return, at 30 September
2018 the Company was ranked second out of 33 VCTs over ten years amongst
generalist (including planned exit) VCTs used by the Association of
Investment Companies ("AIC") to measure performance. Over the shorter
periods of one, three and five years, the VCT was ranked 30(th) and
28(th) (out of 46 VCTs) and 23(rd) (out of 38 VCTs) respectively.
This was partly as a result of the increase in volatility of shorter
term performance which almost inevitably arises from the obligation,
in accordance with VCT legislation, to invest in earlier stage companies,
and partly from a drag on overall returns arising from liquid funds
raised pending investment in the portfolio. For further details on
performance, please refer to the Strategic Report in the Annual Report.
Final dividend
Your Board is proposing a final dividend in respect of the year ended
30 September 2018 of 3.50 (2017: 3.00) pence per share. The dividend,
comprising 2.50 pence from capital and 1.00 pence from income, will
be proposed to shareholder at the Annual General Meeting of the Company
to be held on 6 February 2019, for payment on 15 February 2019 to
shareholders on the register on 11 January 2019. This final dividend
is in addition to the interim dividend of 2.50 pence per share paid
on 21 June 2018.
If approved by shareholders, this forthcoming final dividend will
bring dividends paid per share in respect of the year ended 30 September
2018 to 6.00 pence (2017: 6.00 pence plus 15.00 pence special dividend)
and the Company will have paid dividends totalling 67.00 pence per
share in respect of the last five years. Shareholders should note,
however, that as a result of the changes in the VCT rules that require
VCTs to make growth capital investments in younger, smaller companies,
which are likely to have a higher risk profile, the Company may find
it a challenge to generate a similar level of dividends over the next
five years. Your Board will continue to monitor whether the current
target annual dividend of 6.00 pence per share remains sustainable
in the current investment environment.
For the reasons set out under 'Dividend Investment Scheme' below,
the Company's Dividend Investment Scheme has been suspended and will
not apply to the final dividend and any subsequent dividends which
may be declared and paid whilst the Scheme remains suspended. If you
have elected into the Scheme you do not need to take any action as
you will automatically receive your dividend in cash instead of shares.
Investment portfolio
During the year GBP6.21 million was invested in four new growth capital
investments and five existing growth portfolio companies (analysed
in the Investment Adviser's Review and explained in Note 8 below).
The new growth capital investments totalling GBP2.48 million were
made into the following companies:
* Proactive Investors, a provider of investor media
services;
* Super Carers, an online platform connecting people
seeking home care;
* Hemmels, a restorer of classic cars; and
* Rotageek, a provider of workforce management
software.
In addition, five follow-on investments totalling GBP3.73 million
were made into:
* BookingTek, a provider of direct-booking systems to
major hotel groups;
* MPB, an online marketplace for used camera and video
equipment;
* Tapas Revolution, a leading Spanish restaurant chain
in the casual dining sector;
* MyTutor, a digital marketplace connecting people
seeking online tutoring; and
* Preservica, a seller of proprietary digital archiving
software.
After the year end, further amounts totalling GBP1.93 million were
invested into one new and three existing portfolio companies, comprising
an investment of GBP0.93 million into Biosite, a provider of workforce
management and security services; an investment of GBP0.45 million
into Proactive, a provider of investor media services; an investment
of GBP0.08 million into MPB, an online marketplace for used camera
and video equipment; and an investment of GBP0.47 million into Grow
Kudos, a platform for the dissemination of academic research.
The new growth capital investments made to date now have a value of
GBP18.17 million, against a cost now of GBP17.20 million, and so have
already become significant part of the portfolio.
Cash proceeds totalling GBP6.58 million for the year were received
from portfolio companies that were either sold, repaid loans, or settled
other capital proceeds. Of this total, GBP5.92 million was received
as cash proceeds from the sale of Gro-Group, Fullfield (trading as
Motorclean), Hemmels and Lightworks, together realising a net gain
of GBP1.31 million over investment cost, with a further GBP0.44 million
being received as loan and share capital repayments and finally, GBP0.22
million from receipts of deferred consideration.
For the year under review, the portfolio as a whole achieved a net
increase of GBP1.11 million on investments realised. The principal
gains were from the sale of Gro-Group and Lightworks.
However, there were also losses incurred by the sale of Fullfield
(trading as Motorclean) and Hemmels. The loss on the sale of Hemmels
is explained further in the Investment Review. It serves to remind
shareholders that an inherent risk of investing in relatively early
stage smaller companies, (as required by the terms of the new VCT
regulations), is that not all such companies will succeed.
Investment realisations produced GBP2.64 million in capital gains
and capital losses of GBP1.04 million when compared to original investment
cost, a net gain of GBP1.60 million.
The portfolio also achieved a net increase of GBP0.57 million on investments
still held, with positive increases from Equip, Preservica and CGI,
which were partially offset by valuation falls at Veritek, Idox and
Wetsuit Outlet.
The portfolio was valued at GBP49.40 million (2017: GBP48.03 million)
at the year end representing 95.1% of cost (2017: 94.8%).
Further details of the investment activity during the year and a summary
of the performance highlights can be found in the Investment Adviser's
Review.
Industry and regulatory developments
As mentioned in my Overview above, a number of further changes to
the VCT Scheme were introduced with the enactment of the Finance Act
2018 on 15 March 2018. These changes were reportedly designed to exclude
tax-motivated investments where capital is not at risk (that is, principally
seeking to preserve investors' capital) and to encourage VCTs to put
their money to work more quickly. They also place further restrictions
on the way investments are able to be structured. A summary of the
current VCT regulation is set out in the Annual Report.
Investment Policy revision
The Board has been advised that the changes in legislation referred
to in the previous paragraph are material enough to require the Company
to revise its Investment Policy ("the Policy"). Shareholders may recall
that they were asked to approve a change in the Policy only two years
ago in response to previous legislative changes. The Policy that is
being proposed, which will require the approval by shareholders of
an ordinary resolution at the February 2019 Annual General Meeting,
comprises a revision to the previously approved Policy so that the
Company will seek to make investments "in accordance with the requirements
of the prevailing VCT legislation". This should minimise the need
to revise the Policy again in response to further legislative changes.
An explanation of the proposed revisions to the Policy, and the full
wording of the new Policy, which the Board recommends shareholders
approve, are given in the Directors' Report in the Annual Report.
Dividend Investment Scheme
A total of 1,573,716 new Ordinary shares were issued under Dividend
Investment Scheme (the "Scheme") (2017: 3,865,859) during the financial
year.
The Scheme has historically been a practical and cost effective way
for the Company to retain cash for investment and operating purposes
and to reward the loyalty of those existing shareholders who wished
to invest further in the Company. Given the Company's recent successful
fundraising and current relatively high cash position, the Board has
taken the decision to suspend the Scheme until further notice.
This means that those shareholders who had opted into the Scheme will
now receive cash in respect of any dividends paid by the Company while
the Scheme is suspended.
High levels of liquidity can dilute returns to shareholders. Furthermore,
as a result of the changes enacted by the Finance Act 2018, funds
raised under the Scheme would have an additional impact on the VCT's
qualification status conditions in respect of the Company's 2019 financial
year. From the start of that year, 30% of all funds raised (including
under the Scheme) must be invested in qualifying investments within
year of the financial year end in which the shares under the Scheme
are allotted. This would have placed a further compliance hurdle on
top of the Company's existing investment obligations.
Please rest assured that the Board will keep the suspension of the
Scheme under review and will provide shareholders with advanced notice
of any future decision to reintroduce, modify or cancel the Scheme.
Succession planning
During the year, a new UK Corporate Governance Code was published
which will apply to the Company's financial year beginning on 1 October
2019. This code introduces a number of new provisions which will apply
to the Company, including a provision regarding the tenure of chairmen.
These changes have been considered by the Board and the Nomination
& Remuneration Committee and factored into the Company's succession
plans. Accordingly, given that I have served a Director on the Board
since 2000, it is the present expectation that I will stand down as
Chairman and as a Director on or before the Company's 2020 Annual
General Meeting. The Half Year Report to shareholders will contain
an update on the Company's succession plans.
Shareholder Event
The Investment Adviser holds an annual VCT event for shareholders
in central London.
These events include presentations on the Mobeus-advised VCTs' investment
activity and performance. We have been pleased to receive very positive
comments from those attending in previous years. The next event will
again be held at the Royal Institute of British Architects in central
London on Tuesday, 5 February 2019. There will be separate day-time
and evening sessions. Shareholders have already been sent an invitation
to this event with further details. If you have not replied to the
invitation, but would like to attend, please apply to Mobeus (events@mobeusequity.co.uk)
by email to register. The Board looks forward to meeting all shareholders
who are able to join them at the event.
Outlook
Your Board considers that your Company is well positioned to take
advantage of the current strong demand for new growth capital investments,
although entry valuations are presently perceived to be relatively
expensive for the most interesting opportunities.
While the new growth capital element of the portfolio is still young,
both your Board and the Investment Adviser will seek to assess, balance
and diversify the risks within the growing proportion of the overall
portfolio that these investments will represent. Your Board cautions
that investing in such earlier stage companies does involve increased
risk and those that succeed often take longer to achieve scale. Returns
may, therefore, take longer to emerge and may be more volatile. Unfortunately,
the least successful investments are likely to emerge before the most
successful. This is likely to cause a slower rate of financial progress
to be anticipated in the earlier years, although it should be offset
by more significant gains in the longer-term.
Meanwhile, the portfolio retains a solid foundation of investments
made under the previous MBO strategy, the majority of which are mature
and profitable companies providing attractive income returns.
The Board and Investment Adviser have carried out an analysis of the
possible impact of Brexit on the investment portfolio. This will be
kept under review.
The recent successful fundraising provides the Company with sufficient
funds to meet its cash needs and to continue the current investment
rate in the medium-term. Your Board is also pleased to note that the
Investment Adviser continues to expand and strengthen its investment
team to source and manage investments that complement the portfolio.
Lastly, I would like to take this opportunity to thank all shareholders
for their continued support.
Colin Hook
Chairman
12 December 2018
INVESTMENT POLICY*
The Company's policy is to invest primarily in a diverse portfolio
of UK unquoted companies. Investments are generally structured as
part loan and part equity in order to receive regular income to generate
capital gains upon sale.
Investments are made selectively across a number of sectors, principally
in established companies.
The Company's cash and liquid resources are held in a range of instruments
of varying maturities, subject to the overriding criterion that the
risk of loss of capital be minimised.
VCT regulation
The Investment Policy is designed to ensure that the Company continues
to qualify and is approved as a VCT by HMRC.
Amongst other conditions, the Company may not invest more than 15%
of its investments (by VCT value at the time of investment) in a single
company or group and must have at least 70% by VCT value of its investments
throughout the period in shares or securities comprised in VCT qualifying
holdings of which a minimum overall of 30% by VCT value (70% for funds
raised after 6 April 2011) must be in ordinary shares which carry
no preferential rights (save as may be permitted under VCT rules).
In addition, although the VCT can invest less than 30% (70% for funds
raised after 6 April 2011) of an investment in a specific company
in ordinary shares it must have at least 10% by VCT value of its total
investments in each VCT qualifying company in ordinary shares which
carry no preferential rights (save as may be permitted under VCT rules).
The companies in which investments are made must have no more than
GBP15 million of gross assets at the time of investment and GBP16
million immediately following the investment to be classed as a VCT
qualifying holding.
Asset mix
The Company initially holds its funds in a portfolio of interest bearing
investments and deposits. The investment portfolio of qualifying investments
is built up over a three year period with the aim of investing and
maintaining at least 70% of net funds raised in qualifying investments.
Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses across
different industry sectors. To reduce the risk of high exposure to
equities, each qualifying investment is structured to achieve the
optimum balance between loan stock and equity to provide protection
against downside risk alongside the best potential overall returns.
Co-investment
The Company is entitled to invest alongside other VCTs advised by
Mobeus that have a similar investment policy, normally on a pro rata
to net assets basis.
Borrowing
The Company's Articles of Association permit borrowing of up to 10%
of the adjusted capital and reserves (as defined therein). However,
it has never borrowed and the Board has currently no plans to undertake
any borrowing.
* Please note that the Board is proposing that shareholders approve
a revised Investment Policy at the AGM on 6 February 2019. This is
explained further in the Annual Report.
INVESTMENT ADVISER'S REVIEW
Demand for growth capital investment remains strong and there is a
large pipeline of investment opportunities. It is expected that the
current pace and quantum of new and follow-on investments will continue
in the short to medium-term.
Portfolio review
The portfolio's activity in the year is summarised as follows:
2018 2017
GBPm GBPm
--------------------------------- --------- --------
Opening portfolio value 48.09(1) 54.37
New and further investments 6.21 5.30
Disposal proceeds (6.58) (14.73)
Net realised gains 1.11 3.88
Valuation movements 0.57 (0.79)
--------------------------------- --------- --------
Portfolio value at 30 September 49.40 48.03
--------------------------------- --------- --------
(1) Adjusted for deferred consideration of GBP0.05 million recognised
in a previous period.
This has been a year of solid progress building the growth capital
portfolio with four investments into new growth businesses totalling
GBP2.48 million, five existing growth portfolio companies receiving
follow-on funding totalling GBP3.73 million, and net cash proceeds
received of GBP6.58 million, primarily from four realisations. The
past year's investment and divestment activity has increased the proportion
of the portfolio comprised of growth capital investments by value
to 47.2% at the year end, excluding companies preparing to trade.
After the year end, the Company invested a further GBP1.93 million
into one new and three existing growth companies, bringing the total,
to date, to GBP17.99 million in growth capital investments since the
introduction of the new VCT regulations in 2015.
Details of these movements for each investee company is provided at
the end of this Investment Review.
The portfolio's contribution to the overall results of the VCT is
summarised in the table below:
Investment Portfolio Capital Movement 2018 2017
GBPm GBPm
----------------------------------------- ------- -------
Increase in the value of unrealised
investments 5.91 3.46
Decrease in the value of unrealised
investments (5.34) (4.25)
Net increase in the value of unrealised
investments 0.57 (0.79)
Realised gains 2.23 3.88
Realised losses (1.12) -
----------------------------------------- ------- -------
Net realised gains in the year 1.11 3.88
Net investment portfolio movement
in the year 1.68 3.09
----------------------------------------- ------- -------
Valuation changes of portfolio investments still held
Within the valuation increases of GBP5.91 million, the principal contributors
were Equip (GBP1.00 million), Preservica (GBP0.80 million) and CGI
(GBP0.66 million). Equip achieved a record year of profitability,
underpinned by continued growth in its Rab brand. Preservica is growing
in line with its investment plan, with Mobeus making a second investment
shortly before the year end. CGI has seen improved trading, principally
benefitting from the growth in the UK and European caravan market.
Within total valuation decreases of GBP5.34 million, the main reductions
were at Veritek (GBP1.62 million), IDOX plc (GBP1.23 million) and
Wetsuit Outlet (GBP0.88 million). Veritek has experienced a challenging
trading environment but is restructuring its operations accordingly.
IDOX plc, a legacy AiM investment, announced disappointing results
for its 2017 financial year end which caused a fall in its share price,
albeit with a partial recovery in the share price since. Wetsuit Outlet
has had a disappointing year post investment, with growth in profitability
not being achieved as envisaged. Management has since implemented
several measures to restore margins.
Realised gains and losses from sales of investments
The largest gain was GBP1.72 million, from the sale of Gro-Group to
Mayborn Group, whilst a gain of GBP0.35 million was achieved from
the sale of Lightworks to Siemens PLM Software, a business of Siemens
AG.
The largest loss was GBP0.75 million, from the sale of Fullfield (trading
as Motorclean) back to management, whilst a loss of GBP0.37 million
resulted from the sale of Hemmels to its largest customer. Although
the Hemmels loss was modest, it was unexpected, arising shortly after
the initial investment, and illustrates the inherent risk of investing
in early stage growth companies.
The company also realised a gain in the year from deferred consideration
receipts of GBP0.16 million arising from past realisations, during
the year.
Investment portfolio yield and capital repayments
During the year under review, the Company received the following amounts
in loan interest and dividend income:
Investment Portfolio Yield 2018 2017
GBPm GBPm
--------------------------------------- -------- ------
Loan interest received in the year 2.50 2.90
Dividends receive in the year 0.42 0.29
--------------------------------------- -------- ------
Total portfolio income in the year 2.92(1) 3.19
--------------------------------------- -------- ------
Portfolio value at 30 September 49.40 48.03
Portfolio Income Yield (Income as a %
of Portfolio value at 30 September) 5.9% 6.6%
(1) Total portfolio income in the period is generated solely from
investee companies within the portfolio. See Note 3 of the Financial
Statements for all income receivable by the Company.
The Company also received loan stock repayments of GBP0.39 million
and preference share repurchases of GBP0.05 million, both at cost.
New investments in the year
A total of GBP2.48 million was invested into four new investment during
the year as detailed below:
Company Business Date of Investment Amount of new
investment
(GBPm)
Investor media
Proactive Investors services January 2018 0.54
--------------------- -------------------- --------------------
Proactive Investors specialises in timely multi-media news provision,
events organisation, digital services and investor research. Proactive
provides breaking news, commentary and analysis on hundreds of small-cap
listed companies and pre-IPO businesses across the globe. The investment
will enable Proactive to expand its services into the US market,
which is the largest global market for investor media services.
The company's accounts for the year ended 30 June 2017 show turnover
of GBP3.99 million and a profit before interest, tax and amortisation
of goodwill of GBP0.53 million. After the year end, a further GBP0.45
million was invested into the company. See further investments made
after the year end below.
Online care
Super Carers provision March 2018 0.65
--------------------- -------------------- --------------------
Super Carers provides an online platform connecting people seeking
home care, typically family members seeking care for their elderly
relatives, with experienced independent carers. Carers and care-seekers
manage care directly, thus reducing the administrative burden and
the need for care managers, enabling care to be delivered with greater
flexibility and more cost effectively. The company's accounts for
the year ended 31 March 2017 show revenues of GBP0.18 million and
a loss before interest, tax and amortisation of goodwill of GBP0.72
million.
Classic car
Hemmels restoration March 2018 0.67
--------------------- -------------------- --------------------
Hemmels commenced trading in September 2016 and specialises in the
sourcing, restoration, selling and servicing of high value classic
cars. Hemmels focused on classic Mercedes-Benz and planned to expand
into the Porsche marque under a separate brand. The investment was
made to enable Hemmels to proceed with its expansion plans and secure
sufficient development stock. After a short period following the
completion of the investment, it became clear that the company's
financial situation and prospects were significantly at variance
to expectations and the investment has since been realised, as also
reported with 'Realisations during the year' below.
Workforce management
Rotageek software August 2018 0.62
--------------------- -------------------- --------------------
Rotageek is a provider of cloud-based enterprise software to help
larger retail and leisure organisations predict and meet demand
to schedule staff effectively. This investment will be used for
further technology development and to grow sales from enterprise
clients. The company's unaudited accounts for the year ended 31
December 2017 show revenues of GBP0.90 million and a loss before
interest, tax and amortisation of goodwill of GBP1.57 million.
Further investments in existing portfolio companies in the year
The Company made further investments totalling GBP3.73 million into
five existing portfolio companies during the year under review, as
detailed below:
Company Business Date of Investment Amount of new
investment (GBPm)
Provider of
direct-booking
systems to major
BookingTek hotel groups November 2017 0.09
-------------------- ------------------- ------------------
London-based BookingTek provides software that enables hotels to
reduce their reliance on third-party booking systems through an
enterprise-grade, real-time booking platform for meeting rooms
and restaurant reservations. BookingTek's existing clients include
two of the world's top 10 hotel groups and the UK's largest hotel
chain. The small follow-on investment saw the Company taking up
its rights in a further financing round supported by existing shareholders.
The company's latest audited accounts for the year ended 31 December
2017 show turnover of GBP2.15 million and a loss before interest,
tax and amortisation of goodwill of GBP1.55 million.
Online marketplace
for used camera
and video December 2017
MPB Group equipment and February 2018 0.62
-------------------- ------------------- ------------------
MPB is Europe's leading online marketplace for used camera and
video equipment. Based in Brighton, its custom-designed pricing
technology enables MPB to offer both buy and sell services through
the same platform and offers a one-stop shop for all its customers.
Having expanded into the US (opening a New York office) and German
markets as part of the initial VCT investment round, this follow-on
investment, alongside funds provided by the Proven VCTs, is to
support its continued growth plan. Having doubled its sales over
the last year, this investment will give the company sufficient
capital to achieve its next planned expansion. The company's latest
audited accounts for the year ended 31 March 2018 show turnover
of GBP21.71 million and a loss before interest, tax and amortisation
of goodwill of GBP2.00 million.
Tapas Revolution Restaurant chain March 2018 0.62
-------------------- ------------------- ------------------
Based in London, Tapas Revolution is a leading Spanish restaurant
chain in the casual dining sector focusing on shopping centre sites
with high footfall. Having opened its first restaurant in Shepherd's
Bush Westfield, with the support of the initial VCT investment
in 2017, the business now operates six established restaurants.
This follow-on investment is to finance the opening of several
new locations around the UK. The company's latest audited accounts
for the year ended 31 October 2017 show a turnover of GBP5.84 million
and a loss before interest, tax and amortisation of goodwill of
GBP0.68 million.
MyTutor Online tutoring May 2018 1.15
-------------------- -------------------- ------------------
My Tutor is a digital marketplace that connects school pupils who
are seeking private one-to-one tutoring with university students.
The business is satisfying a growing demand from both schools and
parents to improve pupils' exam results to enhance their academic
and career prospects. This investment supports an opportunity to
grow My Tutor's market presence and drive technological development
within the company. The company's latest unaudited accounts for
the year ended 31 December 2017 show turnover of GBP0.56 million
and a loss before interest, tax and amortisation of goodwill of
GBP1.40 million.
Seller of
proprietary
digital archiving
Preservica software September 2018 1.25
-------------------- -------------------- ------------------
Preservica has developed market leading software for the long-term
preservation of digital records, ensuring that digital content
can remain accessible, irrespective of future changes in technology.
Previously a division of the Company's former portfolio company
Tessella, Preservica was demerged prior to the sale of Tessella
in December 2015. The investment provided additional growth capital
to finance the development of the business. The Company's latest
audited accounts for the year ended 31 March 2018 show turnover
of GBP2.85 million and a loss before interest, tax and amortisation
of goodwill of GBP1.93 million.
Further investments after the year end
The Company made further investments totalling GBP1.93 million into
one new and three existing portfolio companies after the year end,
as detailed below: Company Business Date of investment Amount of new
investment (GBPm)
Workforce
management
and security
Biosite services October 2018 0.93
-------------------- -------------------- -------------------
Based in the Midlands, Biosite is a provider of biometric access
control and software-based workforce management solutions for the
construction sector. The business is growing significantly, and
this investment will support the further development of software
and hardware products. The Company's latest unaudited accounts
for the year ended 31 July 2017 show turnover of GBP6.38 million
and a loss before interest, tax and amortisation of goodwill of
GBP0.45 million.
Proactive Investor media
Investors services October 2018 0.45
-------------------- -------------------- -------------------
Proactive Investors specialises in timely multi-media news provision,
events organisation, digital services and investor research. This
follow-on investment was agreed at the time of the original investment
in January and these further funds will be used to develop its
brand and enable the company to continue its global expansion.
Platform for the
dissemination of
Grow Kudos academic research November 2018 0.47
------------------- -------------------- -------------------
Grow Kudos is an online platform which provides and promotes academic
research dissemination. The Kudos product was developed to allow
researchers to increase the impact and readership of their work
and to track and analyse distribution both within academia and
across broader audiences. The investment will be used principally
to expand the company's suite of services and to support sales
growth. The company's unaudited accounts for the year ended 31
December 2017 show revenues of GBP0.53 million and a loss before
interest, tax and amortisation of goodwill of GBP0.59 million.
In October 2018, a further GBP0.08 million was invested into MPB Group,
an existing portfolio company. This investment was part of a planned
drawdown having previously been approved by the Board as part of a
larger funding round completed in February 2018.
Realisations during the year
The Company realised its investments in Gro-Group Holdings, Fullfield
(trading as Motorclean), Hemmels and Lightworks during the year, generating
a net realised gain of GBP0.95 million for the year. Net cash proceeds
received in the year were GBP6.58 million. GBP5.92 million was from
the sale of four investments as detailed below; GBP0.44 million from
loan and share capital repayments and GBP0.22 million from other receipts
of deferred consideration: Company Business Period of investment Total cash proceeds
over the life of the
investment/ Multiple
over cost
Gro-Group Manufacturer March 2013 to GBP5.43 million
and distributor December 2017 2.3 x cost
of baby sleep
products
-------------------- --------------------- ---------------------
The Company sold its investment in Gro-Group to Mayborn Group for
GBP4.19 million (realised gain in the year: GBP1.72 million) in
December 2017. Since this date, deferred consideration of GBP0.14
million has also been received. Including this deferred consideration,
the Company has realised a gain over the life of the investment
of GBP3.03 million. This equates to a multiple of 2.3 times the
investment cost of GBP2.40 million and an IRR of 21%.
Fullfield Vehicle cleaning July 2011 to GBP3.16 million
(Motorclean) and valet services August 2018 1.2 x cost
-------------------- --------------------- ---------------------
The Company sold its investment in Fullfield (trading as Motorclean)
back to management in August 2018 receiving cash proceeds of GBP0.86
million (realised gain in the period: GBP0.75 million). This realisation
contributed to a return of 1.2 times the original investment cost
and an IRR of 5.0% in the seven years that this investment was
held.
Hemmels Classic car March 2018 to GBP0.33 million
restorer September 2018 0.5 x cost
-------------------- --------------------- ---------------------
The Company sold its investment in Hemmels to the business's largest
customer for GBP0.30 million in September 2018, generating a realised
loss of GBP0.37 million on the original investment cost over the
six months that this investment was held. The investment was realised
six months after the original investment, for reasons already explained
under new investments.
Lightworks Provider of March 2011 to GBP0.44 million
software for September 2018 21.7 x cost
CAD and CAM
vendors
-------------------- --------------------- ---------------------
The Company sold its investment in Lightworks to Siemens PLM Software
for GBP0.43 million in September 2018 (realised gain in the year:
GBP0.35 million), generating a realised gain over the life of the
investment of GBP0.42 million. This equates to a multiple of 21.7
times the investment cost of GBP0.02 million and an IRR of 57%.
Other realised gains in the year amounted to GBP0.16 million arising
from deferred consideration from companies realised in a previous
year. Together with the realised gains upon the four disposals of
GBP0.95 million, the total for the year was GBP1.11 million, as shown
in the tables at the start of this Review.
Mobeus Equity Partners LLP
Investment Adviser
12 December 2018
Investment Portfolio Summary for the year ended 30
September
2018
Total Total Additional Total % of
cost at Valuation investments valuation portfolio
at at by value
30-Sep-18 30-Sep-17 30-Sep-18
GBP GBP GBP GBP
---------------------- ----------- ----------- ------------ ----------- -----------
Tovey Management
Limited (trading
as Access IS) 3,313,932 3,880,197 - 4.110.232 8.3%
Provider of data
capture and
scanning hardware
---------------------- ----------- ----------- ------------ ----------- -----------
Virgin Wines Holding
Company
Limited 2,745,503 3,483,880 - 3,227,371 6.5%
Online wine retailer
---------------------- ----------- ----------- ------------ ----------- -----------
Preservica Limited 2,181,666 935,000 1,246,666 2,977,489 6.0%
Seller of proprietary
digital
archiving software
---------------------- ----------- ----------- ------------ ----------- -----------
ASL Technology
Holdings Limited 2,722,106 2,845,619 - 2,904,306 5.9%
Printer and
photocopier services
---------------------- ----------- ----------- ------------ ----------- -----------
EOTH Limited (trading
as Equip
Outdoor
Technologies) 1,383,313 1,809,879 - 2,809,199 5.7%
Distributor of
branded outdoor
equipment and
clothing including
the Rab and Lowe
Alpine brands
---------------------- ----------- ----------- ------------ ----------- -----------
Media Business
Insight Holdings
Limited 3,666,556 2,443,888 - 2,469,625 5.0%
A publishing and
events business
focused on the
creative production
industries
---------------------- ----------- ----------- ------------ ----------- -----------
Manufacturing
Services Investment
Limited (trading as
Wetsuit
Outlet) 3,205,182 3,205,182 - 2,326,781 4.7%
Online retailer in
the water
sports market
---------------------- ----------- ----------- ------------ ----------- -----------
My Tutorweb Limited 1,783,566 636,477 1,147,089 1,963,647 4.0%
Digital marketplace
connecting
school pupils seeking
one-to-one
online tutoring
---------------------- ----------- ----------- ------------ ----------- -----------
CGI Creative Graphics
International
Limited 1,943,948 1,301,638 - 1,962,334 4.0%
Vinyl graphics to
global automotive,
recreation vehicle
and aerospace
markets
---------------------- ----------- ----------- ------------ ----------- -----------
Master Removers Group
Limited
(trading as Anthony
Ward Thomas,
Bishopsgate and
Aussie Man
& Van)) 682,183 1,379,326 - 1,926,851 3.9%
A specialist
logistics, storage
and removals business
---------------------- ----------- ----------- ------------ ----------- -----------
MPB Group Limited 1,269,194 1,023,613 619,119 1,885,665 3.8%
Online marketplace
for used
photographic
equipment
---------------------- ----------- ----------- ------------ ----------- -----------
Vian Marketing
Limited (trading
as Red Paddle Co) 1,207,437 1,906,790 - 1,870,551 3.8%
Design, manufacture
and sale
of stand-up
paddleboards and
windsurfing sails
---------------------- ----------- ----------- ------------ ----------- -----------
Ibericos Etc. Limited
(trading
as Tapas Revolution) 1,397,386 776,386 621,000 1,630,329 3.3%
Spanish restaurant
chain
---------------------- ----------- ----------- ------------ ----------- -----------
Tharstern Group
Limited 1,454,278 1,770,484 - 1,569,303 3.2%
Software based
management
Information systems
for the
printing industry
---------------------- ----------- ----------- ------------ ----------- -----------
I-Dox plc 453,881 2,687,629 - 1,462,570 3.0%
Developer and
supplier of
knowledge management
products
---------------------- ----------- ----------- ------------ ----------- -----------
Pattern Analytics
Limited
(trading as Biosite) 857,014 857,014 - 1,384,696 2.8%
Workforce management
and security
services for the
construction
industry
---------------------- ----------- ----------- ------------ ----------- -----------
Turner Topco Limited
(trading
as Auction
Technology Group
(formerly ATG
Media)) 1,529,075 1,209,162 - 1,177,894 2.4%
SaaS based online
market place
platform
---------------------- ----------- ----------- ------------ ----------- -----------
Bourn Bioscience
Limited 1,610,379 925,420 - 1,153,951 2.3%
Management of
In-vitro
fertilisation
clinics
---------------------- ----------- ----------- ------------ ----------- -----------
Aquasium Technology
Limited 166,667 706,592 - 1,002,689 2.0%
Manufacturing and
marketing
of bespoke electron
beam welding
and vacuum furnace
equipment
---------------------- ----------- ----------- ------------ ----------- -----------
Redline Worldwide
Limited 1,129,121 1,145,887 - 956,894 1.9%
Provider of security
services
to the aviation
industry and
other sectors
---------------------- ----------- ----------- ------------ ----------- -----------
RDL Corporation
Limited 1,441,667 1,072,527 - 903,731 1.8%
Recruitment
consultants within
the pharmaceutical,
business
intelligence and IT
industries
---------------------- ----------- ----------- ------------ ----------- -----------
Buster and Punch
Holdings
Limited 725,226 725,226 - 855,330 1.7%
Industrial inspired
lighting
and interiors
retailer
---------------------- ----------- ----------- ------------ ----------- -----------
The Plastic Surgeon
Holdings
Limited (formerly
TPSFF Holdings
Limited) 40,877 765,694 - 829,934 1.7%
Supplier of snagging
and finishing
services to the
property sector
---------------------- ----------- ----------- ------------ ----------- -----------
Vectair Holdings
Limited 53,400 601,006 - 684,085 1.4%
Designer and
distributor of
washroom products
---------------------- ----------- ----------- ------------ ----------- -----------
Super Carers Limited 649,528 - 649,528 649,528 1.3%
Online platform that
connects
people seeking home
care with
experienced
independent carers
---------------------- ----------- ----------- ------------ ----------- -----------
Rota Geek Limited 625,400 - 625,400 625,400 1.3%
Provider of
cloud-based
enterprise
software to help
organisations
predict and meet
demand to
schedule staff
effectively
---------------------- ----------- ----------- ------------ ----------- -----------
Hollydale Management
Limited 994,560 621,600 - 621,600 1.3%
Company seeking to
carry on
a business in the
food sector
---------------------- ----------- ----------- ------------ ----------- -----------
Blaze Signs Holdings
Limited 418,281 438,320 - 598,605 1.2%
Manufacturer and
installer
of signs
---------------------- ----------- ----------- ------------ ----------- -----------
Proactive Group
Holdings Inc. 539,214 - 539,214 539,214 1.1%
Provider of media
services
and investor
conferences for
companies primarily
listed
on secondary public
markets
---------------------- ----------- ----------- ------------ ----------- -----------
BookingTek Limited 872,646 779,095 93,551 436,323 0.9%
Software for hotel
groups
---------------------- ----------- ----------- ------------ ----------- -----------
Omega Diagnostics
Group plc 280,026 501,682 - 350,010 0.7%
In-vitro diagnostics
for food
intolerance,
autoimmune diseases
and infectious
diseases
---------------------- ----------- ----------- ------------ ----------- -----------
Backhouse Management
Limited 782,080 300,800 - 300,800 0.6%
Company seeking to
carry on
a business in the
motor sector
---------------------- ----------- ----------- ------------ ----------- -----------
Barham Consulting
Limited 782,080 300,800 - 300,800 0.6%
Company seeking to
carry on
a business in the
catering
sector
---------------------- ----------- ----------- ------------ ----------- -----------
Creasy Marketing
Services
Limited 782,080 300,800 - 300,800 0.6%
Company seeking to
carry on
a business in the
textile
sector
---------------------- ----------- ----------- ------------ ----------- -----------
McGrigor Management
Limited 782,080 300,800 - 300,800 0.6%
Company seeking to
carry on
a business in the
pharmaceutical
sector
---------------------- ----------- ----------- ------------ ----------- -----------
Jablite Holdings
Limited 498,790 304,755 - 162,366 0.3%
Manufacturer of
expanded polystyrene
products
---------------------- ----------- ----------- ------------ ----------- -----------
Veritek Global
Holdings Limited 2,289,859 1,752,129 - 129,132 0.3%
Maintenance of
imaging equipment
---------------------- ----------- ----------- ------------ ----------- -----------
BG Training Limited 53,125 26,563 - 26,563 0.1%
Technical training
business
---------------------- ----------- ----------- ------------ ----------- -----------
Corero Network
Security plc 600,000 7,866 - 9,832 0.0%
Provider of
e-business
technologies
---------------------- ----------- ----------- ------------ ----------- -----------
Hemmels Limited 30,180 - 671,203 - 0.0%
Company specialising
in the
sourcing,
restoration, selling
and servicing of high
price
classic cars
---------------------- ----------- ----------- ------------ ----------- -----------
CB Imports Group
Limited (trading
as Country Baskets) 175,000 - - - 0.0%
Importer and
distributor of
artificial flowers,
floral
sundries and home
decor products
---------------------- ----------- ----------- ------------ ----------- -----------
Racoon International
Group
Limited 655,851 - - - 0.0%
Supplier of hair
extensions,
hair care products
and training
---------------------- ----------- ----------- ------------ ----------- -----------
Oxonica Limited 2,524,527 - - - 0.0%
International
nanomaterials
group
---------------------- ----------- ----------- ------------ ----------- -----------
NexxtDrive
Limited/Nexxt
E-drive
Limited 487,014 - - - 0.0%
Developer and
exploiter of
mechanical
transmission
technologies
---------------------- ----------- ----------- ------------ ----------- -----------
Biomer Technology
Limited 137,170 - - - 0.0%
Developer of
biomaterials
for medical devices
---------------------- ----------- ----------- ------------ ----------- -----------
Newquay Helicopters
(2013)
Limited (in
liquidation) 9,246 - - - 0.0%
Helicopter service
operator
Disposed in year
Gro-Group Holdings
Limited - 2,606,640 - - 0.0%
Baby sleep products
---------------------- ----------- ----------- ------------ ----------- -----------
Lightworks Software
Limited - 87,596 - - 0.0%
Provider of software
for CAD
and CAM vendors
---------------------- ----------- ----------- ------------ ----------- -----------
Fullfield Limited
(trading
as Motorclean) - 1,606,346 - - 0.0%
Vehicle cleaning and
valet
services
---------------------- ----------- ----------- ------------ ----------- -----------
Total 51,932,294 48,030,308 6,212,770 49,397,230 100.0%
---------------------- ----------- ----------- ------------ ----------- -----------
For further information on the Investment Portfolio, please see the
Annual Report and Financial Statements.
PRINCIPAL RISKS
The Directors acknowledge the Board's responsibilities for the Company's
internal control systems and have instigated systems and procedures
for identifying, evaluating and managing the principal risks faced
by the Company. This includes a key risk management review which takes
place at each quarterly Board meeting. The principal risks identified
by the Board, a description of the possible consequences of each risk
and how the Board manages each risk are set out below.
The risk profile of the Company changed as a consequence of the VCT
regulations introduced in 2015. As the Company is required to focus
its investment on growth capital investments in younger companies
it is anticipated that investment returns will be more volatile and
will have a higher risk profile. The Board remains confident that
the Company and the Investment Adviser has adapted to these new requirements
and put in place appropriate resource to identify and make suitable
investments.
The Board regularly sets and reviews policies for financial risk management
and full details of these can be found in Note 16 to the Financial
Statements.
Risk Possible How the Board manages risk
consequence
Investment Investment in
and VCT qualifying * The Board regularly reviews the Company's Strategy
strategic earlier stage including its Investment Policy.
unquoted small
companies
involves a * Careful selection and review of the Investment
higher portfolio on a regular basis.
degree of risk
than investment
in fully listed
companies.
Smaller
companies often
have
limited product
lines, markets
or financial
resources and
may be dependent
for their
management on a
smaller number
of key
individuals.
----------------- ------------------------------------------------------------
Loss of A breach of the
approval VCT Tax Rules * The Company's VCT qualifying status is regularly
as a Venture may lead to the reviewed by the Board and the Investment Adviser.
Capital Company losing
Trust its approval as
a VCT, which * The Board receives regular reports from its VCT
would result in Status Adviser who has been retained by the Board to
qualifying monitor the VCT's compliance with the VCT Rules.
shareholders who
have not
held their
shares for the
designated
period having
to repay the
income tax
relief
they obtained
and future
dividends paid
by the Company
being subject to
tax. The
Company would
also lose its
exemption from
corporation
tax on capital
gains.
----------------- ------------------------------------------------------------
Regulatory The Company is
required to * Regulatory and legislative developments are kept
meet its legal under review by the Board.
and regulatory
obligations as a
VCT, a listed
company and its
own Alternative
Investment Fund
Manager (AIFM).
Failure to
comply might
result
in suspension of
the Company's
Stock Exchange
listing,
financial
penalties or a
qualified
audit report or
a loss of
the Company's
status as a
VCT.
Furthermore,
changes
to the UK VCT
legislation
or the State-aid
rules could
have an adverse
effect on
the Company's
ability to
achieve
satisfactory
investment
returns.
----------------- ------------------------------------------------------------
Counterparty A counterparty
may fail to * The Board regularly reviews and agrees policies for
discharge an managing these risks. Further details can be found i
obligation or n
commitment that the discussion on 'credit risk' in Note 16 to the
it has entered Financial Statements in the Annual Report
into with the
Company.
----------------- ------------------------------------------------------------
Economic Events, such as
the impact * The Board monitors (1) the portfolio as a whole to
of Brexit, an ensure that the Company invests in a diversified
economic portfolio of companies and (2) developments in the
recession macro-economic environment such as movements in
and movements in interest rates.
interest
rates could
affect trading
conditions for
smaller
companies
and consequently
the value
of the Company's
qualifying
investments.
----------------- ------------------------------------------------------------
Financial Failure of the
and systems * The Board carries out an annual review of the
operating (including internal controls in place, reviews the risks facing
breaches of the Company at each quarterly Board meeting and
cyber security) receives reports by exception.
at any of the
third party
service * It reviews the performance of the service providers
providers that annually and has obtained assurance that such
the providers have controls in place to reduce the risk
Company has of breaches of their cyber security.
contracted with
could lead to
inaccurate
reporting or
monitoring.
Inadequate
controls could
lead to the
misappropriation
or insecurity of
assets.
----------------- ------------------------------------------------------------
Market Movements in the
UK Stock * The Board receives and reviews quarterly valuation
Market indices reports from the Investment Adviser.
will inevitably
impact the
valuation of the * The Investment Adviser alerts the Board about any
VCT's adverse movements.
investments.
----------------- ------------------------------------------------------------
Asset The Company's
liquidity investments * The Board receives reports from the Investment
may be difficult Adviser and reviews the portfolio at each quarterly
to realise. board meeting. It carefully monitors investments
where a particular risk has been identified.
----------------- ------------------------------------------------------------
Market Shareholders may
liquidity find it * The Board has a share buyback policy which seeks to
difficult to mitigate market liquidity risk for shareholders. Thi
sell their s
shares policy is reviewed at each quarterly Board meeting.
at a price which
is close
to the net asset
value.
----------------- ------------------------------------------------------------
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and
the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements
for each financial year and the Directors have elected to prepare
the Financial Statements in accordance with United Kingdom Generally
Accepted Accounting Practice (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 of the Company and of
the 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 the Financial Statements have been
prepared in accordance with United Kingdom accounting
standards, 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;
* prepare a Strategic Report, a Director's 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.
Website publication
The Directors are responsible for ensuring the Annual Report and the
Financial Statements are made available on a website. Financial Statements
are published on the Company's website in accordance with legislation
in the United Kingdom governing the preparation and dissemination
of Financial Statements, which may vary from legislation in other
jurisdictions. The maintenance and integrity of the Company's website
is the responsibility of the Directors. The Directors' responsibility
also extends to the ongoing integrity of the Financial Statements
contained therein.
Directors' responsibilities pursuant to Disclosure and Transparency
Rule 4 of the UK Listing Authority
The Directors confirm to the best of their knowledge that:
a) The Financial Statements, which have been prepared in accordance
with United Kingdom Generally Accepted Accounting Practice give a
true and fair view of the assets, liabilities, financial position
and the profit of the Company.
b) The Annual Report includes 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.
Having taken advice from the Audit Committee, the Board considers
the Annual Report and Financial Statements, taken as a whole, is fair,
balanced and understandable and that it provides the information necessary
for shareholders to assess the Company's performance, business model
and strategy.
Neither the Company nor the Directors accept any liability to any
person in relation to the Annual Report except to the extent that
such liability could arise under English law.
For and on behalf of the Board
Colin Hook
Chairman
FINANCIAL STATEMENTS Income Statement
For the year
ended 30
September 2018
Year ended 30 September 2018 Year ended 30 September 2017
Notes Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
Net unrealised
gains/(losses)
on investments 8c - 570,022 570,022 - (794,007) (794,007)
Net gains on
realisation of
investments 8 - 1,113,464 1,113,464 - 3,883,829 3,883,829
Income 3 3,093,838 - 3,093,838 3,266,634 - 3,266,634
Investment
Adviser's fees 4a (428,311) (1,284,934) (1,713,245) (394,012) (1,182,037) (1,576,049)
Investment
Advisers'
performance
fees 4b - (1,119) (1,119) - (571,879) (571,879)
Other expenses (455,836) - (455,836) (423,354) - (423,354)
Profit on
ordinary
activities
before
taxation 2,209,691 397,433 2,607,124 2,449,268 1,335,906 3,785,174
Tax on profit
on ordinary
activities 5 (339,227) 339,227 - (421,283) 421,283 -
Profit for the
year and total
comprehensive
income 1,870,464 736,660 2,607,124 2,027,985 1,757,189 3,785,174
---------------- ------ ---------- ------------ ------------ ---------- ------------ ------------
Basic and
diluted
earnings per
ordinary
share: 6 1.88p 0.74p 2.62p 2.79p 2.42p 5.21p
The revenue column of the Income Statement includes all income and
expenses. The capital column accounts for the unrealised gains/(losses)
and realised gains on investments and the proportion of the Investment
Adviser's fee and performance fee charged to capital.
The total column is the Statement of Total Comprehensive Income of
the Company prepared in accordance with Financial Reporting Standards
("FRS"). In order to better reflect the activities of a VCT and in
accordance with the 2014 Statement of Recommended Practice ("SORP")
(updated in January 2017) by the Association of Investment Companies
("AIC"), supplementary information which analyses the Income Statement
between items of a revenue and capital nature has been presented alongside
the Income Statement.
The revenue column of profit attributable to equity shareholders is
the measure the Directors believe appropriate in assessing the Company's
compliance with certain requirements set out in Section 274 Income
Tax Act 2007.
All the items in the above statement derive from continuing operations
of the Company. No operations were acquired or discontinued in the
year.
Balance sheet
as at 30
September
2018
Company
number:
4069483
as at 30 September 2018 as at 30 September 2017
Notes
GBP GBP GBP GBP GBP GBP
Fixed assets
Investments at
fair value 8 49,397,230 48,030,308
Current assets
Debtors and
prepayments 458,043 3,372,032
Current asset
investments 9 31,627,351 12,412,671
Cash at bank
and
in hand 9 1,284,816 1,375,065
----------- -----------
33,370,210 17,159,768
Creditors:
amounts
falling due
within
one year (183,726) (841,325)
----------- -----------
Net current
assets 33,186,484 16,318,443
Net assets 82,583,714 64,348,751
=============== ====== =========== =========== =========== =========== =========== ===========
Capital and
reserves
Called up
share
capital 10 1,054,384 792,047
Capital
redemption
reserve 33,490 14,014
Share premium
reserve 46,473,760 24,099,311
Revaluation
reserve 4,102,002 4,020,689
Special
reserve 19,655,855 23,215,643
Profit and
loss
account 11,264,223 12,207,047
Equity
shareholders'
funds 82,583,714 64,348,751
=============== ====== =========== =========== =========== =========== =========== ===========
Basic and
diluted
net asset
value
per share
Ordinary
shares 11 78.32p 81.24p
Statement of Changes in Equity for the year ended 30 September 2018
Non-distributable reserves Distributable reserves
Called up Capital Share Special Realised
share redemption premium Revaluation distributable capital Revenue
capital reserve reserve reserve reserve reserve reserve Total
(Note a) (Note b) (Note b)
For the year
ended 30
September 2018 Notes GBP GBP GBP GBP GBP GBP GBP GBP
--------------- ------ ---------- ----------- ----------- ------------ -------------- ------------ ------------ ------------
At 1 October
2017 792,047 14,014 24,099,311 4,020,689 23,215,643 10,134,703 2,072,344 64,348,751
Comprehensive
income for the
year
Profit for the
year - - - 570,022 - 166,638 1,870,464 2,607,124
Total
comprehensive
income for
the year - - - 570,022 - 166,638 1,870,464 2,607,124
--------------- ------ ----------- ----------- -------------- ------------ ------------
Contributions
by and
distributions
to owners
Shares issued
via Offer for
Subscription
(note c) 10 266,076 - 21,293,047 - (199,395) - - 21,359,728
Dividends
re-invested
into new
shares 10 15,737 - 1,081,402 - - - - 1,097,139
Shares bought
back (note d,
note e) 10 (19,476) 19,476 - - (1,379,298) - - (1,379,298)
Dividends paid 7 - - - - - (4,143,353) (1,306,377) (5,449,730)
Total
contributions
by and
distributions
to owners 262,337 19,476 22,374,449 - (1,578,693) (4,143,353) (1,306,377) 15,627,839
--------------- ------ ----------- ----------- -------------- ------------ ------------
Other
movements
Realised
losses
transferred
to special
reserve (note
f) - - - - (1,981,095) 1,981,095 -
Realisation of
previously
unrealised
appreciation - - - (488,709) - 488,709 -
Total other
movements - - - (488,709) (1,981,095) 2,469,804 - -
--------------- ------ ----------- ----------- -------------- ------------ ------------
At 30
September
2018 1,054,384 33,490 46,473,760 4,102,002 19,655,855 8,627,792 2,636,431 82,583,714
=============== ====== ========== =========== =========== ============ ============== ============ ============ ============
Notes
a) The Company's special reserve is available to fund buy-backs of shares as and when
it is
considered by the Board to be in the interests of the shareholders, and to absorb any
existing
and future realised losses and for other corporate purposes. As at 30 September 2018,
the
Company has a special reserve of GBP19,655,855, all of which relates to reserves from
shares
issued on or before 5 April 2014.
b) The realised capital reserve and the revenue reserve together comprise the Profit
and Loss
Account of the Company shown in the Balance Sheet.
c) Under an Offer for Subscription ("Offer") launched on 6 September 2017, 26,607,590
ordinary
shares were allotted between October 2017 and March 2018, raising net funds of
GBP21,359,728
for the Company. This figure is net of offer costs of GBP448,353. The difference
between the
figure shown above of GBP21,359,728, and that per the Statement of Cash Flows of
GBP24,305,938
is due to a debtor of GBP2,946,210 held at the start of the year, arising from the
first allotment
under the Offer in the previous year on 28 September 2017.
d) The shareholders authorised the Company to purchase its own shares for cancellation
pursuant
to section 701 of the Companies Act 2006 at the Annual General Meeting held on 7
February
2018. The authority was limited to a maximum number of 14,187,907 shares (this being
approximately
14.99% of the issued share capital at the date of the Notice of the meeting). The
minimum
price which may be paid for a share is 1 penny per share, the nominal value thereof.
The maximum
price that may be paid for a share is an amount that is not more than 5% above the
average
of the middle market quotations of the shares as derived from the Daily Official List
of the
London Stock Exchange for the five business days preceding such purchase. The
authorities
provide that the Company may make a contract or contracts to purchase its own shares
prior
to the expiry of the authority which may be executed in whole or part after the expiry
of
such authority, and may purchase its shares in pursuance of any such contract.
e) During the year, the Company repurchased 1,947,624 of its own shares at the
prevailing
market price for a total cost of GBP1,379,298, which were subsequently cancelled. The
difference
between the figure shown above of GBP1,379,298, and that per the Statement of Cash
Flows of
GBP1,461,936 is due to a share buyback creditor of GBP82,638 held at the start of the
year.
f) The transfer of GBP1,981,095 to the special reserve from the realised capital
reserve above
is the total of realised losses incurred by the Company this year.
Statement of Changes in Equity for the year ended 30 September 2017
Non-distributable reserves Distributable reserves
Called
up Capital Share Special Realised
share redemption premium Revaluation distributable capital Revenue
capital reserve account reserve reserve reserve reserve Total
For the year
ended 30
September 2017 GBP GBP GBP GBP GBP GBP GBP GBP
--------------- -------- ----------- ----------- ------------ -------------- ------------- ------------ -------------
At 1 October
2016 719,140 11,985 18,308,887 4,744,396 24,980,045 20,225,980 1,850,205 70,840,638
Comprehensive
income for the
year
Profit for the
year - - - (794,007) - 2,551,196 2,027,985 3,785,174
Total
comprehensive
income for the
year - - - (794,007) - 2,551,196 2,027,985 3,785,174
---------------- ----------- ----------- -------------- ------------- -------------
Contributions
by and
distributions
to owners
Shares issued
under Offer
for
Subscription 36,277 - 2,910,719 - (786) - 2,946,210
Dividends
re-invested
into new
shares 38,659 - 2,879,705 - - - 2,918,364
Shares bought
back (2,029) 2,029 - - (160,323) - (160,323)
Dividends paid - - - - - (14,175,466) (1,805,846) (15,981,312)
Total
contributions
by and
distributions
to owners 72,907 2,029 5,790,424 - (161,109) (14,175,466) (1,805,846) (10,277,061)
---------------- ----------- ----------- -------------- ------------- -------------
Other
movements
Realised losses
transferred to
special
reserve - - - - (1,603,293) 1,603,293 -
Realisation of
previously
unrealised
depreciation - - - 70,300 - (70,300) -
-------------
Total other
movements - - - 70,300 (1,603,293) 1,532,993 - -
---------------- ----------- ----------- -------------- ------------- -------------
At 30 September
2017 792,047 14,014 24,099,311 4,020,689 23,215,643 10,134,703 2,072,344 64,348,751
================ ======== =========== =========== ============ ============== ============= ============ =============
The composition of each of these reserves is explained below:
Called up share capital
The nominal value of shares originally issued, increased for subsequent
share issues either via an Offer for Subscription or Dividend Investment
Scheme or reduced due to shares bought back by the Company.
Capital redemption reserve
The nominal value of shares bought back and cancelled is held in this
reserve, so that the company's capital is maintained.
Share premium reserve
This reserve contains the excess of gross proceeds less offer costs
over the nominal value of shares allotted under recent Offers for
Subscription and the Company's Dividend Investment Scheme.
Revaluation reserve
Increases and decreases in the valuation of investments held at the
year end are accounted for in this reserve, except to the extent that
the diminution is deemed permanent. In accordance with stating all
investments at fair value through profit and loss (as recorded in
note 8), all such movements through both revaluation and realised
capital reserves are shown within the Income Statement for the year.
In accordance with stating all investments at fair value through profit
and loss (as recorded in note 8), all such movements through both
revaluation and realised capital reserves are shown within the Income
Statement for the year.
Special distributable reserve
The cost of share buybacks is charged to this reserve. In addition,
any realised losses on the sale or impairment of
investments (excluding transaction costs), and 75% of the Investment
Adviser fee expense, and the related tax effect, are transferred from
the realised capital reserve to this reserve. The cost of any IFA
facilitation fee payable as part of the Offer for Subscription is
also charged to this reserve.
Realised capital reserve
The following are accounted for in this reserve:
- Gains and losses on realisation of investments;
- Permanent diminution in value of investments;
- Transaction costs incurred in the acquisition and disposal of investments;
and
- 75% of the Investment Adviser fee expense and 100% of any performance
fee payable, together with the related tax effect to this reserve
in accordance with the policies, and
- Capital dividends paid.
Revenue reserve
Income and expenses that are revenue in nature are accounted for in
this reserve together with the related tax effect, as well as income
dividends paid that are classified as revenue in nature. Statement of Cash Flows
For the year ended 30 September 2018 Year ended Year ended
30 September 30 September
2018 2017
Notes GBP GBP
Cash flows from operating activities
Profit for the financial year 2,607,124 3,785,174
Adjustments for:
Net unrealised (gains)/losses on investments (570,022) 794,007
Net gains on realisations on investments (1,113,464) (3,883,829)
Increase in debtors (4,832) (120,887)
Decrease in creditors and accruals (574,960) (561,152)
Net cash inflow from operating activities 343,846 13,313
Cash flows from investing activities
Purchase of investments 8 (6,290,160) (5,304,234)
Disposal of investments 8 6,579,334 14,728,706
Decrease in bank deposits with a maturity
over three months - 2,028,243
------------- -------------
Net cash inflow from investing activities 289,174 11,452,715
Cash flows from financing activities
Shares issued as part of Offer for subscription 10 24,305,938 -
Equity dividends paid 7 (4,352,591) (13,062,948)
Purchase of own shares (1,461,936) (115,024)
Net cash inflow/(outflow) from financing
activities 18,491,411 (13,177,972)
Net increase/(decrease) in cash and
cash equivalents 19,124,431 (1,711,944)
Cash and cash equivalents at start of
year 10,635,967 12,347,911
Cash and cash equivalents at end of
year 29,760,398 10,635,967
================================================= ====== ============= =============
Cash and cash equivalents comprise:
Cash at bank and in hand 9 1,284,816 1,375,065
Cash equivalents 9 28,475,582 9,260,902
Notes to the Financial Statements
for the year ended 30 September 2018
1 Company information
The Income and Growth VCT plc is a public limited company incorporated
in England, registration number 4069483. The registered office
is 30 Haymarket, London, SW1Y 4EX.
2 Basis of preparation
A summary of the principal accounting policies, all of which
have been applied consistently throughout the year are set out
at the start of the related disclosure throughout the Notes to
the Financial Statements. All accounting policies are included
within an outlined box at the top of each relevant note.
These Financial Statements have been prepared in accordance with
applicable United Kingdom accounting standards, including Financial
Reporting Standard 102 ("FRS102"), with the Companies Act 2006
and the 2014 Statement of Recommended practice, 'Financial Statements
of Investment Trust Companies and Venture Capital Trusts' ('the
SORP') (updated in January 2017) issued by the Association of
Investment Companies. The Company has a number of financial instruments
which are disclosed under FRS102 s11/12 as shown in Note 16 to
the Financial Statements in the Annual Report.
3 Income
Dividends receivable on quoted equity shares are brought into
account on the ex-dividend date. Dividends receivable on unquoted
equity shares are brought into account when the Company's right
to receive payment is established and there is no reasonable
doubt that payment will be received.
Interest income on loan stock is accrued on a daily basis. Provision
is made against this income where recovery is doubtful or where
it will not be received in the foreseeable future. Where the
loan stocks only require interest or a redemption premium to
be paid on redemption, the interest and redemption premium is
recognised as income or capital as appropriate once redemption
is reasonably certain. When a redemption premium is designed
to protect the value of the instrument holder's investment rather
than reflect a commercial rate of revenue return the redemption
premium is recognised as capital. The treatment of redemption
premiums is analysed to consider if they are revenue or capital
in nature on a company by company basis. Accordingly, the redemption
premium recognised in the year ended 30 September 2018 has been
classified as capital and has been included within gains on investments. 2018 2017
GBP GBP
Income from bank deposits 43,178 55,893
Income from investments
- from equities 424,491 288,843
- from OEIC funds 108,807 21,960
- from loan stock 2,497,742 2,899,869
- from interest on preference share dividend arrears 11,881 -
3,042,921 3,210,672
Other income 7,739 69
------------------------------------------------------ ---------- ----------
Total income 3,093,838 3,266,634
------------------------------------------------------ ---------- ----------
Total income comprises
Revenue dividends received 533,298 310,803
Interest 2,552,801 2,955,762
Other income 7,739 69
------------------------------------------------------ ---------- ----------
Total Income 3,093,838 3,266,634
------------------------------------------------------ ---------- ----------
Income from investments comprises
Listed UK securities 43,335 42,389
Listed overseas securities 108,807 21,960
Unlisted UK securities 2,890,779 3,146,323
Total investment income 3,042,921 3,210,672
------------------------------------------------------ ---------- ----------
Total loan stock interest due but not recognised in the year
was GBP445,302 (2017: GBP223,159) due to uncertainty over its
recoverability.
4 Investment Adviser's fees and performance fees
25% of the Investment Adviser's fees are charged to the revenue
column of the Income Statement, while 75% is charged against
the capital column of the Income Statement. This is in line with
the Board's expected long-term split of returns from the investment
portfolio of the Company.
100% of any performance incentive fee payable for the year is
charged against the capital column of the Income Statement, as
it is based upon the achievement of capital growth.
a) Investment Adviser's fees Revenue Capital Total Revenue Capital Total
2018 2018 2018 2017 2017 2017
GBP GBP GBP GBP GBP GBP
Mobeus Equity
Partners LLP 428,311 1,284,934 1,713,245 394,012 1,182,037 1,576,049
-------------------- -------- ---------- ---------- -------- ---------- ----------
Under the terms of a revised investment management agreement
dated 29 March 2010, Mobeus Equity Partners LLP ("Mobeus") (formerly
Matrix Private Equity Partners LLP ("MPEP")) provides investment
advisory, administrative and company secretarial services to
the Company, for a fee of 2.4% per annum of closing net assets,
calculated on a quarterly basis by reference to the net assets
at the end of the preceding quarter. One sixth of this fee is
subject to minimum and maximum limits of GBP150,000 (2017: GBP150,000)
and GBP170,000 (2017: GBP170,000) per annum respectively.
The Investment Adviser fees disclosed above are stated after
applying a cap on expenses excluding IFA trail commission and
exceptional items set at 3.25% of closing net assets at the year-end.
In accordance with the investment management agreement any excess
expenses are wholly borne by the Investment Adviser. The excess
expenses during the year attributable to the Investment Adviser
amounted to GBPnil (2017: GBPnil).
With effect from 1 April 2018, the Investment Adviser's fee upon
the net funds raised from the over-allotment facility of GBP10
million under the recent Offer has been reduced to 1.4% from
2.4%, for one year.
b) Investment Adviser's performance fees
Revenue Capital Total Revenue Capital Total
2018 2018 2018 2017 2017 2017
Portfolio GBP GBP GBP GBP GBP GBP
Mobeus Equity Partners LLP - - - - 571,879 571,879
Foresight Group LLP - 1,119 1,119 - - -
- 1,119 1,119 - 571,879 571,879
-------------------------------------- -------- ------ -------- -------- --------
Under a Deed of Termination and Variation relating to Performance
Incentive Agreements dated 29 March 2010, the Investment Adviser's
Incentive Agreement for the former 'O' Share Fund was continued,
while the former 'S' Share Fund's Incentive Agreement was terminated.
Under the terms of the pre-merger 'O' Share Fund Incentive Agreement,
each of the ongoing Investment Adviser, Mobeus Equity Partners
LLP and a former Investment Adviser, Foresight Group LLP ("Foresight")
are entitled to a performance fee equal to 20% of the excess
of the value of any realisation of an investment made after 30
June 2007, over the value of that
investment in an Investment Adviser's portfolio at that date
("the Embedded Value"), which value is itself uplifted at the
rate of 6% per annum subject to a High Watermark test.
On 30 September 2014, a new incentive fee agreement was signed
between the Board and Mobeus, with effect from 1 October 2013,
to amend and replace the previous agreement. The previous agreement
remains in force, but only with the former adviser, Foresight
Group LLP, to whom, for the year ended 30 September 2018, GBP1,119
(2017: GBPnil) is payable. The agreement is due to expire on
10 March 2019. Mobeus waived their right to their portion of
the fee, under the previous agreement.
Any payment under the new incentive agreement is now 15% of net
realised gains for each year, payable in cash. It is payable
only if Cumulative Net Asset Value (NAV) total return per share
(being the closing NAV at a year end plus cumulative dividends
paid to that year-end, since 1 October 2013) equals or exceeds
a Target Return. The Target Return is the greater of two targets,
being:
i) compound growth of 6% per annum (but 5% per annum for the
year ended 30 September 2014 only), before deducting any incentive
fee payable (for the year of calculation only) under both this
amended agreement and the existing incentive agreement with Foresight
Group LLP in Cumulative NAV total return per share; or
ii) the cumulative percentage change in the Consumer Prices Index
since 1 October 2013 to the relevant financial year end, the
resultant figure then being multiplied by (100+A)/100, where
A is the number of full 12 month periods (or part thereof) that
have passed between 1 October 2013 and the relevant financial
year-end.
Both measures of Target Return are applied to the same opening
base, being NAV per share as at 30 September 2013 of 113.90 pence.
The objective of this Target Return is to enable shareholders
to benefit from a cumulative NAV return of at least 6% per annum
(5% in the financial year ended 30 September 2014), before any
incentive fee is payable. Once a payment has been made, cumulative
NAV total return is calculated after deducting past years' incentive
fees paid and payable.
Under this amended agreement, any fee payments to Mobeus are
subject to an annual cap of an amount equal to 2% of the net
assets of the Company as at the immediately preceding year-end.
This cap will include any fee payable to Foresight Group LLP
under the old agreement, although any such payment to Foresight
Group LLP is not capped. Any excess over the 2% remains payable
to Mobeus in the following year(s), subject to the 2% annual
cap in such subsequent year(s) and after any payment in respect
of such subsequent year(s).
The Target Return for the year ended 30 September 2018 was a
6% uplift on the previous year's Target Return of 142.44 pence,
being 150.99 pence. As Cumulative Total NAV return is 145.82
pence per share at the year-end, the Target Return has not been
met and therefore no fee is payable (2017: GBP571,879).
c) Offer for Subscription fees 2018 2017
GBPm GBPm
Funds raised by I&G VCT 22.01 2.99
Offer costs payable to Mobeus at 3.25% of funds raised by I&G VCT 0.72 0.10
------------------------------------------------------------------- ------ -----
Under the terms of an Offer for Subscription, with the other
Mobeus advised VCTs, launched on 6 September 2017, Mobeus is
entitled to fees of 3.25% of the investment amount received from
investors. This amount totalled GBP2.60 million across all four
VCTs, out of which all the costs associated with the allotment
were met, excluding any payments to advisers facilitated under
the terms of the Offer.
5 Taxation on ordinary activities
The tax expense for the year comprises current tax and is recognised
in profit or loss. The current income tax charge is calculated
on the basis of tax rates and laws that have been enacted or
substantively enacted by the reporting date.
Any tax relief obtained in respect of adviser fees allocated
to capital is reflected in the capital reserve - realised and
a corresponding amount is charged against revenue. The tax relief
is the amount by which corporation tax payable is reduced as
a result of these capital expenses.
Deferred tax is recognised in respect of all timing differences
that have originated but not reversed at the balance sheet date
where transactions or events that result in an obligation to
pay more tax in the future or a right to pay less tax in the
future have occurred at the balance sheet date. Timing differences
are differences between the Company's taxable profits and its
results as stated in the financial statements that arise from
the inclusion of gains and losses in the tax assessments in periods
different from those in which they are recognised in the Financial
Statements.
Deferred tax is measured at the average tax rates that are expected
to apply in the years in which the timing differences are expected
to reverse based on tax rates and laws that have been enacted
or substantively enacted at the balance sheet date. Deferred
tax is measured on a non-discounted basis.
A deferred tax asset would be recognised only to the extent that
it is more likely than not that future taxable profits will be
available against which the asset can be utilised.
2018 2018 2018 2017 2017 2017
Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
a) Analysis of tax charge:
UK Corporation tax on
profits/(losses) for the
year 339,227 (339,227) - 421,283 (421,283) -
---------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Total current tax
charge/(credit) 339,227 (339,227) - 421,283 (421,283) -
---------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Corporation tax is based on
a rate of 19.0% (2017:
19.5%)
b) Profit on ordinary
activities before tax 2,209,691 397,433 2,607,124 2,449,268 1,335,906 3,785,174
Profit on ordinary
activities multiplied by
main company rate of
corporation
tax in the UK of 19.0%
(2017: 19.5%) 419,841 75,512 495,353 477,607 260,502 738,109
Effect of:
UK dividends (80,653) - (80,653) (56,324) - (56,324)
Unrealised (gains not
taxable)/losses not
allowable - (108,304) (108,304) - 154,831 154,831
Realised gains not taxable - (211,558) (211,558) - (757,347) (757,347)
Unrelieved expenditure 39 - 39 - - -
Losses utilised - (94,877) (94,877) - (79,269) (79,269)
---------------------------- ----------
Actual current tax charge 339,227 (339,227) - 421,283 (421,283) -
---------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Tax relief relating to Investment Adviser fees is allocated between
revenue and capital where such relief can be utilised.
No asset or liability has been recognised for deferred tax in
relation to capital gains or losses on revaluing investments
as the Company is exempt from corporation tax in relation to
capital gains or losses as a result of qualifying as a Venture
Capital Trust.
There is no potential liability to deferred tax (2017: GBPnil).
There is an unrecognised deferred tax asset of GBP880,000 (2017:
GBP965,000).
6 Basic and diluted earnings and return per share
2018 2017
GBP GBP
Total earnings after taxation: 2,607,124 3,785,174
Basic and diluted earnings per share (note a) 2.62p 5.21p
------------------------------------------------------------- ----------- ------------
Revenue profit from ordinary activities after taxation 1,870,464 2,027,985
Basic and diluted revenue earnings per share (note b) 1.88p 2.79p
------------------------------------------------------------- ----------- ------------
Net unrealised capital gains/(losses) on investments 570,022 (794,007)
Net realised capital gains on investments 1,113,464 3,883,829
Capitalised Investment Adviser fees and performance fees
less taxation (946,826) (1,332,633)
------------------------------------------------------------- ----------- ------------
Total capital return 736,660 1,757,189
Basic and diluted capital earnings per share (note c) 0.74p 2.42p
------------------------------------------------------------- ----------- ------------
Weighted average number of shares in issue in the year 99,602,770 72,621,839
Notes:
a) Basic earnings per share is total earnings after taxation
divided by the weighted average number of shares in issue.
b) Revenue earnings per share is the revenue return after taxation
divided by the weighted average number of shares in issue.
c) Capital earnings per share is the total capital return after
taxation divided by the weighted average number of shares in
issue.
7 Dividends paid and payable
Dividends payable are recognised as distributions in the financial
statements when the Company's liability to pay them has been
established. This liability is established for interim dividends
when they are paid, and for final dividends when they are approved
by the shareholders, usually at the Company's Annual General
Meeting.
The Company's status as a VCT means it has to comply with Section
259 of the Income Tax Act 2007, which requires that no more than
15% of the income from shares and securities in a year can be
retained from the revenue available for distribution for the
year. Accordingly, the Board is required to determine the amount
of minimum income dividend.
Amounts recognised as distributions to equity shareholders in the year:
Dividend Type For the Pence per Date Paid 2018 2017
year share
ended
30
September
------------ ----------- ----------- ---------- ---------- ----------- -----------
15
February
Final Income 2016 1.00p 2017 - 718,814
15
February
Final Capital 2016 3.00p 2017 - 2,156,442
20 June
Interim Income 2017 1.50p 2017 - 1,087,032
20 June
Interim Capital 2017 1.50p 2017 - 1,087,032
31 August
Special Capital 2017 15.00p 2017 - 10,931,992
15
February
Final Income 2017 0.50p 2018 470,185
15
February
Final Capital 2017 2.50p 2018 2,350,933
21 June
Interim Income 2018 0.80p 2018 843,492
21 June
Interim Capital 2018 1.70p 2018 1,792,420
Previous dividends not claimed within the statutory period (7,300)
-------------------------------------------------------------- ----------- -----------
5,449,730* 15,981,312
------------------------------------ ---------- ---------- ----------- -----------
* - GBP5,449,730 (30 September 2017: GBP15,981,312) disclosed
above differs to that shown in the Statement of Cash Flows of
GBP4,352,591; (30 September 2017: GBP13,062,948) due to GBP1,097,139
(30 September 2017: GBP2,918,364) of new shares issued as part
of the Company's Dividend Investment Scheme.
2018 2018 2018 2017 2017 2017
Proposed
distribution to
equity holders at
the year end Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
Final dividend
for the year
ended 30
September 2018
of 1.00p
(income)
(2017: 0.50p),
2.50p (capital)
(2017: 2.50p)
per ordinary
share 1,054,384 2,635,959 3,690,343 473,245 2,366,229 2,839,474
------------------ ---------- ---------- ---------- -------- ---------- ----------
Any proposed final dividend is subject to approval by shareholders
at the Annual General Meeting and has not been included as a
liability in these financial statements.
Set out below are the total income dividends payable in respect
of the financial year, which is the basis on which the requirements
of section 274 of the Income Tax Act 2007 are considered. 2018 2017
GBP GBP
Revenue available by way of dividends for the year 1,870,464 2,027,985
---------------------------------------------------------------- ---------- ----------
Interim income dividend for the year - 0.80p (2017: 1.50p) 843,492 1,087,032
Proposed final income dividend for the year - 1.00p (2017: 0.50
p) 1,054,384 473,245
---------------------------------------------------------------- ---------- ----------
Total income dividends for the year 1,897,876 1,560,277
---------------------------------------------------------------- ---------- ----------
8 Investments at fair value
The most critical estimates, assumptions and judgements relate
to the determination of the carrying value of investments at
"fair value through profit and loss" (FVTPL). All investments
held by the Company are classified as FVTPL and measured in accordance
with the International Private Equity and Venture Capital Valuation
("IPEV") guidelines, as updated in December 2015. This classification
is followed as the Company's business is to invest in financial
assets with a view to profiting from their total return in the
form of capital growth and income.
For investments actively traded on organised financial markets,
fair value is generally determined by reference to Stock Exchange
market quoted bid prices at the close of business on the balance
sheet date. Purchases and sales of quoted investments are recognised
on the trade date where a contract of sale exists whose terms
require delivery within a time frame determined by the relevant
market. Purchases and sales of unlisted investments are recognised
when the contract for acquisition or sale becomes unconditional.
Where the terms of a disposal state that consideration may be
received at some future date and, subject to the conditionality
and materiality of the amount of deferred consideration, an estimate
of the fair value, discounted for the time value of money may
be recognised through the Income Statement. In other cases, the
proceeds will only be recognised once the right to receive payment
is established and there is no reasonable doubt that payment
will be received.
Unquoted investments are stated at fair value by the Directors
in accordance with the following rules, which are consistent
with the IPEV guidelines:
All investments are held at the price of a recent investment
for an appropriate period where there is considered to have been
no change in fair value. Where such a basis is no longer considered
appropriate, each investment is considered as a whole on a 'unit
of account' basis, alongside the following factors:
(i) Where a value is indicated by a material arms-length transaction
by an independent third party in the shares of a company, this
value will be used.
(ii) In the absence of i), and depending upon both the subsequent
trading performance and investment structure of an investee company,
the valuation basis will usually move to either:
a) a multiple basis. The shares may be valued by applying a suitable
price-earnings ratio, revenue or gross profit multiple to that
company's historic, current or forecast post-tax earnings before
interest and amortisation of goodwill, revenue or gross profit
(the ratio used being based on a comparable sector but the resulting
value being adjusted to reflect points of difference identified
by the Investment Adviser compared to the sector including, inter
alia, a lack of marketability).
or:
b) where a company's underperformance against plan indicates
a diminution in the value of the investment, provision against
cost is made, as appropriate.
(iii) Premiums, to the extent that they are considered capital
in nature, and that will be received upon repayment of loan stock
investments, are accrued at fair value when the Company receives
the right to the premium and when considered recoverable.
(iv) Where a multiple or cost less impairment basis is not appropriate
and overriding factors apply, discounted cash flow or net asset
valuation bases may be applied.
Capital gains and losses on investments, whether realised or
unrealised, are dealt with in the profit and loss and revaluation
reserves and movements in the period are shown in the Income
Statement.
All investments are initially recognised and subsequently measured
at fair value. Changes in fair value are recognised in the Income
Statement.
A key judgement made in applying the above accounting policy
relates to investments that are permanently impaired. Where the
value of an investment has fallen permanently below cost, the
loss is treated as a permanent impairment and as a realised loss,
even though the investment is still held. The Board assesses
the portfolio for such investments and, after agreement with
the Investment Adviser, will agree the values that represent
the extent to which an investment loss has become realised and
treated as a realised loss in the Income Statement. This is based
upon an assessment of objective evidence of that investment's
future prospects, to determine whether there is potential for
the investment to recover in value.
The methods of fair value measurement are classified in to hierarchy
based on the reliability of the information used to determine
the valuation.
- Level 1 - Fair value is measured based on quoted prices in
an active market.
- Level 2 - Fair value is measured based on directly observable
current market prices or indirectly being derived from market
prices.
- Level 3 - Fair value is measured using valuation techniques
using inputs that are not based on observable market data.
2018 2017
GBP GBP
Traded on AIM 1,822,412 3,197,177
Unquoted equity shares 20,758,488 14,353,491
Unquoted preference shares 368,541 414,186
Loan stock 26,447,789 30,065,454
Total 49,397,230 48,030,308
------------------------------------------------------------ ----------- -----------
Brought forward net unrealised gains/(losses) now realised 488,709 (70,300)
Realised gains/(losses) during the year 1,168,917 4,009,372
Transaction costs (55,453) (125,543)
Total realised gains over cost 1,602,173 3,813,529
Unrealised gains for the year 570,022 (794,007)
Total realised and unrealised gains 2,172,195 3,019,522
------------------------------------------------------------ ----------- -----------
Movements in investments during the year are summarised as follows:
Unquoted Unquoted
Traded equity preference Unquoted
on AIM shares shares Loan Stock Total
GBP GBP GBP GBP GBP
------------------- ------------ ------------ ----------- ------------ ------------
Cost at 30
September 2017 1,333,907 21,758,149 25,757 27,540,446 50,658,259
Permanent
impairment at 30
September 2017
(note d) (500,000) (6,011,453) - (87,187) (6,598,640)
Unrealised
gains/(losses) at
30 September 2017 2,363,270 (1,393,205) 388,429 2,612,195 3,970,689
------------
Valuation at 30
September 2017 3,197,177 14,353,491 414,186 30,065,454 48,030,308
-
Purchases at cost
(note b) - 4,135,145 - 2,077,625 6,212,770
Sale proceeds
(note a) - (2,801,086) (51,776) (3,726,472) (6,579,334)
Realised
gains/(losses) on
investments (note
a) - 2,053,622 - (940,158) 1,113,464
Unrealised
(losses)/gains on
investments (note
c) (1,374,765) 3,017,316 6,131 (1,028,660) 620,022
-------------------
Valuation at 30
September 2018 1,822,412 20,758,488 368,541 26,447,789 49,397,230
------------------- ------------ ------------ ----------- ------------ ------------
Cost at 30
September 2018 1,333,907 24,937,303 24,718 25,636,366 51,932,294
Permanent
impairment at 30
September 2018
(note d) (500,000) (6,019,699) - (117,367) (6,637,066)
Unrealised gains
at 30 September
2018 988,505 1,840,884 343,823 928,790 4,102,002
Valuation at 30
September 2018 1,822,412 20,758,488 368,541 26,447,789 49,397,230
------------------- ------------ ------------ ----------- ------------ ------------
A full breakdown of the increases and decreases in unrealised
valuations of the portfolio is seen in the Investment Portfolio
Summary in the Annual Report.
Major movements in investments
Note a) Disposals of investment portfolio companies during the
year were:
Company Type Investment Disposal Valuation Realised
Cost Proceeds at 30 gain in
September year
2017
GBP GBP GBP GBP
Gro-Group Holdings
Limited Realisation 2,398,928 4,328,503 2,606,640 1,721,863
Fullfield Limited
(trading as Motorclean) Realisation 1,517,734 856,577 1,606,346 (749,769)
LightWorks Software
Limited Realisation 20,471 433,210 87,596 345,614
Realisation
and
permanent
Hemmels Limited(1) impairment 641,023 304,819 671,203 (366,384)
Loan
repayments
and
The Plastic Surgeon repurchase
Holdings Limited of
(formerly TPSFF preference
Holdings Limited) shares 198,811 289,305 289,305 -
Loan
MPB Group Limited repayment 154,780 154,780 154,780 -
Others 6,988 212,140 50,000(2) 162,140
4,938,735 6,579,334 5,465,870 1,113,464
----------- ---------- ---------- ----------
(1) New investment in the year
(2) Relates to deferred consideration in respect of Alaric Systems
referred to in note c below.
Note b) The purchases at cost figure shown above of GBP6,212,770
differs from the figure shown in the Statement of Cash Flows
of GBP6,290,160, by GBP77,390. These funds are included in Debtors
at the year end when they were held in a solicitor's client account
in advance of an investment that completed in October 2018.
Note c) Unrealised gains above of GBP620,022 differ from that
shown in the Income Statement of GBP570,022. The difference of
GBP50,000 is a reduction in the year in the estimated fair value
of contingent consideration held within debtors at the Balance
Sheet date last year (see Note 11 of the Annual Report), to nil.
This reduction is because GBP134,241 of such consideration was
received in the year in respect of Alaric Systems, an investment
realised in a prior year. GBP50,000 was recognised in a previous
year and treated as a debtor.
Within net unrealised gains of GBP620,022 for the year, the significant
increases in value compared to last year were as follows: GBP999,320
in EOTH Limited, GBP795,823 in Preservica Limited, GBP660,696
in CGI Creative Graphics International Limited and GBP547,525
in Master Removers Group Limited. These gains were partially
offset by unrealised falls in valuation compared to last year,
including: GBP1,622,997 in Veritek Global Holdings Limited, GBP1,225,059
in IDOX plc, GBP878,401 in Manufacturing Services Investment
Limited (trading as Wetsuit Outlet), GBP436,323 in BookingTek
Limited and GBP256,509 in Virgin Wines Holding Company Limited.
The decrease in unrealised valuations of the loan stock investments
above reflect the changes in the entitlements to loan premiums,
and/or in the underlying enterprise value of the investee company.
The decrease does not arise from assessments of credit risk or
market risk upon these investments.
Note d) During the year, permanent impairments of the cost of
investments have increased from GBP6,598,640 to GBP6,637,066.
The increase of GBP38,426 is due to the impairments of the remaining
investment costs of two investee companies.
Provisions and write-offs against unlisted investments
The amounts provided below cost at the end of the year or written-off
against unlisted investments were as follows: Net write-offs
Total Provisions at end of year in year
Financial Year GBP GBP
2018(1) 16,029,509 38,426
2017 13,528,607 2,403,079
2016 11,500,860 (1,115,371)
2015 9,793,793 65,779
2014 7,709,509 (1,876,253)
2013 10,475,290 2,001,476
2012 11,991,733 313,850
2011 11,206,678 1,881,554
1 - GBP38,426 of the remaining cost of two investments were permanently
impaired in the year.
9 Current asset investments and Cash at bank
Cash equivalents, for the purposes of the Statement of Cash Flows,
comprise bank deposits repayable on up to three months' notice
and funds held in OEIC money-market funds. Current asset investments
are the same but also include bank deposits that mature after
three months. Current asset investments are disposable without
curtailing or disrupting the business and are readily convertible
into known amounts of cash at their carrying values at immediate
or up to one year's notice. Cash, for the purposes of the Statement
of Cash Flows is cash held with banks in accounts subject to
immediate access. Cash at bank in the Balance Sheet is the same.
Current asset investments and Cash at bank
2018 2017
GBP GBP
OEIC Money market funds 28,475,582 9,260,902
Cash equivalents per Statement of Cash Flows 28,475,582 9,260,902
Bank deposits that mature after three months 3,151,769 3,151,769
---------------------------------------------- ----------- -----------
Current asset investments 31,627,351 12,412,671
---------------------------------------------- ----------- -----------
Cash at bank 1,284,816 1,375,065
---------------------------------------------- ----------- -----------
10 Called up share capital
2018 2017
GBP GBP
Allotted, called-up and fully paid:
Ordinary Shares of 1p each: 105,438,384 (2017: 79,204,702) 1,054,384 792,047
1,054,384 792,047
------------------------------------------------------------ ---------- --------
Under the Offer for Subscription launched on 6 September 2017,
a total of 26,607,590 (2017: 3,627,706) ordinary shares were
allotted at an effective offer price of 82.71 pence per share,
raising net funds of GBP21,359,728 (2017: GBP2,946,210). This
figure is less than that shown in the Statement of Cash Flows
due to an allotment debtor of GBP2,946,210 held at the start
of the year.
Under the terms of the Dividend Investment Scheme, a total of
1,573,716 (2017: 3,865,859) ordinary shares were allotted during
the year for a total consideration of GBP1,097,139 (2017: GBP2,918,364).
During the year, the Company purchased 1,947,624 (2017: 202,886)
of its own ordinary shares for cash (representing 2.5% (2017:
0.3%) of the ordinary shares in issue at the start of the year)
at the prevailing market price for a total cost of GBP1,379,298
(2017: GBP160,323). The shares bought back were subsequently
cancelled.
11 Basic and diluted net asset value per share
2018 2017
Net assets GBP82,583,714 GBP64,348,751
Number of shares in issue 105,438,384 79,204,702
Basic and diluted net asset value per share 78.32p 81.24p
12 Post balance sheet events
On 9 October 2018, a follow-on investment of GBP0.93 million
was made into Pattern Analytics Limited (trading as Biosite).
On 10 October 2018, a follow-on investment of GBP0.45 million
was made into Proactive Group Holdings Inc.
On 19 October 2018, a follow-on investment of GBP0.08 million
was made into MPB Group Limited.
On 31 October 2018, The Plastic Surgeon Holdings Limited (formerly
TPSFF Holdings Limited) carried out a repurchase of preference
shares in which GBP0.05 million of proceeds were received by
the Company.
On 28 November 2018, a new investment of GBP0.47 million was
made into Kudos Innovations Limited (trading as Grow Kudos).
13 Statutory information
The financial information set out in these statements does not
constitute the Company's statutory accounts for the year ended
30 September 2018 but is derived from those accounts. Statutory
accounts will be delivered to the Registrar of Companies after
the Annual General Meeting. The auditors have reported on these
accounts and their report was unqualified and did not contain
a statement under section 498(2) of the Companies Act 2006.
14 Annual Report
The Annual Report will be published on the Company's website
at www.incomeandgrowthvct.co.uk shortly and, following the adoption
of electronic communications by the Company, shareholders will
shortly receive notification from the Company on how to download
a pdf of the Report from the website. Shareholders and members
of the public who wish to receive a hard copy of the Annual Report,
may request a copy by writing to the Company Secretary, Mobeus
Equity Partners LLP, 30 Haymarket (4th floor), London SW1Y 4EX
or by email: vcts@mobeusequity.co.uk.
15 Annual General Meeting
The Annual General Meeting of the Company will be held at 11.00
am on Wednesday, 6 February 2019 at The Clubhouse, 8 St James's
Square, London, SW1Y 4JU.
Contact details for further enquiries
Robert King or Robert Brittain of Mobeus Equity Partners LLP
(the Company Secretary) on 020 7024 7600 or by e-mail to vcts@mobeusequity.co.uk.
Mark Wignall at Mobeus Equity Partners LLP (the Investment Adviser)
on 020 7024 7600 or by e-mail to info@mobeusequity.co.uk.
DISCLAIMER
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of,
this announcement.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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