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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Mobeus Income & Growth 2 Vct Plc | LSE:MIG | London | Ordinary Share | GB00B0LKLZ05 | 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% | 59.00 | 57.50 | 60.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Trust,ex Ed,religious,charty | -7.57M | -9.64M | -0.0987 | -5.98 | 57.62M |
From Apr 2019 to Apr 2024
TIDMMIG
RNS Number : 6161R
Mobeus Income & Growth 2 VCT PLC
01 July 2020
mobeus Income & Growth 2 VCT plc
Annual Financial Results of the Company for the Year ended 31 march 2020
Mobeus Income & Growth 2 VCT plc (the "Company") today announces the final results for the year ended 31 March 2020. These results were approved by the Board of Directors on 30 June 2020. You may, in due course, view the Annual Report & Financial Statements, comprising the statutory accounts of the Company by visiting www.mig2vct.co.uk .
Financial Highlights
Hot Features
Premium
As at 31 March 2020:
Net assets: GBP43.57 million
Net Asset Value ("NAV") per share: 72.99 pence
- Net Asset Value ("NAV") total return per share was (0.6)%
and Share Price total return per share was 12.9%.
- Shareholders received dividends in the year totalling 26.00
pence per share.
------------------------------------------------------------
- The Company invested GBP5.19 million into six new growth
capital investments and one follow-on investment.
------------------------------------------------------------
- The Company realised investments for total consideration
of GBP11.38 million, representing a net gain of GBP3.77
million for the year.
------------------------------------------------------------
- An interim dividend for the year ending 31 March 2021 of
7.00 pence per share was paid on 19 June 2020.
------------------------------------------------------------
Cumulative total return per share (NAV basis)
The table below shows the recent past performance of the current
share class, first raised in 2005/06 at an original subscription
price of 100 pence per share, before the benefit of income
tax relief. Performance data for all fundraising rounds are
shown in tables at the end of the Annual Report.
Reporting date Net NAV Cumulative dividends Cumulative total
as at assets per paid per return per share
31 March share share to shareholders
(NAV basis)(2)
(GBPm) (p) (p) (p)
------- ------ -------------------- -----------------
2020 43.57 72.99 109.00 181.99
------- ------ -------------------- -----------------
2019 48.73 99.60 83.00 182.60
------- ------ -------------------- -----------------
2018 47.60 96.54 78.00 174.54
------- ------ -------------------- -----------------
2017 38.06 106.70 62.00 168.70
------- ------ -------------------- -----------------
2016 43.14 119.61 47.00 166.61
------- ------ -------------------- -----------------
(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 to date on the current share class, launched in 2005.
CHAIRMAN'S STATEMENT
I am pleased to present the annual results of Mobeus Income &
Growth 2 VCT plc for the year ended 31 March 2020.
Overview
The year under review saw strong progress prior to a very challenging
final month for the portfolio as a result of the UK Government's
lockdown and social distancing measures, in response to the outbreak
of COVID-19. These measures had an immediate adverse impact on
UK businesses with many companies experiencing a significant
reduction in demand for their products and services, compounded
by restrictions on their ability to operate.
The Board has liaised closely with Mobeus Equity Partners LLP
("the Investment Adviser") who has been actively engaged with
portfolio companies. The focus has been to ensure that all practical
steps are taken to enable each company to trade through the crisis
and to seek to grow value thereafter.
The full impact of the COVID-19 crisis will only emerge as time
passes but there has been an immediate adverse impact on the
portfolio valuation largely due to the general market and comparable
public valuations. Whilst there has been a negative impact on
the majority of the portfolio, conversely, some companies are
trading strongly as a result. This is set out in detail in the
Investment Adviser's Review and summarised in my Statement overleaf.
Further information is contained under the Outlook heading below
and the Investment Adviser's Review of this Annual Report.
Overall, the Company made good progress in all areas, although
the final month of the year proved challenging, resulting in
a small net reduction in NAV total return per share for the year.
During the year, the Company invested in six new companies and
provided follow-on funding to one existing portfolio company.
The year was exceptional for realisations. The Company sold its
holdings in five portfolio companies, including the first profitable
exit of a younger growth capital investment, as well as achieving
the most successful exit in the history of the Company, Auction
Technology Group.
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.
Following the onset of the COVID-19 crisis, the Investment Adviser's
focus has been to prioritise the funding requirements of the
existing portfolio. A number of companies are continuing to experience
significant growth and further investment is being made to capitalise
on these opportunities with two investments made after the year
end. Other portfolio companies continue to experience adverse
trading because of the crisis and may require further investment
funding. The Company is well capitalised and able to support
the portfolio considering each case on merit should the need
arise.
In the immediate term, the Investment Adviser is adopting a cautious
approach when considering and recommending new investment opportunities.
Adequate depth of investment appraisal and due diligence is challenging
during the current lockdown, business performance is highly volatile
and achievement of forecasts uncertain. However, looking further
forward, the Board and Investment Adviser believe the investment
landscape will become clearer to judge and a number of attractive
opportunities may be brought forward.
We are delighted with the strong support from investors for our
recent fundraising, which was launched on 25 October 2019 and
became fully subscribed within two months.
Performance
This NAV total return, expressed on a pence per share basis,
was derived as follows:
2020 2019
(pence (pence
per per
Year ended
31 March share) share)
Net realised
and
unrealised
(losses)/
gains on the
investment
portfolio (3.12) 6.41
Income from
the
investment
portfolio
and
liquid assets 4.11 4.48
Share buybacks
and
adjustments 1.12 0.07
Gross return 2.11 10.96
Less: Investment
Adviser's
fees and other
expenses (2.72) (2.90)
Net return (0.61) 8.06
NAV total
return per
share (0.6)% 8.4%
Despite the profitable realisations and a profitable revenue return, the impact of COVID-19 on portfolio valuations at the year-end has caused the Company's NAV total return per share in the year to fall by 0.6% (2019: 8.4% increase). This net return of (0.61) pence is derived by comparing the NAV per share at the year-end of 72.99 pence with the start of the financial year of 99.60 pence, after accounting for interim dividends totalling 26.00 pence per share paid during the year (discussed under Dividends below and as set out in the chart under Performance and Key Performance Indicators ).
Whilst the aggregate portfolio valuation decreased due to reductions in the valuations of specific portfolio companies, reflecting the impact of COVID-19, this adverse impact was partly offset by a number of other factors. Firstly, the uplift achieved from the five profitable realisations in the year. Secondly, several of the Company's investment structures incorporate a preference, such that any reduction in enterprise value does not feed directly into the same reduction in the value of the Company's investment. Finally, the Company has significant liquidity which, in accordance with its policy, has been invested in lower risk liquidity funds and bank deposit accounts that have not fallen in value.
Given these specific factors, the Board therefore believes that the Company's performance has demonstrated a degree of resilience compared to other Generalist VCTs. At the financial year-end, your Company was ranked 15th out of 41 Generalist VCTs over five years and 1st out of 31 over 10 years, in the Association of Investment Companies' analysis of NAV Cumulative Total Return.
The Share Price total return for the year, after accounting for dividends paid, was 12.9% (2019: 4.6%). This figure has been enhanced by a reduction in the discount at which the shares trade (see Share Buybacks section).
For further details on the performance of the Company, please refer to the Performance section of the Strategic Report and the Performance Data at the end of the Annual Report.
Target Return
Since the start of the financial year ended 31 March 2018, the Board reintroduced its target of achieving an average NAV total return of 8.0% per annum, following the target suspension in 2017 after the introduction of the new VCT rules. For the year under review this was (0.6)% (2019: 8.4%), while the average over three years is 4.4% per annum.
The Board reminds Shareholders that the impact of an exceptional event such as COVID-19 has adversely affected this year's returns but their investment returns should be viewed over the longer term.
Dividends
The Board paid two interim dividends of 15.00 and 11.00 pence per share (2019: 5.00 pence) in respect of the year ended 31 March 2020, which were paid to Shareholders on 20 September 2019 and 27 March 2020 respectively.
Additionally, a 7.00 pence per share interim dividend was declared for the year ending 31 March 2021 and paid on 19 June 2020. Cumulative dividends paid since inception amount to 116.00 pence (2019: 83.00 pence) per share.
The Board were able to declare these significant dividends following five successful realisations by the Company in the year under review, the adequacy of distributable reserves, and after taking into consideration the cash flow forecasts and transition to the new VCT regulations. The Board regularly monitors cash flow and qualifying ratio projections to ensure that it is able to maintain compliance with VCT regulations whilst performing optimally.
The Board's target of paying a regular dividend, at a current level of not less than 5.00 pence per share in respect of each financial year has been achieved or exceeded in each of the last ten years. Whilst the Board still believes this dividend target is attainable, it should be noted that the move of the portfolio to an increased proportion of younger growth capital investments may lead to increased volatility, which could offset the return in any one year.
Shareholders should also note that there may continue to be circumstances where the Company is required to pay dividends in order to maintain its regulatory status as a VCT, for example, to stay above the minimum percentage of assets required to be held in qualifying investments, which increased to 80% on 1 April 2020. Shareholders should also note that, to the extent this is necessary, it will correspondingly reduce the Company's NAV per share.
A chart showing the dividends paid in respect of each of the last five years and cumulative dividends on the same basis is included in the Strategic Report.
A full dividend history is contained in the Performance Overview on the Company's website: www.mig2vct.co.uk
Investment portfolio
The portfolio valuation movements for the year were as follows:
GBPm
Portfolio value
at 31 March 2019 30.04
New and further
investments 5.19
Disposal proceeds (11.38)
Net realised gains 3.77
Valuation movements (5.63)
Portfolio value
at 31 March 2020 21.99
Following a detailed review by the Investment Adviser, and as agreed by the Board, the portfolio has been valued 6.2% lower (2019: 11.7% increase) compared to the value at the start of the year on a like-for-like basis. The reduction mainly occurred in the last quarter after the outbreak of COVID-19. The value of the investments still held decreased by GBP5.63 million, partially offset by the gain of GBP3.77 million from realised investments.
During the year under review, the Company invested a total of GBP5.19 million (2019: GBP2.90 million) into six (2019: two) new and one (2019: five) existing investments:
New - GBP4.83 million:
- Parsley Box - home delivered, ambient ready meals for the elderly;
- Arkk Solutions - a regulatory and reporting requirement service provider;
- Active Navigation - A data analysis software provider;
- IPV - A media asset software provider;
- Bleach London - A hair care brand;
- Bella & Duke - A premium frozen raw dog food provider.
Existing - GBP0.36 million:
- MPB Group - an online marketplace for used camera and video equipment.
After the year-end, GBP0.22 million was invested in Andersen EV, being an electric vehicle (EV) charging product business. This is the first new investment made since the onset of COVID-19. A total of GBP0.90 million was also invested to support the further expansion of another two existing portfolio companies:
- MyTutor - A digital marketplace for school tutoring;
- Rotageek -A workforce management software provider.
Details of this investment activity and the performance of the portfolio are contained in the Investment Adviser's Review and explained within Note 8 to the Financial Statements.
At the year-end, 68.9% by value of the investment portfolio was held in newer growth capital investments and 31.1% was held in more mature MBO type investments.
Cash proceeds totalling GBP11.38 million were received in the year from portfolio companies that were either sold, repaid loans or settled other capital proceeds. Of this total, GBP10.93 million was received as cash proceeds from the sales of The Plastic Surgeon, ASL Technology, Redline Worldwide, Biosite and Auction Technology Group.
The sales generated a net gain of GBP3.77 million on realised investments. The principal gains over opening valuation were from The Plastic Surgeon (GBP0.30 million), ASL (GBP0.49 million), Redline (GBP0.59 million), and Auction Technology Group (GBP2.41 million). Redline was the first profitable growth capital investment to be realised.
Further gains of GBP0.17 million were achieved by the receipt of proceeds, most notably relating to Entanet, an investment sold in a previous year and the partial exit from Master Removers Group. The Company's holding in Super Carers was deemed to be realised following the appointment of administrators after the year-end, resulting in a realised loss of GBP0.19 million.
Portfolio investments still held experienced a net decrease in unrealised valuations of GBP5.63 million for the year. The most significant falls were from Wetsuit Outlet, CGI Creative Graphics and Media Business Insight, offset by moderate increases at Proactive and Access IS.
These transactions and valuation movements are explained further in the Investment Adviser's Review.
Liquidity
At 31 March 2020, the Company had net assets of GBP43.57 million (2019: GBP48.73 million), including GBP21.99 million in investments (2019: GBP30.04 million) and liquid assets of GBP21.81 million (2019: GBP18.66 million). Liquid assets thus represented 50.1% (2019: 38.3%) of net assets at the year-end. This figure increased by GBP10.26 million due to the further allotment of shares after the year-end, and was then partly reduced by the dividend payment of GBP5.15 million (7.00 pence per share) in June 2020. The Company therefore remains in a very strong cash position.
Fundraising
On 25 October 2019, the Company launched an offer for subscription (the Offer") of GBP15 million with an over-allotment facility of an additional GBP5 million, alongside offers from the other Mobeus advised VCTs.
I am pleased to report that the Offer experienced such strong demand that the Company received subscriptions amounting to more than the full amount sought in early January 2020. In response to a further GBP2.10 million of applications received, the Company increased its Offer size in order to satisfy this additional demand.
In accordance with the Offer's prospectus, the first allotment took place on 8 January 2020, which included all applications received up to 20 December 2019 totalling GBP11.06 million. The balance of subscriptions of GBP10.76 million were allotted before the end of the tax year, on 2 April 2020.
Share buybacks
During the year under review, the Company bought back a total of 1,128,609 shares for cancellation. The buybacks represented 2.3% (2019: 0.8%) of the issued share capital of the Company at the beginning of the year. Further details of the Company's Share Buyback Policy are included in the Strategic Report of the Annual Report.
Shareholder Communications
This year's Shareholder event was held on Tuesday, 4 February 2020 at the National Gallery in central London. Separate daytime and evening sessions included presentations on the Mobeus advised VCTs' investment activity and performance. We have received positive feedback from many of the circa 400 people who attended the event and were pleased to hear that overall they found the day informative and worthwhile.
Fraud Warning
Boiler Room fraud and unsolicited communications to Shareholders.
We have been made aware of an increase in the number of Shareholders being contacted in connection with sophisticated but fraudulent financial scams which purport to come from the Company or to be authorised by it. This is often by a phone call or an email usually originating from outside of the UK, often claiming or appearing to be from a corporate finance firm offering to buy your VCT shares at an inflated price.
Further information and fraud advice plus details of who to contact, can be found in the Information for Shareholders section at the end of the Annual Report.
Shareholders are also encouraged to ensure their personal data is always held securely and that data held by the Registrars of the Company is up to date, to avoid cases of identity fraud.
Board Succession
Whilst the Board are cognizant of the tenure of the Board members, the succession plan and planning have currently been suspended due to COVID-19 and will resume during the next year.
Annual General Meeting
The next Annual General Meeting of the Company will be held at 11:00 am on Wednesday, 9 September 2020 at the office of the Investment Adviser, Mobeus Equity Partners LLP, 30 Haymarket, London, SW1Y 4EX.
The manner in which the AGM can be held is subject to the UK Government's guidelines associated with the COVID-19 pandemic. At the time of writing, it is not clear what restrictions might be in force in September. It may be the case that it becomes necessary to adjust the way in which this year's AGM is conducted.
Any updates on the AGM will be announced to the London Stock Exchange and on the Company's website: www.mig2vct.co.uk which Shareholders intending to attend should consult.
The Board encourages Shareholders to submit their vote by proxy form either by completing and returning the form enclosed with the Annual Report or submitting your proxy votes electronically via the Link Shareholder Portal www.signalshares.com. Shareholders are also advised to appoint the Chairman of the Meeting as their proxy as another nominated proxy may not be able to attend the meeting.
Before you lodge your proxy votes, any questions you may have about the resolutions to be passed at the AGM can be sent to the agm@mobeus.co.uk email address and a timely response will be provided.
If permitted by then, both the Board and the Investment Adviser look forward to welcoming Shareholders to the meeting which will include a presentation from the Investment Adviser on the investment portfolio. Shareholders are encouraged to attend (if allowed) and to ask questions of the Board and the Investment Adviser. The Notice of the meeting is included in the Annual Report and an explanation of the resolutions proposed can be found in the Directors' Report within the Annual Report.
Outlook
The impact of COVID-19 has been immediate and wide reaching. The eventual effects of the pandemic, many of which remain unclear at present, are likely to be felt over the course of months and years to come. Nevertheless, your Board considers that your Company is well positioned and should be able to respond to most likely scenarios. Last year's successful realisations and the recent fundraising have given the Company good cash reserves with which to support the existing portfolio and to capitalise on opportunities arising, inside and outside the portfolio. The portfolio comprises a foundation of mature investments providing a healthy income return, as well as a younger, diversified growth capital portfolio seeking to achieve scale, to drive value. The Investment Adviser and the Board believe that as the economic environment stabilises, attractive new investment opportunities will emerge. The Board notes that the Investment Adviser, in its review at the end of the COVID-19 section, reports that the portfolio displayed encouraging signs of revenue/operational recovery since the year-end low point.
Further details can be found in the Investment Adviser's Review within the Annual Report.
Finally, I would like to take this opportunity to thank all Shareholders for their continued support and, in particular, to extend a very warm welcome to our new Shareholders.
Ian Blackburn
Chairman
INVESTMENT POLICY
The Company invests primarily in a diverse portfolio of UK unquoted
companies. Investments are made selectively across a number of
sectors, principally in established companies. Investments are
usually structured as part loan stock and part equity in order
to produce a regular income stream and to generate capital gains
from realisations.
There are a number of conditions within the VCT legislation which
need to be met by the Company and which may change from time to
time. The Company will seek to make investments in accordance
with the requirements of prevailing VCT legislation.
Asset allocation and risk diversification policies, including
the size and type of investments the Company makes, are determined
part by the requirements of prevailing VCT legislation. No single
investment may represent more than 15% (by VCT tax value) of the
Company's total investments at the date of investment.
In the Company's cash and liquid funds are held in a portfolio
of readily realisable interest bearing investments, deposit and
current accounts, of varying maturities, subject to the overriding
criterion that the risk of loss of capital be minimised.
The Company's Articles of Association permit borrowings of amounts
up to 10% of the adjusted capital and reserves (as defined therein).
However, the Company has never borrowed and the Board would only
consider doing so in exceptional circumstances.
Investment ADVISER'S Review
COVID-19
In March 2020, in response to the COVID-19 pandemic, the UK Government
introduced lockdown and social distancing measures. These measures
had an immediate adverse impact on UK business with many companies
experiencing significant reduction in demand. Businesses' ability
to trade was further impacted by restrictions on their employees'
working practices and disruption to their supply chains.
The travel, hospitality, leisure, consumer and physical retail
sectors have seen the most significant adverse impact. In contrast,
there have been beneficiaries, including businesses in software
and IT, online direct to consumer and those with in-contract business
customers.
Many of the VCT's portfolio companies are encountering very challenging
trading conditions, although the full extent and impact of COVID-19
will only emerge over time. The Investment Adviser has reviewed
and evaluated the impact of COVID-19 on each company and upon
the value of the portfolio as a whole. The Investment Adviser
is fully engaged with the portfolio companies to ensure that all
steps are being taken to assist each to trade through this crisis,
restore and grow value thereafter. As part of this, Mobeus is
reviewing the implications for new and follow-on investments with
the recent fundraising and relatively high liquidity levels providing
a solid foundation for such assessments.
Quoted markets have staged a meaningful recovery since the 31
March 2020 valuations. Trading in many portfolio companies has
also proven more resilient in practice than could have been foreseen
at the time of maximum uncertainty just after UK lockdown had
been imposed on 23 March 2020. Whilst considerable uncertainty
remains regarding the medium-term impact of COVID-19 on the wider
economy, your portfolio is robust and the near term outlook appears
to be improving from its March low.
Portfolio review
The year to 31 March 2020 had seen very positive progress within
the portfolio prior to the COVID-19 lockdown in late March. The
Company invested a total of GBP5.19 million into six new growth
capital investments and one existing portfolio company, and received
net cash proceeds of GBP11.38 million, primarily from five profitable
realisations.
The review of the impact of COVID-19 was a major factor in determining
the year-end valuations of each investee company, leading to an
overall net valuation reduction of GBP5.63 million.
The portfolio's activity in the year is summarised as follows:
2020 2019
GBPm GBPm
Opening portfolio 30.04 26.89
value
New and follow-on 5.19 2.90
investments
Disposal proceeds (11.38) (2.88)
Net realised
gains 3.77 0.60
Valuation movements (5.63) 2.53
Portfolio value
at 21.99 30.04
31 March
The investment and divestment activity during the year has increased
the proportion of the portfolio of growth capital investments
to 68.9% (2019: 50.0%) by value at the year-end.
After the year-end, the first new investment was made since the
onset of COVID-19. GBP0.22 million was invested in Andersen EV,
an electric vehicle (EV) charging product business. T he Company
also provided further investment totalling GBP0.90 million into
two existing portfolio companies, Rotageek and MyTutor. This brings
the total invested in growth capital investments (by value) made
since the introduction of the new VCT regulations in 2015 to GBP13.77
million.
Detail of these movements for each investee company are provided
in the Investment Portfolio Summary at the end of this Investment
Review.
The portfolio's contribution to the overall results of the Company
is as follows:
Investment Portfolio 2020 2019
Capital Movement GBPm GBPm
Increase in
the 1.25 4.74
value of unrealised
investments (6.88) (2.21)
Decrease in
the
value of unrealised
Investments
Net (decrease)
in the value
of (5.63) 2.53
unrealised
investments
Realised gains 3.96 0.84
Realised losses (0.19) (0.24)
Net realised
gains/ 3.77 0.60
in the year
Net (decrease)/
increase in
value of investment (1.86) 3.13
portfolio in
the
year
Valuation changes of portfolio investments still held
The valuation reductions of GBP6.88 million are principally the
result of an assessment of the impact of COVID-19 on each portfolio
company.
At a summary level, there have been some clear beneficiaries of
the COVID-19 crisis that are currently trading strongly. Although
some of the fillip will subside, there can be a reasonable expectation
that some of the behavioural change will prove structural. Other
businesses are raising capital to ensure that they are ready to
capitalise on demand when it returns. The majority of the portfolio
has experienced a material impact but not sufficient to threaten
their viability and/or require rescue financing. They have scaled
back operations in response and are making full use of UK government
assistance schemes where appropriate. Finally, there are a few
businesses whose viability is now under threat. In the main, these
are businesses that were already struggling and hence the Company's
value had already been written down significantly. The value risk
to the Company from this subset is therefore modest.
Within total valuation decreases, the main reductions were Wetsuit
Outlet GBP0.85 million, CGI Creative Graphics GBP0.78 million
and Media Business Insight GBP0.73 million. These three companies
saw some of the most significant impact of sudden decline in demand
for their product and services. By contrast some investee companies'
trading has benefited from the lockdown, including Virgin Wines,
Parsley Box, Bella & Duke, Bleach London and MyTutor.
Within total valuation increases, the principal contributors were
Proactive GBP0.29 million, Access IS GBP0.27 million and Active
Navigation GBP0.27 million. Access IS's valuation reflects the
long-term nature of many of its projects, while the other two
are underpinned by the Company's preferred investment structure.
Details of the valuation movements for each investee company are
provided at the end of this Investment Adviser's Review.
Realised gains and losses from sales of investments
Cash proceeds totalling GBP11.38 million have been received, principally
from five realisations during the year.
In the first half of the financial year, the Company received
proceeds from ASL Technology (GBP3.68 million) and The Plastic
Surgeon (GBP1.18 million), generating gains of GBP0.49 million
and GBP0.30 million respectively. Total proceeds received over
the life of each investment resulted in a multiple over their
original cost of 2.2x for the sale of ASL Technology and 5.6x
for The Plastic Surgeon.
In December, the Company realised GBP0.93 million from its first
growth capital investment made under the new VCT rules, Redline
Worldwide, generating a gain of GBP0.59 million in the year. Over
the time that this investment was held, a multiple of 1.7x cost
has been achieved to date with further proceeds potentially receivable
in due course.
In February, the Company exited investments held in Pattern Analytics
(trading as Biosite) and Turner TopCo (trading as Auction Technology
Group), generating a total realised gain in the year of GBP2.41
million. Biosite was realised for proceeds of GBP1.53 million
which contributed to GBP1.60 million received over the life of
the investment and a gain over original cost of 1.5x. Auction
Technology Group generated proceeds of GBP3.61 million, contributing
to a figure over the life of the investment of GBP7.80 million.
Compared to an original cost of GBP1.73 million, this resulted
in a multiple on cost of 4.5x over the 11 1/2 years this investment
was held - an exceptional return for Shareholders and the largest
ever for the Fund.
The Company achieved a further gain of GBP0.17 million arising
from the disposal of Entanet in 2017, increasing the final return
on cost to 2.8x. The partial realisation of Master Removers Group
during the year generated proceeds of GBP0.28 million and a nominal
gain. A token amount was also received from the liquidation proceeds
from H Realisations (2018) Limited (formerly Hemmels). Finally,
following the sale of its trade and assets after the year-end
the Company recognised a realised loss of GBP0.19 million in respect
of Super Carers. After the year-end, the Company received a loan
repayment of GBP0.05 million from BookingTek.
Investment portfolio yield
During the year under review, the Company received the following
amounts in interest and dividend income:
Investment Portfolio 2020 2019
Yield GBPm GBPm
---------------------- ----- -----
Interest received
in 2.05 1.55
the year
0.28 0.51
Dividends received
in
the year 2.33 2.06
Total portfolio
income
in the year(1) 21.99 30.04
Portfolio value
at
31 March
Portfolio Income
Yield 10.6% 6.9%
(Income as a
% of
Portfolio value
at
31 March)
(1) Total portfolio income for the year is generated solely from
investee companies within the portfolio. See Note 3 of the Financial
Statements for all income receivable by the Company.
The increase in income was due to interest of GBP0.94 million
upon the loan instruments in Auction Technology Group being paid,
as part of the sale transaction, which had not previously been
recognised.
New investments in the year
A total of GBP4.83 million was invested into six new investments
during the year as detailed below:
Company Business Date of investment Amount of new investment
(GBPm)
Home delivered,
ambient ready
meals for the
Parsley Box elderly May 2019 0.55
--------------------- ------------------------- ------------------------------
Parsley Box is a UK direct to consumer supplier of home delivered, ambient ready meals
for
the elderly. Founded in 2017, Parsley Box has grown rapidly and has developed a unique
meal
delivery solution for its customers. The company supplies a diverse range of ambient
meals
via next day delivery which are easy to store and aim to contribute to a more
independent
and healthier lifestyle. The investment will scale the company's marketing strategy,
enable
it to process larger order volumes and continue to build out its team. Parsley Box's
revenues
grew by 270% between 2018 and 2019.
Regulatory and
reporting requirement
Arkk Consulting service provider May 2019 0.91
Arkk Consulting (trading as Arkk Solutions) provides services and
software to enable organisations to remain compliant with regulatory
reporting requirements. Arkk was established in 2009 and currently
has over 800 clients across 20 countries. These include more than
80 of the FTSE 350, and half of the largest 20 accountancy firms
in the UK. The investment will build on Arkk's reputation and customer
base, to target the cloud-based period end reporting market by building
the sales and marketing team. The company has shown good revenue
growth of over 15% per annum between 2016 and 2018.
Data analysis
Active Navigation software November 2019 0.94
----------------------------------- ---------------------- -------
Data Discovery Solutions (trading as Active Navigation) is a data
analysis software solution which makes it easier for companies to
clean up network drives, respond to new data protection laws and
dispose of redundant and out dated documents. Active Navigation's
solution is used by significant blue chip customers, particularly
those in highly regulated industries such as energy and professional
services, as well as government entities in the USA, Canada, Australia
and the UK. Active Navigation will seek to drive continued growth
from its file analysis platform with the recruitment of experienced
sales and professional services staff. Since 2014 revenues have
grown from GBP1.50 million to GBP5.00 million in its financial year
to 30 June 2018.
IPV Media asset software November 2019 0.54
----------------------------------- ---------------------- -------
IPV has developed a media asset management software product called
'Curator'. This enables enterprise level customers to receive and
search hours of video footage, edit into multiple short clips and
broadcast to online video platforms (such as YouTube) and company
intranets, in a very short time. This enables IPV's impressive list
of blue-chip clients, such as Turner Sports, NASA and Sky, to improve
efficiency in managing their video content. The company has built
an impressive senior management team of proven operators and is
targeting a media asset management market in the US and UK, worth
an estimated GBP1 billion per annum. The investment will be used
to build out a sales and marketing team and to fund lead generation
for new direct and partner channels as well as supporting the existing
partner network. From 2016 to 2018 recurring revenues grew over
50% annually and represented approximately 70% of total revenues
in 2018.
Direct to consumer
Bleach hair care brand December 2019 0.44
----------------------------------- ---------------------- -------
Bleach London Holdings (trading as Bleach London) is an established branded, fast
growing
business which manufactures a range of haircare and colouring products. Bleach London
is regarded
as a leading authority in the hair colourant market having opened one of the world's
first
salons focused on colouring and subsequently launched its first range of products in
2013.
The investment was part of a wider GBP5.60 million investment round alongside trade and
angel
investors. The funds will be used to drive continued growth in sales through retailers
as
well as capitalise on its strong social media presence whilst accelerating its growing
direct
to consumer channel. Bleach London delivered an impressive three times revenue growth
between
2017 and 2018.
Premium frozen
raw dog food
Bella & Duke provider February 2020 1.45
----------------------------------- ---------------------- -------
Bella & Duke is a direct to consumer subscription service, providing premium frozen raw
dog
food to pet owners in the UK. Founded in 2016, the business provides an alternative to
standard
meal options for dogs by focusing on the well documented health benefits of a raw food
diet.
This area is a growing niche in the large and established pet food market and is being
driven
by the premiumisation of dog food. The investment will seek to optimise its production
and
supply facilities, expand and enhance its team and develop alternative products (such
as cat
food). The company has grown revenues over 300% between 2018 and 2019.
New Investment after the year-end.
GBP 0.22 million was invested into a new company after the year-end as detailed below:
Company Business Date of investment Amount of new investment
(GBPm)
Electric vehicle
Andersen EV (EV) chargers June 2020 0.22
------------------ -------------------- -------------------------
Muller EV Limited (trading as Andersen EV) is a design led manufacturer of premium electric vehicle (EV) chargers. Incorporated in 2016, this business has secured high profile partnerships with Porsche and Jaguar Land Rover, establishing an attractive niche position in charging points for the high end EV market. The Company's funds will be used to scale the business through investment in further products and software, sales and marketing and electric vehicle manufacturer partnerships. Andersen is well positioned in a nascent sector experiencing significant growth and has achieved sales ahead of budget in its latest year to February 2020, a trend which has continued in the year-to-date.
Further investments in existing portfolio companies in the year
GBP0.36 million was invested into one existing portfolio company
during the year as detailed below:
Company Business Date of investment Amount of new investment
(GBPm)
Online marketplace
for used camera
MPB and video equipment July 2019 0.36
---------------------- -------------------- -------------------------
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 also provided by other investors, is to support
its continued growth plan. Having more than doubled its sales over
the last two years, this investment will help drive the company's
objective to create a GBP100m+ turnover internationally diverse
and profitable re-commerce business.
Further investments in existing portfolio companies after the year-end
Company Business Date of investment Amount of new investment
(GBPm)
Digital marketplace
connecting school
pupils seeking one-to-one
MyTutor online tutoring May 2020 0.53
---------------------------- -------------------- -------------------------
MyTutorweb (trading as MyTutor) 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 further investment,
alongside other existing shareholders, seeks to build and reinforce
its position as a UK category leader in the online education market
as well as to begin to develop a broader, personalised learning
product offering. MyTutor has grown strongly over the last six
months with average year on year growth of 70% and over 210,000
tutorials delivered in 2019. The COVID- 19 impact on the education
sector has significantly heightened the awareness of online learning
and tutoring
Workforce management
Rotageek software May 2020 0.37
---------------------------- -------------------- -------------------------
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, alongside funds
from a new VCT investor and existing shareholders will be used to
capitalise on opportunities that will emerge as the retail sector
recovers from lockdown restrictions. Rotageek will also be moving
into healthcare to help address the workforce management issues
of a sector that is chronically overburdened at present. For the
year ended 31 December 2019, revenues have grown over 45% on the
prior year.
Realisations during the year
The Company realised its investments in The Plastic Surgeon, ASL
Technology, Redline Worldwide, Pattern Analytics (trading as Biosite)
and Turner TopCo (trading as Auction Technology Group) during the
year, generating an aggregate realised gain of GBP3.79 million. Net
cash proceeds received from the sale of these investments totalled
GBP10.93 million, as detailed below.
Company Business Period of investment Total cash proceeds
over the life of the
investment/
Multiple over cost
Plastic Surgeon Supplier of snagging April 2008 to GBP2.19 million
and finishing services May 2019 5.6 x cost
to the property sector
-------------------------- --------------------- ----------------------
The Company sold its remaining investment in The Plastic Surgeon
to Polygon Group for GBP1.18 million (realised gain in the year:
GBP0.30 million). Over the eleven years this investment was held,
it generated proceeds of GBP2.19 million compared to an original
investment cost of GBP0.39 million which is a multiple on cost of
5.6x and an IRR of 20.5%.
ASL Technology Printer and photocopier December 2010 GBP4.57 million
services to June 2019 2.2 x cost
-------------------------- --------------------- ----------------------
The Company sold its investment in ASL Technology for GBP3.68 million
(realised gain in the year: GBP0.49 million). Over the eight and
a half years this investment was held, it generated proceeds of
GBP4.57 million compared to an original investment cost of GBP2.09
million, which is a multiple on cost of 2.2x and an IRR of 12.6%.
Redline Provider of security February 2016 GBP1.18 million
services to the aviation to December 2019 1.7x cost
industry and other
sectors
-------------------------- --------------------- ----------------------
The Company sold its investment in Redline Worldwide for GBP0.93
million (realised gain in the year: GBP0.59 million)(including proceeds
received after completion). Since investment in 2016, the investment
has generated proceeds to date of GBP1.18 million compared to an
original investment cost of GBP0.68 million, which is a multiple
on cost to date of 1.7x. The investment generated an IRR at completion
of 16.0%. Further proceeds may be payable in due course.
Biosite Workforce management November 2016 GBP1.60 million
and security services to February 2020 1.5x cost
-------------------------- --------------------- ----------------------
The Company sold its investment in Pattern Analytics Limited (trading
as Biosite) to ASSA ABLOY for GBP1.53 million. Since investment
in 2016, the investment has generated proceeds of GBP1.60 million
compared to an original investment cost of GBP1.04 million, which
is a multiple on cost of 1.5x and an IRR of 21.0%.
Auction Technology SaaS based online October 2008 GBP7.80 million
Group auction marketplace to February 2020 4.5 x cost
platform
-------------------------- --------------------- ----------------------
The Company sold its investment in Turner Topco Limited (trading
as Auction Technology Group) to TA Associates for GBP4.55 million
(including GBP0.94 million loan interest due on completion; realised
gain in the year of GBP2.41 million). This investment generated
proceeds over the life of the investment (including proceeds received
following a partial realisation from a sale to ECI Partners in June
2014) of GBP7.80 million. These returns generated a multiple on
cost of 4.5x and an IRR of 28.9%.
There was also a partial realisation of Master Removers Group ("MRG") during the year which generated proceeds receivable of GBP0.28 million and a nominal realised gain. This occurred following a reorganisation of MRG's share capital resulting in the Company increasing its equity share in MRG from 3.4% to 5.2%.
Following the year-end, and continued under performance, the trade and assets of Super Carers were sold to Home Instead for a nominal sum. A realised loss of GBP0.19 million was recognised during the year in respect of Super Carers.
Loan stock repayments and other receipts
In addition to net realised gains for the year on the five disposals of GBP3.79 million, there were also realised gains of GBP0.17 million comprising consideration received from Entanet, an investment realised in a prior year, liquidation proceeds from H Realisations (2018) Limited (formerly Hemmels Limited) and MRG's partial realisation. Including a GBP0.19 million realised loss in respect of Super Carers, the total realised gains for the year were GBP3.77 million, as shown in both tables of this review. After the year end, the Company received a loan repayment of GBP0.05 million from BookingTek.
Mobeus Equity Partners LLP
Investment Adviser
INVESTMENT PORTFOLIO SUMMARY
Total
Book Valuation Valuation
Date of Change % of
first cost at at Disposals in at net
assets
investment 31 March 31 March Additions at opening valuation 31 March by
and Sector 2020 2019 at cost valuation for year 2020 value
GBP GBP GBP GBP GBP GBP
Qualifying
investments
Unquoted
investments
Tovey Management October
Limited (trading 2015 1,733,500 2,314,753 - - 273,972 2,588,725 5.9%
as Access IS) Electronic
Provider of data and
capture and electrical
scanning hardware equipment
MPB Group Limited June 2016 1,176,231 1,180,748 356,458 - 195,455 1,732,661 4.0%
Online marketplace General
for photographic retailers
and video
equipment
December
Preservica Limited 2015 1,133,464 1,620,741 - - (139,369) 1,481,372 3.4%
Seller of
proprietary Software
digital archiving and
computer
software services
Bella & Duke February
Limited 2020 1,451,101 - 1,451,101 - - 1,451,101 3.3%
A premium frozen General
raw dog food retailers
provider
Virgin Wines
Holding November
Company 2013 1,284,333 1,556,726 - - (130,642) 1,426,084 3.3%
General
Limited retailers
Online wine
retailer
EOTH Limited
(trading October
as Rab and 2011 817,185 1,970,986 - - (566,961) 1,404,025 3.2%
General
Lowe Alpine) retailers
Branded outdoor
equipment and
clothing
Data Discovery
Solutions November
Limited 2019 943,000 - 943,000 - 267,232 1,210,232 2.8%
(trading as Active Software
Navigation) and
Provider of global computer
market leading services
file analysis
software
for information
governance,
security
and compliance
Proactive Group January
Holdings Inc 2018 635,346 883,102 - - 288,844 1,171,946 2.7%
Provider of media General
services and financial
investor
conferences
for companies
primarily listed
on secondary
public
markets
MyTutorWeb Limited
(trading as May 2017 979,834 979,834 - - - 979,834 2.2%
Support
MyTutor) services
Digital
marketplace
connecting
school pupils
seeking
one-to-one
online tutoring
Vectair Holdings January
Limited 2006 60,293 972,093 - - (44,180) 927,913 2.1%
Designer and
distributor Support
of services
washroom products
Arkk Consulting
Limited May 2019 908,995 - 908,995 - (149,762) 759,233 1.7%
(trading as Arkk Software
Solutions) and
Provider of
services computer
and software services
to enable
organisations
to remain
compliant with
regulatory
reporting
requirements
Vian Marketing
Limited
(trading as July 2015 717,038 1,180,612 - - (441,678) 738,934 1.7%
Leisure
Red Paddle Co) goods
Design,
manufacture
and sale
of stand-up
paddleboards
and
windsurfing sails
Parsley Box
Limited May 2019 551,400 - 551,400 - 105,370 656,770 1.6%
Supplier of home General
delivered, ambient retailers
ready meals for
the elderly
Tharstern Group
Limited July 2014 789,815 842,506 - - (235,196) 607,310 1.4%
Software based Software
management and
information
systems computer
to the print services
sector
Buster and Punch
Holdings Limited March 2017 436,391 608,509 - - (20,992) 587,517 1.3%
Industrial
inspired General
lighting and retailers
interiors retailer
Bleach London
Holdings December
Limited 2019 445,332 - 445,332 - 116,029 561,361 1.3%
Hair colourants General
brand retailers
November
IPV Limited 2019 535,459 - 535,459 - - 535,459 1.2%
Provider of media Software
asset software and
computer
services
Rota Geek Limited August 2018 366,600 619,101 - - (107,490) 511,611 1.2%
Workforce management Support
software services
Ibericos Etc. Limited
(trading as January 2017 812,248 811,028 - - (426,205) 384,823 0.9%
Travel &
Tapas Revolution) Leisure
Spanish restaurant
chain
Bourn Bioscience
Limited January 2014 757,101 383,189 - - (133,346) 249,843 0.6%
Management of In-vitro
fertilisation Healthcare
equipment
clinics &
services
Kudos Innovations November
Limited 2018 277,950 277,950 - - - 277,950 0.6%
Online platform Support
that provides and services
promotes academic
research
dissemination
CGI Creative Graphics
International June 2014 999,568 964,132 - - (779,501) 184,631 0.5%
General
Limited industrials
Vinyl graphics to
global automotive,
recreation vehicle
and aerospace
markets
Blaze Signs Holdings
Limited April 2006 437,030 807,949 - - (650,292) 157,657 0.4%
Manufacturing and Support
installation of services
signs
Master Removers December
Group 2019 2014 251,763 1,113,167 - (278,292) (708,406) 126,469 0.3%
Limited (trading Support
as Anthony Ward services
Thomas, Bishopsgate
and Aussie
Man & Van)
A specialist
logistics,
storage and
removals business
Media Business Insight
Holdings January 2015 1,447,188 770,532 - - (726,297) 44,235 0.1%
Limited Media
A publishing and
events business
focused on the
creative
production
industries
Manufacturing Services
Investment July 2017 1,412,992 893,985 - - (854,587) 39,398 0.1%
Limited (trading General
as Wetsuit Outlet) retailers
Online retailer
in the water sports
market
RDL Corporation
Limited October 2010 1,000,000 494,929 - - (494,929) - 0.0%
Recruitment
consultants Support
for services
the pharmaceutical,
business
intelligence and
IT industries
Super Carers Limited
(1) March 2018 384,720 192,360 - (192,360) - - 0.0%
Online platform Support
that connects services
people seeking home
care from
experienced
independent
carers
BookingTek Limited October 2016 504,336 126,084 - - (126,084) - 0.0%
Software for hotel Software
groups and
computer
services
Jablite Holdings
Limited April 2015 281,398 91,600 - - (91,600) - 0.0%
Manufacturer of Construction
expanded and
polystyrene products materials
Veritek Global
Holdings
Limited July 2013 967,780 49,432 - - (49,432) - 0.0%
Maintenance of imaging Support
equipment services
Racoon International December
Group Limited 2006 906,935 - - - - - 0.0%
Supplier of hair
extensions, hair Personal
care goods
products and training
Realised in year
ASL Technology
Holdings December
Limited 2010 - 3,190,292 - (3,190,292) - - 0.0%
Printer and
photocopier Support
services services
Pattern Analytics November
Limited (trading 2016 - 1,531,481 - (1,531,481) - - 0.0%
Software
as Biosite) and
Workforce management computer
and security services
services for the
construction industry
Turner Topco
Limited October
(trading as 2008 - 1,198,168 - (1,198,168) - - 0.0%
Auction Technology
Group) Media
SaaS based online
auction market
place platform
The Plastic
Surgeon
Holdings April 2008 - 875,502 - (875,502) - - 0.0%
Support
Limited services
Snagging and
finishing
of domestic
and commercial
properties
Redline Worldwide February
Limited 2016 - 341,107 - (341,107) - - 0.0%
Provider of
security Support
services to the services
aviation industry
Total qualifying 47.8%
investments 25,406,326 28,842,598 5,191,745 (7,607,202) (5,630,047) 20,797,094 (2)
Non-qualifying
investments
Media Business
Insight January
Limited 2015 561,884 672,742 - - - 672,742 1.5%
A publishing and
events business Media
focused on the
creative
production
industries
Manufacturing
Services
Investment July 2017 304,000 304,000 - - - 304,000 0.7%
Limited (trading General
as Wetsuit Outlet) retailers
Online retailer
in the water
sports
market
Tovey Management October
Limited (trading 2015 219,873 219,873 - - - 219,873 0.5%
as Access IS) Electronic
Provider of data and
capture and electrical
scanning hardware equipment
365 Agile Group
plc (formerly March 2001 254,586 - - - - - 0.0%
Iafyds plc) Electronic
Development of
energy and
saving electrical
devices for
domestic
use equipment
Racoon
International December
Group Limited 2006 139,050 - - - - - 0.0%
Supplier of hair
extensions, hair Personal
care goods
products and
training
H Realisations
(2018)
Limited March 2018 17,932 - - - - - 0.0%
(formerly Hemmels Automobiles
Limited) and
Company
specialising
in the parts
sourcing,
restoration,
selling and
servicing of high
price, classic
cars
Total
non-qualifying
investments 1,497,325 1,196,615 - - - 1,196,615 2.7%
Total investment
portfolio per note 26,903,651 30,039,213 5,191,745 (7,607,202) (5,630,047) 21,993,709 50.5%
8
Cash and current
asset investments
(3) 18,662,785 21,806,051 50.1%
Total investments
including cash 26,903,651 48,701,998 5,191,745 (7,607,202) (5,630,047) 43,799,760 100.6%
and current asset
investments
Other current
assets 229,113 150,699 0.3%
Current
liabilities (201,154) (385,165) (0.9)%
Totals 26,903,651 5,191,745 (7,607,202)
Net assets at the
year-end 48,729,957 43,565,294 100.0%
Total Investment
Portfolio split
by
type
Growth focused
portfolio 15,820,418 15,017,984 5,191,745 (2,343,240) (2,701,950) 15,164,539 68.9%
MBO focused
portfolio 11,083,233 15,021,229 - (5,263,962) (2,928,097) 6,829,170 31.1%
Investment
Adviser's
Total 26,903,651 30,039,213 5,191,745 (7,607,202) (5,630,047) 21,993,709 100.0%
(1) The closing valuation of this investment is nil as the remaining cost and valuation still held were permanently impaired during the year.
(2) As at 31 March 2020, the Company held more than 70% of its total investments in qualifying holdings, and therefore complied with the VCT Qualifying Investment test. For the purposes of the VCT qualifying test, the Company is permitted to disregard disposals of investments for twelve months from the date of disposal. It also has up to three years to bring in new funds raised, before these need to be included in the qualifying investment test.
(3) Disclosed as Current asset investments and Cash at bank within Current assets in the Balance Sheet.
Principal risks, management and regulatory environment
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 significant risks faced by the
Company. This includes a key risk management review which takes place at
each quarterly board meeting. Further details of these are contained in
the corporate governance section of the Directors' Report in the Annual
Report. The principal risks identified by the Board are set out below:
Risk Possible How the Board manages
consequence risk
Political Events such as ----The Board monitors
and an economic
Economic recession, (1) the portfolio as a
Brexit whole to ensure that the
negotiations, Company invests in a diversified
a protracted portfolio of companies
period of and
political (2) developments in the
uncertainty, macro-economic environment
COVID-19, such as interest rates.
movements in * The Board and Investment Adviser have carried out an
interest rates, analysis of the portfolio, latterly with particular
could affect focus upon the impact of COVID-19 which will be kept
trading under review.
conditions for
smaller
companies and
consequently
the value of
the Company's
qualifying
investments.
Investment Investment in ---- The Board regularly
and small unquoted reviews the Company's
strategic small companies investment strategy.
can involve ---- Investee companies
a higher degree are carefully selected
of risk by the Investment Adviser
than investment for recommendation to
in larger, the Board.
and/or fully ---- The investment portfolio
listed is reviewed by the Board
companies on a regular basis.
and will likely ---- The Investment Adviser
have more generally appoints a director
variable to the Board of each investee
returns. company
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 The Company ---- The Board receives
approval must comply regular reports from Philip
as a with section Hare & Associates LLP
Venture 274 of the ("PHA") who have been
Capital Income Tax Act retained to undertake
Trust 2007 ("ITA") an independent VCT status
which allows monitoring role.
it to be
exempted ---- The Company's VCT
from capital qualifying status is continually
gains tax reviewed by PHA and the
on investment Investment Adviser on
gains. Any a regular basis.
breach of
these rules
may
lead to the
Company losing
its approval
as a VCT,
qualifying
Shareholders
who have not
held their
shares for the
designated
holding period
having to
repay the
income tax
relief
they obtained
and that
future
dividends paid
by
the Company
becoming
subject
to tax. The
Company would
also lose its
exemption
from
corporation
tax on
capital gains
The Company is
required
to comply with
frequent
changes to the
VCT specific
regulations
relating to
European State
Aid
regulations
as enacted by
the UK ---- The Board receives
Government advice from PHA in respect
which still of these requirements,
apply. including those that may
Non-compliance arise from the withdrawal
VCT would result from the EU, and conducts
Regulatory in a loss its affairs in order to
Changes of VCT status. comply with these requirements.
Regulatory The Company is ---- Regulatory and legislative
required developments are kept
to comply with under review by the Company's
the Companies solicitors and the Board.
Act, the
Listing Rules
of the UK
Listing
Authority
and United
Kingdom
Accounting
Standards.
Changes to and
breach of any
of these
might lead to
suspension
of the
Company's Stock
Exchange
listing,
financial
penalties, a
qualified
audit report.
Financial Failure of the systems ---- The Board carries
and at any of the third-party out an annual review of
operating service providers that the internal controls
the Company has contracted in place and reviews the
with, could lead to risks facing the Company
inaccurate at each quarterly Board
reporting or monitoring. meeting.
Inadequate controls could ---- It reviews the
lead to the performance
misappropriation of the service providers
or insecurity of assets. annually.
Market Movements in the valuations ---- The Board receives
of the Company's quarterly valuation
investments reports
will, inter alia, be from the Investment
connected Adviser
to movements in UK Stock and remains focused on
Market indices. the investments being
at fair value, after
considering
many factors, including
the impact of market
movements.
---- The Investment
Adviser
alerts the Board about
any adverse movements.
Asset The Company's investments ---- The Board receives
may be difficult to reports from the
realise. Investment
Adviser and reviews the
portfolio at each
quarterly
Board meeting. It
carefully
monitors investments
where
a particular risk has
been identified.
liquidity
Market liquidity Shareholders may find
it difficult to sell
their
shares at a price which ---- The Board has a
is close to the net asset share
value at a price which buyback policy which
is close to the net asset seeks
value given the limited to mitigate market
secondary market in VCT liquidity
shares. risk.
Cyber and ---- The Board monitors
Data Security The Company and its and seeks assurance from
Shareholders the VCT's principal
may suffer losses in the suppliers
event of the IT systems in respect of the
at principal suppliers systems
being compromised by and processes they have
cyber adopted to counter these
attack. risks.
The risk profile of the Company has changed as a result of the changes to
the VCT Rules. As the Company's investment focus is 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 is confident that
the Investment Adviser will continue to adapt to changes in investment requirements.
The occurrence of the COVID-19 pandemic has created heightened uncertainty,
but has not changed the nature of the principal risks. The Board considers
that the present processes for mitigating those risks remain appropriate.
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 for 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 the 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 Directors' Report and Directors'
Remuneration Report which comply with the requirements of
the Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the Company's transactions and disclose
with reasonable accuracy at any time the financial position of the Company
and enable them to ensure that the Financial Statements comply with the
Companies Act 2006. They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
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, as 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. Accordingly, any liability to a person who
has demonstrated reliance on any untrue or misleading statement or omission
shall be determined in accordance with section 90A and schedule 10A of the
Financial Services and Markets Act 2000.
The names and functions of the Directors are stated in the Annual Report.
For and on behalf of the Board:
Ian Blackburn
Chairman
FINANCIAL STATEMENTS
Income Statement
for the year ended 31 March 2020
Year ended 31 March Year ended 31 March
2020 2019
Notes Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
Net investment portfolio
(losses)/gains 8 - (1,860,406) (1,860,406) - 3,137,000 3,137,000
Income 3 2,454,166 - 2,454,166 2,189,574 - 2,189,574
Investment Adviser's fees 4a (275,715) (827,145) (1,102,860) (259,026) (777,077) (1,036,103)
Other expenses 4c (383,905) - (383,905) (320,722) - (320,722)
Profit/(loss)
on ordinary
activities before taxation 1,794,546 (2,687,551) (893,005) 1,609,826 2,359,923 3,969,749
Taxation on on ordinary
profit/(loss) activities 5 (292,105) 157,158 (134,947) (208,983) 147,645 (61,338)
Profit/(loss)
for the year and total
comprehensive
income 1,502,441 (2,530,393) (1,027,952) 1,400,843 2,507,568 3,908,411
Basic and diluted earnings
per ordinary share: 7 2.94p (4.95)p (2.01)p 2.84p 5.09p 7.93p
The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the net investment portfolio (losses)/gains (unrealised 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 October 2019) 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 31 March 2020
31 March 2020 31 March 2019
Notes GBP GBP
Fixed assets
Investments at fair value 8 21,993,709 30,039,213
Current assets
Debtors and prepayments 150,699 229,113
Current asset investments 9 19,419,301 16,117,301
Cash at bank 9 2,386,750 2,545,484
21,956,750 18,891,898
Creditors: amounts falling due
within one year (385,165) (201,154)
Net current assets 21,571,585 18,690,744
Net assets 43,565,294 48,729,957
Capital and reserves
Called up share capital 596,893 489,251
Share premium reserve 10,673,405 30,498,349
Capital redemption reserve 5,157 98,089
Revaluation reserve (3,206,720) 4,357,307
Special distributable reserve 24,090,692 4,391,645
Realised capital reserve 9,809,815 7,600,987
Revenue reserve 1,596,052 1,294,329
Equity Shareholders' funds 43,565,294 48,729,957
Basic and diluted net asset value
per ordinary share 72.99p 99.60p
The Financial Statements were approved and authorised for issue by the Board of Directors and are signed on its behalf by:
Ian Blackburn
Chairman
Statement of Changes in Equity
for the year ended 31 March 2020
Non-distributable
reserves Distributable reserves
Called
up Share Capital Special Realised Revenue
share premium redemption Revaluation distributable capital reserve
capital reserve reserve reserve reserve reserve Total
(Note (Note (Note
a) b) b)
Notes GBP GBP GBP GBP GBP GBP GBP GBP
At 1 April
2019 489,251 30,498,349 98,089 4,357,307 4,391,645 7,600,987 1,294,329 48,729,957
Comprehensive
income for
the year
(Loss)/profit
for the year - - - (5,630,047) - 3,099,654 1,502,441 (1,027,952)
Total
comprehensive
income for
the year - - - (5,630,047) - 3,099,654 1,502,441 (1,027,952)
Contributions
by and
distributions
to owners
Shares issued
via Offer
for
Subscription
(Note c) 118,928 10,944,747 - - (106,495) - - 10,957,180
Issue costs - (271,342) - - - - - (271,342)
Shares bought
back (Note
d) (11,286) - 11,286 - (944,508) - - (944,508)
Dividends paid 6 - - - - (8,797,809) (3,879,514) (1,200,718) (13,878,041)
Total
contributions
by and
distributions
to owners 107,642 10,673,405 11,286 - (9,848,812) (3,879,514) (1,200,718) (4,136,711)
Other
movements
Cancellation
of share
premium reserve
(Note e) - (30,498,349) (104,218) - 30,602,567 - - -
Realised
losses
transferred
to special
reserve (Note
a) - - - - (1,054,708) 1,054,708 - -
Realisation
of previously
unrealised
gains - - - (1,933,980) - 1,933,980 - -
Total other
movements - (30,498,349) (104,218) (1,933,980) 29,547,859 2,988,688 - -
At 31 March
2020 596,893 10,673,405 5,157 (3,206,720) 24,090,692 9,809,815 1,596,052 43,565,294
a): The Company's special reserve is available to fund buybacks
of shares as and when it is considered by the Board to be in the
interests of Shareholders, and to absorb any existing and future
realised losses and for other corporate purposes. At 31 March 2020,
the Company has a special reserve of GBP24,090,692, GBP9,493,840
of which relates to shares issued on or before 5 April 2014, or
that arise from shares issued more than three years ago. Reserves
originating from share issues are not distributable under VCT rules
if they are within three years of the end of an accounting period
in which the shares were issued. The total transfer of GBP1,054,708
from the realised capital reserve to the special distributable reserve
above is the total of realised losses incurred by the Company in
the year.
b): The realised capital reserve and the revenue reserve together
comprise the Profit and Loss Account of the Company.
c): Under an Offer for Subscription launched on 25 October 2019,
11,892,778 ordinary shares were allotted on 8 January 2020, raising
net funds of GBP10,685,838 for the Company. This figure is net of
issue costs of GBP271,342.
d): During the year, the Company purchased 1,128,609 of its own
shares at the prevailing market price for a total cost of GBP944,508,
which were subsequently cancelled. This figure is higher than that
shown in the Statement of Cashflows of GBP883,588 by GBP60,920.
This is due to GBP60,920 included in creditors at the year-end.
e): The cancellation of GBP30,498,349 from the Share Premium Reserve
and GBP104,218 from the Capital Redemption Reserve (as approved
at the Annual General Meeting on 11 September 2019 and by the court
order dated 25 October 2019) has increased the Company's special
reserve out of which it can fund buybacks 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, or for other
corporate purposes.
Statement of Changes in Equity
for the year ended 31 March 2019
Non-distributable
reserves Distributable reserves
Called
up Share Capital Special Realised Revenue
redemption
share premium Revaluation distributable capital reserve
capital reserve reserve reserve reserve reserve Total
Notes GBP GBP GBP GBP GBP GBP GBP GBP
At 1 April 2018 493,042 30,498,349 94,298 1,398,656 6,052,525 7,943,475 1,117,852 47,598,197
Comprehensive
income for the
year
Profit/(loss) for
the year - - - 2,531,926 - (24,358) 1,400,843 3,908,411
Total comprehensive
income for the
year - - - 2,531,926 - (24,358) 1,400,843 3,908,411
Contributions by
and
distributions to
owners -
Shares bought back (3,791) - 3,791 - (327,702) - - (327,702)
Dividends paid - - - - - (1,229,623) (1,229,623) (2,459,246)
Dividends refunded - - - - - 5,040 5,257 10,297
Total contributions
by and distributions to owners (3,791) - 3,791 - (327,702) (1,224,583) (1,224,366) (2,776,651) Other movements Realised losses transferred to special reserve - - - - (1,333,178) 1,333,178 - - Realisation of previously unrealised losses - - - 426,725 - (426,725) - - Total other movements - - - 426,725 (1,333,178) 906,453 - - At 31 March 2019 489,251 30,498,349 98,089 4,357,307 4,391,645 7,600,987 1,294,329 48,729,957
Notes:
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 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 issue costs over the nominal value of shares allotted under Offers for Subscription.
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.
Special distributable reserve
This reserve is created from cancellations of the balances upon the Share premium reserve, which are transferred to this reserve from time to time. The cost of share buybacks and any realised losses on the sale or impairment of investments (excluding transaction costs) are charged to this reserve. 75% of the Investment Adviser fee expense, and the related tax effect, that are charged to the realised capital reserve are transferred to this reserve. This reserve will also be charged any facilitation payments to financial advisers, which arose as part of the Offer for Subscription.
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's fee (subsequently transferred to the Special distributable reserve along with the related tax effect) 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 as well as 25% of the Investment Adviser fee 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 31 March 2020
Year ended Year ended
Notes 31 March 2020 31 March 2019
GBP GBP
Cash flows from
operating activities
(Loss)/profit
for the financial year (1,027,952) 3,908,411
Adjustments
for:
Net investment portfolio losses/(gains) 1,860,406 (3,137,000)
Tax charge for the current year 134,947 61,338
Decrease in
debtors 17,494 56,764
Increase in creditors and accruals 83,422 4,341
Net cash inflow
from operations 1,068,317 893,854
Corporation
tax paid (61,351) (50,401)
Net cash inflow
from operating activities 1,006,966 843,453
Cash flows from
investing activities
Purchase of investments 8 (5,191,745) (2,898,440)
Disposal of investments 8 11,403,836 2,934,649
Net cash inflow from investing activities 6,212,091 36,209
Cash flows from
financing activities
Shares issued as part of Offer for subscription 10,957,180 -
Issue costs (271,342) -
Equity dividends
paid 6 (13,878,041) (2,459,246)
Dividends
refunded - 10,297
Purchase of own
shares (883,588) (327,702)
Net cash outflow from financing activities (4,075,791) (2,776,651)
Net increase/(decrease) in cash and cash
equivalents 3,143,266 (1,896,989)
Cash and cash equivalents at start of year 18,662,785 20,559,774
Cash and cash equivalents at end of the year 21,806,051 18,662,785
Cash and cash equivalents comprise:
Cash equivalents 19,419,301 16,117,301
Cash at bank and
in hand 2,386,750 2,545,484
Notes to the Financial Statements for the year ended 31 March 2020
(1) Company Information
Mobeus Income and Growth 2 VCT plc is a public limited company incorporated in England, registration number 03946235. 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. The Financial Statements have been prepared on a going concern basis which is deemed appropriate by the Board in light of the ongoing COVID-19 pandemic due to the strong liquidity of the Company following the recent fundraising and successful realisations, in addition to the Company's ability to control the outflow of funds.
These Financial Statements have also 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 October 2019) issued by the Association of Investment Companies.
(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 31 March 2020 has been classified as capital and has been included within gains on investments.
2020 2019
GBP GBP
Income from bank deposits 18,525 13,644
Income from investments
- from equities 275,221 512,578
- from overseas based OEICs 74,318 74,234
- from UK based OEICs 35,975 34,525
- from loan stock 2,049,810 1,521,722
- from interest on preference share dividend
arrears 317 31,481
2,435,641 2,174,540
Other income - 1,390
Total income 2,454,166 2,189,574
Total income comprises
Dividends 385,514 621,337
Interest 2,068,652 1,566,847
Other - 1,390
2,454,166 2,189,574
Total loan stock interest due but not recognised in the year was GBP231,708 (2019: GBP421,336). The decrease in the year is due to the realisation of one investee company whose interest was only recognised upon exit, offset by a number of investee company interest provisions in light of COVID-19.
(4) Investment Adviser's fees and Other expenses
All expenses are accounted for on an accruals basis.
a) Investment Adviser's 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. This is because although the incentive fee is linked to an annual dividend target, it is ultimately based upon the achievement of capital growth.
2020 2019
Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
Mobeus Equity Partners
LLP
Investment Adviser's
fees 275,715 827,145 1,102,860 259,026 777,077 1,036,103
275,715 827,145 1,102,860 259,026 777,077 1,036,103
Under the terms of a revised investment management agreement dated 10 September 2010, (as amended and restated on 15 September 2016) Mobeus Equity Partners LLP provides investment advisory, administrative and company secretarial services to the Company, for a fee of 2% per annum calculated on a quarterly basis by reference to the net assets at the end of the preceding quarter, plus a fee of GBP113,589 per annum, the latter being subject to changes in the retail prices index each year. In 2013, Mobeus has agreed to waive such further increases due to indexation, until otherwise agreed with the Board. In accordance with the policy statement published under "Management and Administration" in the Company's prospectus dated 10 May 2000, the Directors have charged 75% of the investment management expenses to the capital account. This is in line with the Board's expectation of the long-term split of returns from the investment portfolio of the Company. For 2019, the Investment Adviser's fee upon the net funds raised from use of the over-allotment facility of GBP5 million under the 2017/18 Offer was reduced from 2.0% to 1.0% per annum. From 1 July 2020, the Investment Adviser's fee upon the net funds raised under the 2019/2020 Offer for Subscription from the use of the over-allotment facility of GBP5 million will be reduced from 2.0% to 1.0% per annum for one year. In addition, under the 2019/20 Offer for Subscription, for net funds raised from gross applications in excess of GBP20 million, the fee will be reduced from 2.0% to 0%, also for one year.
Under the terms of the management agreement the total Investment Adviser and administration expenses of the Company excluding any irrecoverable VAT, exceptional costs and any performance incentive fee, are linked to a maximum of 3.6% of the value of the Company's closing net assets. For the year ended 31 March 2020, the expense cap has not been breached (2019: GBPnil).
The Company is responsible for external costs, such as legal and accounting fees, incurred on transactions that do not proceed to completion ("abort expenses") subject to the cap on total annual expenses referred to above.
In accordance with general market practice, the Investment Adviser earned arrangement fees and fees for supplying Directors and/or monitoring services from investee companies. The share of such fees attributable to the investments made by the Company were GBP129,795 (2019: GBP74,339) and GBP175,528 (2019: GBP170,217) respectively. The fees for supplying directors and/or monitoring services were from 35 (2019: 33) investee companies during the year.
(b) Performance fees
Performance incentive agreement
The following performance incentive fee arrangement dated 20 September 2005 continues to be in place, and operated as detailed below:
New Ordinary and former C share fund shares
Basis of Calculation
The performance incentive fee payable is calculated as an amount equivalent to 20 per cent of the excess of a "Target rate" comprising:-
i. an annual dividend target (indexed each year for RPI), and
ii. a requirement that any cumulative shortfalls below the annual dividend target must be made up in later years. Any excess is not carried forward, whether a fee is payable for that year or not.
Payment of a fee is also conditional upon the average Net Asset Value ("NAV") per share for each such year equalling or exceeding the average "Base NAV" per share for the same year. Base NAV commenced at GBP1 per share when C fund shares were first issued in 2005, which is adjusted for subsequent shares issued and bought back.
Any performance fee will be payable annually. It will be reduced to the proportion which the number of "Incentive Fee Shares" represent of the total number of shares in issue at any calculation date. Incentive Fees Shares are the only shares upon which an incentive fee is payable. They will be the number of C fund shares in issue just before the Merger of the two former share classes on 10 September 2010, (which subsequently became Ordinary shares) plus Ordinary shares issued under new fundraisings since the Merger. This total is then reduced by an estimated proportion of the shares bought back by the Company since the Merger, that are attributable to the Incentive Fee Shares.
Clarifications to the agreement
During the year ended 31 March 2016, the Board and the Investment Adviser agreed to confirm and clarify in more detail a number of principles and interpretations applied to the agreement. The principal ones are reflected in the paragraphs above and explained below:-
First, the incentive fee is paid upon dividends paid in a year, not declared and paid in a year, as the original agreement stated. Secondly, the average NAV referred to above is calculated on a daily weighted average basis throughout the year. In turn, this average NAV is compared to a Base NAV that is also calculated on a daily weighted average basis throughout the year. Thirdly, the methodologies to account for new shares issued and buybacks of shares, their inclusion in the incentive fee calculations and to identify the proportion of all shares upon which an incentive fee is payable have been clarified.
Finally, it has been agreed that any excess of cumulative dividends paid over the cumulative annual dividend target is not carried forward, whether a fee is paid for that year or not.
These clarifications have been incorporated in to the performance incentive agreement. The Board has been advised that, as these and a number of more minor clarifications, are clarifications of the Incentive Agreement, rather than changes to it, there was no need to seek Shareholder approval for them.
Position at 31 March 2020
The cumulative dividends paid exceeded the annual cumulative dividend target at 31 March 2020 by 13.13 pence per share (GBP3,496,083 in aggregate being 44.6% of the total shortfall) at the year-end, (where 44.6% is the proportion of Incentive Fee Shares to the total number of shares in issue at the year-end date) and taking into account the target rate of dividends and the dividends paid to Shareholders.
The 6.00 pence annual dividend hurdle was 8.13 pence per share at the year-end after adjustment for RPI. The Base NAV was 103.20 per share at the year end and an average of 105.46 pence for the year, compared to an average NAV for the year of 96.07 pence.
There is no present obligation arising as the hurdles are not met, as the average NAV per share for the year was less than the Base NAV per share for the year, therefore, no incentive fee is payable for the year (2019: GBPNil).
(c) Other expenses
Expenses are charged wholly to revenue, with the exception of expenses incidental to the acquisition or disposal of an investment, which are written off to the capital column of the Income Statement or deducted from the disposal proceeds as appropriate.
2020 2019
GBP GBP
Directors' remuneration (including NIC of GBP6,674
(2019: GBP5,380)) (Note a) 102,674 99,802
IFA trail commission 51,669 49,262
Broker's fees 12,000 12,000
Auditor's fees - Audit of Company (excluding
VAT) 29,213 23,575
- tax compliance services (Note b) (excluding
VAT) - 1,922
- audit related assurance services (Note b)
(excluding VAT) 6,663 4,613
Registrar's fees 45,052 28,622
Printing 49,776 38,993
Legal & professional fees 34,104 9,836
VCT monitoring fees 8,400 8,400
Directors' insurance 8,269 7,428
Listing and regulatory fees 26,939 25,702
Sundry 9,146 10,567
Other expenses 383,905 320,722
a): See analysis in Directors' emoluments table within the Annual Report, which excludes the NIC above. The key management personnel are the three non-executive Directors. The Company has no employees.
b): The Directors consider the Auditor was best placed to provide the other services disclosed above. The audit related assurance services are in relation to the audit of the Financial Statements within the Company's Half-Year Report. The Audit Committee reviews the nature and extent of these services to ensure that auditor independence is maintained. In this regard, compliance tax services (excluding iXBRL services for 2019 only) are carried out by another firm, so are included within legal and professional fees. iXBRL services will be supplied by an alternative provider to BDO for the year ended 31 March 2020 and in future years.
(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 Investment Adviser fees allocated to capital is reflected in the realised capital reserve 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.
2020 2019
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 292,105 (157,158) 134,947 208,983 (147,645) 61,338
Total current tax
charge 292,105 (157,158) 134,947 208,983 (147,645) 61,338
Corporation tax is
based on a rate
of 19% (2019: 19%)
b) Profits/(losses)
on ordinary
activities before
tax 1,794,546 (2,687,551) (893,005) 1,609,826 2,359,923 3,969,749
Profits/(losses)
on ordinary
activities multiplied
by main rate
of corporation tax
in the UK of 19%
(2019: 19%) 340,964 (510,635) (169,671) 305,867 448,385 754,252
Effect of:
UK dividends (52,292) - (52,292) (97,390) - (97,390)
Net investment portfolio
losses/
(gains) not deductible/taxable - 353,477 353,477 - (596,030) (596,030)
Unrelieved expenditure 3,433 - 3,433 518 - 518
Over provision in
prior year - - - (12) - (12)
Actual tax charge 292,105 (157,158) 134,947 208,983 (147,645) 61,338
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 (2019: GBPnil). There is no unrecognised deferred tax asset in 2020 (2019: GBPnil).
(6) 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.
A key judgement in applying the above accounting policy is in determining the amount of minimum income dividend to be paid in respect of a year. 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.
Amounts recognised as distributions to equity Shareholders in
the year:
For year ended Pence 2020 2019
Dividend Type 31 March per share Date Paid GBP GBP
Interim Income 2019 2.50p 22/03/2019 - 1,229,623
Interim Capital 2019 2.50p 22/03/2019 - 1,229,623
Interim Capital 2020 8.00p 20/09/2019 3,879,514 -
Interim Capital* 2020 7.00p 20/09/2019 3,394,575 -
Interim Income 2020 2.00p 27/03/2020 1,200,718 -
Interim Capital* 2020 9.00p 27/03/2020 5,403,234 -
Dividends paid in previous years not
claimed within the statutory period - (10,297)
13,878,041 2,448,949
* These dividends were paid out of the Company's special distributable reserve.
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.
Recognised income distributions in the
Financial Statements for the year
For year ended Pence 2020 2019
Dividend Type 31 March per share Date Paid GBP GBP
Revenue available for distribution by
way of dividends for the year 1,502,441 1,400,843
Interim Income 2019 2.50p 22/03/2019 - 1,229,623
Interim Income 2020 2.00p 27/03/2020 1,200,718
Total income dividends
for the year 1,200,718 1,229,623
(7) Basic and diluted earnings and return per share
2020 2019
GBP GBP
Total earnings after taxation: (1,027,952) 3,908,411
Basic and diluted earnings per share (Note
a) (2.01)p 7.93p
Net revenue earnings from ordinary activities
after taxation 1,502,441 1,400,843
Basic and diluted revenue earnings per share
(Note b) 2.94p 2.84p
Net investment portfolio (losses)/gains (1,860,406) 3,137,000
Capital Investment Adviser's fees (net of taxation) (669,987) (629,432)
Total capital earnings (2,530,393) 2,507,568
Basic and diluted capital earnings per share
(Note c) (4.95)p 5.09p
Weighted average number of shares in issue
in the year 51,134,517 49,247,849
Notes:
a) Basic earnings per share is total earnings after taxation divided by the weighted average number of shares in issue.
b) Basic revenue earnings per share is the revenue return after taxation divided by the weighted average number of shares in issue.
c) Basic capital earnings per share is the total capital return after taxation divided by the weighted average number of shares in issue.
d) There are no instruments that will increase the number of shares in issue in future. Accordingly, the above figures currently represent both basic and diluted returns.
(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 2018 (as updated by Special Valuation guidance issued in March 2020). 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.
Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional. 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. 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 at each measurement date in accordance with appropriate valuation techniques, which are consistent with the IPEV guidelines:
(i) Each investment is considered as a whole on a 'unit of account' basis, i.e. that the value of each portfolio company is considered as a whole, alongside consideration of:-
The price of new investments made, if deemed to be made as part of an orderly transaction, are considered to be at fair value at the date of the transaction. The inputs that derived the investment price are calibrated within individual valuation models and at every subsequent measurement date are reconsidered for any changes in light of more recent events or changes in light of more recent events or changes in the market performance of the investee company. The valuation bases used are the following:
- a multiple basis. The enterprise value of the investment may be determined 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, or 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, scale and liquidity).
or:-
- where a company's underperformance against plan indicates a diminution in the value of the investment, provision against cost is made, as appropriate.
(ii) Premiums, to the extent that they are considered capital in nature, and that they 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.
(iii) Where a multiple or the price of recent investment less impairment basis is not appropriate and overriding factors apply, a discounted cash flow, net asset valuation, realisation proceeds basis or a weighted combination of any of the above 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 the price of recent investment, 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. 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.
Accounting standards classify methods of fair value measurement as Levels 1, 2 and 3. This hierarchy is based upon the reliability of information used to determine the valuation. All of the unquoted investments are Level 3, i.e. fair value is measured using techniques using inputs that are not based on observable market data.
Movements in investments during the year are summarised as follows:
Unquoted
Unquoted preference Unquoted
equity shares shares Loan Stock Total
GBP GBP GBP GBP
Cost at 31 March 2019 13,750,498 22,095 14,941,143 28,713,736
Permanent impairment at 31 March
2019 (2,117,304) (739) (913,787) (3,031,830)
Unrealised gains at 31 March
2019 2,885,394 229,632 1,242,281 4,357,307
Valuation at 31 March 2019 14,518,588 250,988 15,269,637 30,039,213
Purchases at cost 5,191,745 - - 5,191,745
Sale proceeds (Notes a and b) (6,557,993) (231,945) (4,586,905) (11,376,843)
Net realised gains on investments
(Note a) 3,360,351 - 409,290 3,769,641
Net unrealised losses on investments
(Note c) (2,599,686) (14) (3,030,347) (5,630,047)
Valuation at 31 March 2020 13,913,005 19,029 8,061,675 21,993,709
Cost at 31 March 2020 15,983,143 21,710 10,898,798 26,903,651
Permanent impairment at 31 March
2020 (Note d) (1,546,240) - (156,982) (1,703,222)
Unrealised gains at 31 March
2020 (523,898) (2,681) (2,680,141) (3,206,720)
Valuation at 31 March 2020 13,913,005 19,029 8,061,675 21,993,709
Net realised gains on investments of GBP3,769,641 together with net unrealised losses on investments of GBP(5,630,047) equal net investment portfolio losses of GBP(1,860,406) shown on the Income Statement.
A breakdown of the increases and the decreases in unrealised valuations of the portfolio is shown in the Investment Portfolio Summary.
Major movements in investments
Note a) Disposals of investment portfolio companies during the year were:
Realised
Investment Disposal Opening gain/(loss)
Company Type Cost Proceeds Valuation in year
GBP GBP GBP GBP
Turner Topco Limited
(trading as Realisation 1,320,963 3,610,968 1,198,168 2,412,800
Auction Technology
Group)
Redline Worldwide Limited Realisation 682,222 926,803 341,107 585,696
ASL Technology Holdings
Limited Realisation 2,092,009 3,681,961 3,190,292 491,669
The Plastic Surgeon
Holdings Limited Realisation 39,444 1,177,723 875,502 302,221
Entanet Holdings Limited Contingent - 167,210 - 167,210
consideration
H Realisations (2018)
Limited (formerly Realisation 1,728 1,728 - 1,728
Hemmels Limited)
Master Removers Group
2019 Limited Partial realisation 117,862 278,969 278,292 677
Pattern Analytics Limited
(trading as Realisation 1,036,002 1,531,481 1,531,481 -
Biosite)
Super Carers Limited Permanent impairment 384,720 - 192,360 (192,360)
Backhouse Management
Limited Realisation 339,400 - - -
Barham Consulting Limited Realisation 339,400 - - -
Creasy Marketing Services
Limited Realisation 339,400 - - -
Hollydale Management
Limited Realisation 354,000 - - -
McGrigor Management
Limited Realisation 339,400 - - -
7,386,550 11,376,843 7,607,202 3,769,641
Note b) The sale proceeds shown above of GBP11,376,843 is GBP26,993 less than that shown on the Statement of Cash Flows due to additional proceeds received in respect of Redline. This amount is recognised as a creditor at 31 March 2020.
Note c) Within net unrealised losses of GBP5,630,047 for the year, the significant losses in value compared to last year were as follows: GBP854,587 in Manufacturing Services Investment Limited (trading as Wetsuit Outlet), GBP779,501 in CGI Creative Graphics International Limited, GBP726,297 in Media Business Insight Holdings Limited, GBP708,406 in Master Removers Group 2019 Limited, and GBP650,292 in Blaze Signs Holding Limited. These losses were partially offset by unrealised gains in valuation compared to last year, including: GBP288,844 in Proactive Group Holdings Inc, GBP273,972 in Tovey Management Limited (trading as Access IS), GBP267,232 in Data Discovery Solutions Limited (trading as Active Navigation), GBP195,455 in MPB Group Limited and GBP116,029 in Bleach London Holdings Limited.
The decrease in unrealised valuations of the loan stock investments above reflects 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 decreased from GBP3,031,830 to GBP1,703,222. The net decrease of GBP1,328,608 is due to the permanent impairment of one investee company and the removal of five investee companies which had been liquidated during the year and which had been permanently impaired previously.
(9) Current asset investments and Cash at bank
Cash equivalents, for the purposes of the Statement of Cash Flows, comprises 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 know amounts of cash at their carrying values at immediate of 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.
2020 2019
GBP GBP
OEIC Money market funds (Cash equivalents per
Statement of Cash Flows) 19,419,301 16,117,301
Current asset investments 19,419,301 16,117,301
Cash at bank 2,386,750 2,545,484
(10) Post balance sheet events
On 2 April 2020, a further 13,929,073 new Ordinary Shares were allotted under the Company's Offer for Subscription raising further net funds of GBP10.26 million. Following this allotment, the Offer for Subscription was closed. In total, net funds raised from the offer are GBP20.95 million.
On 5 May 2020, a further GBP0.37 million was invested into Rotageek and a further GBP0.53 million was invested on 26 May 2020 into MyTutor, both existing portfolio companies.
On 14 May 2020, the Board declared an interim dividend of 7.00 pence per share for the year ending 31 March 2021, paid to Shareholders on the register on 22 May 2020, on 19 June 2020.
On 19 May 2020, the Company received GBP0.05 million as a loan repayment from BookingTek Limited.
On 29 June 2020, GBP0.22 million was invested in a new portfolio company, Andersen EV, an electric vehicle (EV) charging product business.
(11) Statutory information
The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 31 March 2020 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.
(12) Annual Report
The Annual Report will be published on the Company's website at www.mig2vct.co.uk shortly and shareholders who have not requested a hard copy of the report 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@mobeus.co.uk.
(13) Annual General Meeting
The Company's next Annual General Meeting will be held at 11.00 am on Wednesday, 9 September 2020, at the office of the Investment Adviser, Mobeus Equity Partners LLP, 30 Haymarket, London, SW1Y 4EX. Shareholders should note that the impact of COVID-19 could mean that Government guidance prevents physical attendance at the AGM. If this is the case, the Company will make an RNS announcement advising of any changes, which will also be added to the Company's website: www.mig2vct.co.uk to which Shareholders should refer. A copy of the Notice of the meeting can be found within the Annual Report. A proxy form for the meeting is included with Shareholders' copies of this Annual Report or is available electronically at www.signalshares.com. Shareholders may send any questions on the resolutions proposed to the following email address: agm@mobeus.co.uk. A response will be provided prior to lodging your proxy vote.
Contact details for further enquiries:
Robert Brittain or Trish Standaloft of Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by email to info@mobeus.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, of 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
FR URAWRRWUNOAR
(END) Dow Jones Newswires
July 01, 2020 02:00 ET (06:00 GMT)
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