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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 | 59.00 | 59.00 | 59.00 | 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 May 2019 to May 2024
TIDMMIG
RNS Number : 7909C
Mobeus Income & Growth 2 VCT PLC
19 June 2019
MOBEUS INCOME & GROWTH 2 VCT PLC
Annual Results Announcement for the financial year ended 31 March 2019
Mobeus Income & Growth 2 VCT plc (the "Company") today announces its final results for the financial year ended 31 March 2019. These results were approved by the Board of Directors on 19 June 2019.
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
As at 31 March 2019:
Net assets: GBP48.73 million
Net asset value ("NAV") per share: 99.60 pence
Hot Features
Premium
-- Net asset value ("NAV") total return per share was 8.4%* and
share price total return per share was 4.6%* for the year.
-- Shareholders received an interim dividend of 5.00 pence per
share in respect of the year ended 31 March 2019, which was
paid on 22 March 2019.
-- The Company realised investments for a total of GBP2.88 million,
a gain of GBP0.60 million for the year.
-- The Company invested a total of GBP2.90 million into two new
growth capital and five follow-on investments during the year.
*Further details on these alternative performance measures ("APMs") are contained in the Strategic Report within the Annual Report.
Performance Summary
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 can be found in the Annual Report.
Cumulative total return per share
since launch(2)
---------------- ----------- -------------------------- ---------------------------------- ------------------------------------ ---------------------------------- --------------------------------------------------------
(NAV basis) (Share price basis)
Net asset value (NAV) per (p) (p)
Reporting date Net assets share Share price(1) (mid-market price) Cumulative dividends paid per share
as at (GBP m) (p) (p) (p) Dividends paid and proposed in respect of each year (p)
---------------- ----------- -------------------------- ---------------------------------- ------------------------------------ ------------ -------------------- --------------------------------------------------------
31 March 2019 48.73 99.60 85.50 83.00 182.60 168.50 5.00
31 March 2018 47.60 96.54 86.50 78.00 174.54 164.50 16.00
31 March 2017 38.06 106.70 94.50 62.00 168.70 156.50 15.00
31 March 2016 43.14 119.61 105.25 47.00 166.61 152.25 5.00
31 March 2015 42.10 115.45 104.50 42.00 157.45 146.50 19.00
(1) Source: Panmure Gordon & Co (mid-market price).
(2) Cumulative total return per share comprises the NAV per share (NAV basis) or the mid-market price per share (share price basis) plus cumulative dividends paid 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 2019.
Overview
This has been a year of good performance by the Company. Returns to shareholders have been positive, principally due to a rise in the value of the unrealised portfolio and an increase in income. During the year, the Company made investments into two new companies, provided follow-on funding to five existing portfolio companies and realised its investment in three portfolio companies. Further details of this investment activity can be found under the 'Investment portfolio' section of my Statement below and in the Investment Review in the Annual Report.
The Company and the Investment Adviser have responded well to the significant changes in the VCT Rules introduced by the Finance (No 2) Act 2015. At the year end, the investment portfolio was divided almost equally between more mature, MBO type investments, and younger growth capital investments. Within this, 14 growth capital investments valued at GBP10.37 million have been completed since the 2015 VCT rule changes.
The Investment Adviser continues to report an interesting pipeline of further growth capital opportunities and a further two new investments have been completed since the year end. Meanwhile, the more mature portfolio constructed under the previous rules continues to provide a healthy income yield.
Performance
The NAV total return per share for the year was 8.4% (2018: 5.5%) (closing NAV per share plus dividends paid per share in the year less the opening NAV per share, as a percentage of the opening NAV per share). These returns, expressed on a pence per share basis, were derived as follows:
Year ended 31 March 2019 2018
(pence (pence
per per
share) share)
Net realised and unrealised gains on
the investment portfolio 6.41 4.08
Income from the investment portfolio
and on liquid assets 4.48 3.48
Share buybacks and adjustments 0.07 1.09
Gross return 10.96 8.65
Less: Investment Adviser's fees and
other expenses (2.90) (2.81)
-------------------------------------- -------- ---------
Net return 8.06 5.84
NAV total return per share 8.4% 5.5%
After accounting for interim dividends of 5.00 pence per share paid during the year and a net return of 8.06 pence, the NAV per share at the year end was 99.60 pence, compared to 96.54 pence at the start of the financial year.
The share price total return for the year, also after accounting for the dividends paid, was 4.6% (compared with 8.5% for the previous year).
Your Board regards these returns as very encouraging in the context of the significant changes in the VCT rules. Most of the positive returns were derived from the more mature investments within the portfolio, whereas the growth portfolio investments will take time to achieve scale and improve profitability.
At the year end, your Company was ranked 15(th) out of 39 Generalist VCTs, over the last five years, in the Association of Investment Companies' analysis of NAV cumulative total return.
For further details on the performance of the Company, please refer to the Performance section of the Strategic Report and the Performance Data in the Annual Report.
Target Return
Since the start of the financial year ended 31 March 2018, the Board has reintroduced its target of achieving an average NAV total return of 8.0% per annum, following a year in which the target was suspended after the introduction of the new VCT rules. For the year under review this was 8.4% (2018: 5.5%), while the average over two years is 6.9% per annum.
Dividends
The Board declared an interim dividend of 5.00 pence per share (2018: 16.00 pence) in respect of the year ended 31 March 2019, which was paid to shareholders on 22 March 2019. This dividend brought cumulative dividends paid since inception to 83.00 pence (2018: 78.00 pence) per share.
The Board's policy of paying a regular dividend, at a level of not less than its target (currently 5.00 pence per share) in respect of each financial year, has been exceeded in each of the last nine years.
While the Board still believes in the attainment of the dividend target, the increasing proportion of the portfolio comprised of growth capital investments is likely to result, at least in the short to medium-term, in lower income returns and potentially lower dividend payments than have been paid in the recent past.
However, shareholders should also note that there may 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 will increase to 80% on 1 April 2020. Shareholders should note that, to the extent this is necessary, it will correspondingly reduce the Company's NAV per share.
A chart showing the annual and cumulative dividends paid in respect of each of the last five years is included in the Performance section of the Strategic Report within the Annual Report.
Investment Portfolio
For the year under review, the value of the investment portfolio increased by GBP3.13 million, due to an increase of GBP0.60 million from investments realised and an increase of GBP2.53 million on investments still held.
The portfolio valuation movements for the year were as follows:
GBPm
---------------------------------- -------
Portfolio value at 31 March 2018 26.89
Valuation movements 2.53
New and follow-on investments 2.90
Disposal proceeds (2.88)
Realised gains 0.61
Portfolio value at 31 March 2019 30.04
---------------------------------- -------
The portfolio achieved a net increase of GBP2.53 million on unrealised investments still held in the portfolio during the year, with positive increases from ASL, EOTH (Rab and Lowe Alpine) and Auction Technology Group, partially offset by valuation decreases at BookingTek, Wetsuit Outlet and Redline.
During the year, GBP2.90 million was invested into two new growth capital investments and five existing portfolio companies (analysed in the Investment Adviser's Review and explained within Note 8 to the Financial Statements in the Annual Report) as follows:
New - (GBP0.65 million):
-- Rotageek, a provider of workforce management software; and -- Grow Kudos, a digital platform for dissemination of research.
Follow on - (GBP2.25 million):
-- MyTutor, a digital marketplace connecting people seeking online tutoring; -- Preservica, a seller of proprietary digital archiving software;
-- Biosite, a provider of biometric access control and software-based workforce management solutions for the construction sector;
-- Proactive, a provider of investor media services; and -- MPB, an online marketplace for used camera and video equipment.
The new and follow-on investments may require further capital investments as they seek to achieve scale.
After the year end, further amounts totalling GBP1.46 million were invested into two new companies, comprising an investment of GBP0.91 million into Arkk Consulting, a regulatory and reporting requirement service and product provider, and an investment of GBP0.55 million into Parsley Box, a supplier of home delivered ambient ready meals for the elderly.
Cash proceeds totalling GBP2.88 million for the year were received from portfolio companies. Of this total, GBP1.32 million was received as cash proceeds from the sales of Fullfield (trading as Motorclean), Hemmels and Lightworks, with a further GBP1.56 million being received as loan and share capital repayments, and deferred consideration.
For the year under review, the portfolio generated a net gain of GBP0.60 million from the realisation of investments. The majority of this gain was from the sale of the Company's investments in Lightworks and Motorclean (which were realised at a profit over opening valuation of GBP0.48 million and GBP0.14 million respectively). The Company also gained GBP0.22 million from further receipts relating to companies realised in a prior year. The gains were partially offset by a loss incurred from the sale of Hemmels (GBP0.24 million). The loss on the sale of Hemmels is explained further in the Investment Adviser's Review. It serves to remind shareholders that investing in relatively early stage smaller companies (as required by the terms of the new VCT regulations) is inherently riskier than investing in more established companies with longer track records.
After the year end, the Company realised its investment in Plastic Surgeon realising proceeds of GBP1.18 million and generating a multiple on cost of 5.6x over the life of the investment.
For further information on all aspects of the investment portfolio above, please read the Investment Adviser's Review.
Liquidity
At 31 March 2019, the Company had net assets of GBP48.73 million (2018: GBP47.60 million), comprised of GBP30.04 million in investments (2018: GBP25.85 million) and liquid assets of GBP18.66 million (2018: GBP21.59 million). Liquid assets thus represented 38.3% (2018: 45.4%) of net assets at the year end.
Fundraising
From its ongoing assessment of the Company's future cash flows, the Board presently expects that it will be necessary to raise funds within the 2019/20 tax year. The Board will notify shareholders of any intention to launch an offer for subscription at the earliest opportunity.
Share buybacks
During the year under review, the Company bought back a total of 379,029 shares for cancellation. The buybacks represented 0.8% (2018: 1.9%) of the issued share capital of the Company at the beginning of the financial year. Further details of the Company's Share Buyback Policy are included in the Directors' Report in the Annual Report.
Shareholder Event
This year's annual shareholder event was held on 5 February 2019 at the Royal Institute of British Architects in central London. Separate day-time and evening sessions included presentations on the Mobeus advised VCTs' investment activity and performance. We have received positive feedback from those who attended the event, which numbered around 350, and were pleased to hear that they found the day informative and worthwhile. The next shareholder event will be held in the first quarter of 2020.
Annual General Meeting
The Annual General Meeting of the Company will be held at 11.00 am on Wednesday, 11 September 2019 at The Clubhouse, 8 St James's Square, London SW1Y 4JU. 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 and to ask questions of the Board and Investment Adviser. The Notice of the meeting is included in the Annual Report and an explanation of the resolutions to be proposed can be found in the Directors' Report in the Annual Report.
Outlook
Your Board considers that your Company is well positioned, with the portfolio equally divided between more mature investments providing attractive income returns, and younger growth capital companies seeking to achieve scale, and hence value.
The demand for growth capital investment is strong and the amount of capital available for investment in the sector is currently substantial, giving rise to increased competition and higher entry valuations for the most attractive investment opportunities.
While the new growth capital element of the portfolio is still young, both your Board and the Investment Adviser will seek to assess, balance and diversify the risks within the growing proportion of the overall portfolio that these investments will represent. Your Board cautions that investing in such earlier stage companies involves increased risk, as those that succeed often take longer to achieve scale, while those less successful may emerge first. Returns could therefore take longer to emerge and the performance of these businesses may be more volatile, but it is anticipated that these factors will be offset by longer-term gains.
The Board and Investment Adviser have carried out an analysis of the possible impact of Brexit on the investment portfolio. The portfolio as a whole is predominantly UK centric and the greatest risk from Brexit is from the boarder impact on the UK economy. Some value impact is possible over time, but Mobeus believes that the portfolio companies have appropriate plans in place and are as well prepared for Brexit as they can be at this point. The Board continues to monitor closely the impact of Brexit and the present political uncertainties upon the economic environment within which the Company operates.
Finally, I would like to take this opportunity to thank all shareholders for their continued support.
Ian Blackburn
Chairman
19 June 2019
INVESTMENT POLICY
The investment policy is designed to meet the Company's objective.
Investments
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 investment the Company makes, are determined in 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.
Liquidity
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.
Borrowing
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
Demand for growth capital investment remains strong and there is a significant pipeline of investment opportunities. It is expected that the current pace and quantum of new and follow-on investments will continue or increase in the short to medium-term.
Portfolio Review
The portfolio's activity in the year is summarised as follows:
2019 2018
GBPm GBPm
-------------------------------
Opening portfolio value 26.89 28.08
------- -------
New and follow-on investments 2.90 2.73
------- -------
Disposal proceeds (2.88) (5.94)
------- -------
Net realised gains 0.60 2.77
------- -------
Valuation movements 2.53 (0.75)
------- -------
Portfolio value at 31 March 30.04 26.89
------- -------
This has been a year of further solid progress building the growth capital portfolio with two investments into new growth businesses totalling GBP0.65 million and five existing growth portfolio companies receiving follow-on funding totalling GBP2.25 million. Net cash proceeds of GBP2.88 million were received, primarily from three realisations.
Further details are contained later in this Review.
Since the change in VCT rules in 2015, the Company has invested GBP10.37 million (by latest value) in younger growth capital investments, bringing the proportion of the portfolio held in growth capital investments since the rule change to 50% by value at the year end.
After the year end, the Company made two further investments totalling GBP1.46 million into Arkk Consulting and Parsley Box, further details of which are given later in this Review.
Details of the valuation movements for each investee company are provided at the end of this Investment Review.
The portfolio's contribution to the overall results of the VCT is as follows:
Investment Portfolio Capital Movement 2019 2018
GBPm GBPm
Increase in the value of unrealised
investments 4.74 3.14
------- -------
Decrease in the value of unrealised
investments (2.21) (3.89)
------- -------
Net increase/(decrease) in the
value of unrealised investments 2.53 (0.75)
------- -------
Realised gains 0.84 2.77
------- -------
Realised (losses) (0.24) -
------- -------
Net realised gains in the year 0.60 2.77
------- -------
Valuation changes of portfolio investments still held
The principal contributors to the valuation increases of GBP4.74 million were: ASL Technology GBP1,064k, EOTH (Rab and Lowe Alpine) GBP449k, and Turner Topco (trading as Auction Technology Group) GBP421k.
ASL's core business is trading well and, following two recent corporate acquisitions, is beginning to benefit from associated synergies. EOTH achieved a record period of profitability, underpinned by continued growth in its Rab brand. Auction Technology Group, which the VCT part realised in 2014, is trading well ahead of budget with growth showing in all areas of its business.
The main reductions within total valuation decreases of (GBP2.21) million were: BookingTek (GBP588k), Wetsuit Outlet (GBP519k) and Redline (GBP348k). BookingTek has experienced delays to the roll out of its software which has resulted in turnover being lower than budget. Wetsuit Outlet has had a disappointing year post investment, with growth in profitability not being achieved as envisaged. Management has since implemented several measures to restore margins. Finally, Redline's revenues have been unpredictable and sales in recent months have been lower than planned which has impacted valuation.
A small number of new growth investments have shown initial uplifts from cost, due in large part to the structure of the Company's investment, but, in some cases, also due to the underlying investee company performance.
Realised gains and losses from sales of investments
During the financial year, the Company achieved a net realised gain on the sale of investments of GBP0.60 million. The largest gain was GBP0.48 million from the sale of Lightworks to Siemens PLM Software. The gain from the sale of Motorclean back to its management was GBP0.14 million, whereas a loss of (GBP0.24) million was incurred from the sale of Hemmels to its largest customer. Although the Hemmels loss was modest, arising shortly after the initial investment, it was unexpected and illustrates the inherent higher risk of investing in early stage growth companies.
The Company also realised a gain in the year from deferred consideration of GBP0.22 million from past realisations.
In addition to deferred consideration receipts of GBP0.22 million and sales proceeds from disposals of investments of GBP1.32 million referred to above, the Company also received loan stock repayments of GBP1.20 million and preference share repurchases of GBP0.14 million, both at cost.
After the year end, the Company realised its investment in Plastic Surgeon realising proceeds of GBP1.18 million and generating a multiple on cost of 5.6x over the life of the investment. These proceeds exceed the valuation of Plastic Surgeon at the year end by GBP0.30 million.
Investment portfolio yield and capital repayments
During the year under review, the Company received the following amounts in interest and dividend income:
Investment Portfolio Yield 2019 2018
GBPm GBPm
Interest received in the
year 1.55 1.55
------ ------
Dividends received in the
year 0.51 0.11
------ ------
Total portfolio income
in the year(1) 2.06 1.66
------ ------
Portfolio Value at 31 March 30.04 26.89
------ ------
Portfolio Income Yield
(income as a % of Portfolio
value at 31 March) 6.9% 6.2%
------ ------
(1) Total portfolio income in the year is generated solely from investee companies within. See the Financial Statements for all income receivable by the Company.
New investments in the year
GBP0.65 million was invested into two new investments during the year as detailed below:
Company Business Date of Investment Amount of
new investment
(GBPm)
Rotageek Workforce management software August 2018 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 will be used for
further technology development and to grow sales from enterprise
clients. The company's unaudited accounts for the year ended 31
December 2017 show revenues of GBP0.90 million and a loss before
interest, tax and amortisation of goodwill of GBP(1.57) million.
Platform for the dissemination November
Grow Kudos of research 2018 0.28
-------------------------------- -------------------- ----------------
Grow Kudos is an online platform which provides and promotes research
dissemination. The Kudos product was developed to allow researchers
to increase the impact and readership of their work and to track
and analyse distribution both within academia and across broader
audiences. The investment will be used principally to increase its
head count to support sales growth. The company's unaudited accounts
for the year ended 31 December 2017 show revenues of GBP0.53 million
and a loss before interest, tax and amortisation of goodwill of
GBP(0.59) million.
Further investments in existing portfolio companies in the year
GBP2.25 million was invested into five existing portfolio companies during the year as detailed below:
Company Business Date of investment Amount of
new investment
(GBPm)
MyTutor Online tutoring May 2018 0.63
----------------------------- -------------------- ----------------
My Tutor is a digital marketplace that connects school pupils who
are seeking private one-to-one tutoring with university students.
The business is satisfying a growing demand from both schools and
parents to improve pupils' exam results to enhance their academic
and career prospects. This investment supports an opportunity to
consolidate the sizeable GBP2bn UK tutoring market, grow My Tutor's
market presence and drive technological development within the company.
The company's unaudited accounts for the year ended 31 December
2017 show turnover of GBP0.56 million and a loss before interest,
tax and amortisation of goodwill of GBP(1.40) million.
Seller of proprietary September
Preservica digital archiving software 2018 0.65
----------------------------- -------------------- ----------------
Preservica has developed market leading software for the long-term
preservation of digital records ensuring that digital content can
remain accessible, irrespective of future changes in technology.
Previously a division of the Company's former portfolio company
Tessella, Preservica was demerged prior to the sale of Tessella
in December 2015. The investment provides additional growth capital
to finance the development of the business. The company's audited
accounts for the year ended 31 March 2018 show turnover of GBP2.85
million and a loss before interest, tax and amortisation of goodwill
of GBP(1.93) million.
Workforce management
Biosite and security services October 2018 0.54
----------------------------- -------------------- ----------------
Based in the Midlands, Biosite is a provider of biometric access
control and software-based workforce management solutions for the
construction sector. The business is growing significantly and this
investment will support the further development of software and
hardware products. The company's audited accounts for the year ended
31 July 2018 show turnover of GBP9.76 million and a loss before
interest, tax and amortisation of goodwill of GBP(0.64) million.
Proactive Investors Investor media services October 2018 0.34
----------------------------- -------------------- ----------------
Proactive Investors specialises in timely multi-media news provision,
events organisation, digital services and investor research. Proactive
provides breaking news, commentary and analysis on hundreds of small-cap
listed companies and pre-IPO businesses across the globe. This planned
follow-on investment will enable Proactive to continue to expand
its services into the US market, which is the largest global market
for investor media services. The company's unaudited accounts for
the year ended 30 June 2018 show turnover of GBP4.75 million and
a loss before interest, tax and amortisation of goodwill of GBP(0.31)
million.
Online marketplace for October and
used camera and video December
MPB Group equipment 2018 0.09
----------------------------- -------------------- ----------------
MPB is Europe's leading online marketplace for used camera and video
equipment. Based in Brighton, its custom-designed pricing technology
enables MPB to offer both buy and sell services through the same
platform and offers a one-stop shop for all its customers. Having
expanded into the US (opening a New York office) and German markets
as part of the initial VCT investment round, this follow-on investment,
alongside funds provided by the Proven VCTs, is to support its continued
growth plan. Having doubled its sales over the last year, this investment
will give the company sufficient capital to achieve its next phase
of expansion. The company's audited accounts for the year ended
31 March 2018 show turnover of GBP21.71 million and a loss before
interest, tax and amortisation of goodwill of GBP(2.00) million.
Realisations during the year
The Company realised its investments in Fullfield (trading as Motorclean), Hemmels and Lightworks during the year, generating an aggregate net realised gain of GBP0.38 million. Net cash proceeds received from the sale of these investments totalled GBP1.32 million, as detailed below.
Company Business Period of Total cash
investment proceeds over
the life of
the investment
/ Multiple
over cost
Fullfield (Motorclean) Vehicle cleaning and July 2011 GBP2.13 million
valet services to August 1.2 times cost
2018
------------------------- ---------------- -------------------
The Company sold its investment in Fullfield (trading as Motorclean)
back to management in August 2018, receiving cash proceeds of GBP0.58
million (realised gain in the year: GBP0.14 million). This realisation
contributed to a return of 1.2 times the original investment cost
and an IRR of 5.0% in the seven years that this investment was held.
Hemmels Classic car restorer March 2018 GBP0.21 million
to September 0.5 times cost
2018
------------------------- ---------------- -------------------
The Company sold its investment in Hemmels to the business's largest
customer for GBP0.20 million in September 2018, resulting in a realised
loss of GBP(0.24) million on the original investment cost over the
six months the investment was held. The investment was realised
six months after the original investment after it became clear that
the company's financial situation and prospects were significantly
at variance to expectations.
Lightworks Provider of software March 2011 GBP0.56 million
for CAD and CAM vendors to September 21.7 times
2018 cost
--------------------------- ---------------- -----------------
The Company sold its investment in Lightworks to Siemens PLM Software
for GBP0.54 million (realised gain in the year: GBP0.48 million)
in September 2018, generating a realised a gain over the life of
the investment of GBP0.53 million. This equates to a multiple of
21.7 times the investment cost of GBP0.03 million and an IRR of
55.9%.
The Company also received loan repayments totalling GBP1.20 million (notably Hollydale Management: GBP0.35 million), deferred consideration from investments realised in a previous year of GBP0.22 million and preference share repurchases of GBP0.14 million.
Net realised gains on the three disposals above of GBP0.38 million, increased by deferred consideration gains of GBP0.22 million, equal the total realised gain for the year of GBP0.60 million, as shown in both tables at the start of this Review.
New investments made after the year end
The Company made two new investments totalling GBP1.46 million after the year end, as detailed below:
Company Business Date of Investment Amount of new
investment (GBPm)
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's unaudited accounts for
the year ended 31 December 2017 show turnover of GBP3.18
million and a profit before interest, tax and amortisation
of goodwill of GBP0.52 million.
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. The company's unaudited
accounts for the period ended 31 March 2018 show revenues
of GBP0.25 million and a loss before interest, tax and amortisation
of goodwill of GBP(0.21) million.
Realisation after the year end
The Company realised its investment in Plastic Surgeon after the year end, 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 May 2019 5.6 times cost
services to the
property sector
--------------------- --------------------- --------------------
The Company sold its remaining investment in Plastic Surgeon
to Polygon Group for GBP1.18 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%.
Mobeus Equity Partners LLP
Investment Adviser
19 June 2019
Investment Portfolio Summary
at 31 March 2019
Qualifying investments Total Book Valuation Valuation % of
Cost at at 31 March at 31 March Net assets
31 March 2018 2019 by value
2019 GBP GBP
GBP
Unquoted investments
----------- ------------- ------------- ------------
ASL Technology Holdings
Limited
Printer and photocopier
services 2,092,009 2,126,379 3,190,292 6.5
----------- ------------- ------------- ------------
Tovey Management Limited
(trading as Access IS)
Provider of data capture
and scanning hardware 1,733,500 2,027,582 2,314,753 4.8
----------- ------------- ------------- ------------
EOTH Limited (trading as
Rab and Lowe Alpine)
Branded outdoor equipment
and clothing 817,185 1,521,873 1,970,986 4.0
----------- ------------- ------------- ------------
Preservica Limited
Seller of proprietary digital
archiving software 1,133,464 865,666 1,620,741 3.3
----------- ------------- ------------- ------------
Virgin Wines Holding Company
Limited
Online wine retailer 1,284,333 1,371,490 1,556,726 3.2
----------- ------------- ------------- ------------
Pattern Analytics Limited
(trading as Biosite)
Workforce management and
security services for the
construction industry 1,036,002 743,219 1,531,481 3.1
----------- ------------- ------------- ------------
Turner Topco Limited (trading
as Auction Technology Group)
SaaS based online auction
market place platform 1,317,100 77,645 1,198,168 2.5
----------- ------------- ------------- ------------
MPB Group Limited
Online marketplace for
used photographic and video
equipment 819,773 1,254,114 1,180,748 2.4
----------- ------------- ------------- ------------
Vian Marketing Limited
(trading as Red Paddle
Co)
Design, manufacture and
sale of stand-up paddleboards
and windsurfing sails 717,038 987,179 1,180,612 2.4
----------- ------------- ------------- ------------
Master Removers Group Limited
(trading as Anthony Ward
Thomas, Bishopsgate and
Aussie Man & Van)
A specialist logistics,
storage and removals business 369,625 874,317 1,113,167 2.3
----------- ------------- ------------- ------------
My Tutorweb Limited
Digital marketplace connecting
school pupils seeking one-to-one
online tutoring 979,834 349,661 979,834 2.0
----------- ------------- ------------- ------------
Vectair Holdings Limited
Designer and distributor
of washroom products 60,293 740,670 972,093 2.0
----------- ------------- ------------- ------------
CGI Creative Graphics International
Limited
Vinyl graphics to global
automotive, recreation
vehicle and aerospace markets 999,568 1,030,727 964,132 2.0
----------- ------------- ------------- ------------
Manufacturing Services
Investment Limited (trading
as Wetsuit Outlet)
Online retailer in the
water sports market 1,412,992 1,412,992 893,985 1.8
----------- ------------- ------------- ------------
Proactive Group Holdings
Inc
Provider of media services
and investor conferences
for companies primarily
listed on secondary public
markets 635,346 288,952 883,102 1.8
----------- ------------- ------------- ------------
The Plastic Surgeon Holdings
Limited (formerly TPSFF
Holdings Limited)
Snagging and finishing
of domestic and commercial
properties 39,444 731,523 875,502 1.8
----------- ------------- ------------- ------------
Tharstern Group Limited
Software based management
information systems to
the print sector 789,815 887,870 842,506 1.7
----------- ------------- ------------- ------------
Ibericos Etc. Limited (trading
as Tapas Revolution)
Spanish restaurant chain 812,248 854,224 811,028 1.7
----------- ------------- ------------- ------------
Blaze Signs Holdings Limited
Manufacturer and installation
of signs 437,030 639,342 807,949 1.7
----------- ------------- ------------- ------------
Media Business Insight
Holdings Limited
A publishing and events
business focused on the
creative production industries 1,447,188 651,225 770,532 1.6
----------- ------------- ------------- ------------
Rota Geek Limited
Workforce management software 366,600 - 619,101 1.3
----------- ------------- ------------- ------------
Buster and Punch Holdings
Limited
Industrial inspired lighting
and interiors retailer 436,391 553,896 608,509 1.2
----------- ------------- ------------- ------------
RDL Corporation Limited
Recruitment consultants
for the pharmaceutical,
business intelligence and
IT industries 1,000,000 515,476 494,929 1.0
----------- ------------- ------------- ------------
Bourn Bioscience Limited
Management of In-vitro
fertilisation clinics 757,101 558,620 383,189 0.8
----------- ------------- ------------- ------------
Redline Worldwide Limited
Provider of security services
to the aviation industry 682,222 689,047 341,107 0.7
----------- ------------- ------------- ------------
Kudos Innovations Limited
Online platform that provides
and promotes research dissemination 277,950 - 277,950 0.6
----------- ------------- ------------- ------------
Super Carers Limited
Online platform that connects
people seeking home care
from experienced independent
carers 384,720 384,720 192,360 0.4
----------- ------------- ------------- ------------
BookingTek Limited
Direct booking software
for hotel groups 504,336 714,211 126,084 0.3
----------- ------------- ------------- ------------
Jablite Holdings Limited
Manufacturer of expanded
polystyrene products 281,398 171,931 91,600 0.2
----------- ------------- ------------- ------------
Veritek Global Holdings
Limited
Maintenance of imaging
equipment 967,780 102,972 49,432 0.1
----------- ------------- ------------- ------------
Racoon International Group
Limited
Supplier of hair extensions,
hair care products and
training 906,935 - - 0.0
----------- ------------- ------------- ------------
Fullfield Limited (trading
as Motorclean)
Vehicle cleaning and valet
services - 433,939 - 0.0
----------- ------------- ------------- ------------
Lightworks Software Limited
Provider of software for
CAD and CAM vendors - 61,163 - 0.0
----------- ------------- ------------- ------------
Total qualifying investments 25,499,220 24,322,625 28,842,598 59.1
----------- ------------- ------------- ------------
Non-qualifying Investments
----------- ------------- ------------- ------------
Media Business Insight
Limited 561,884 568,576 672,742 1.4
----------- ------------- ------------- ------------
Manufacturing Services
Investment Limited (trading
as Wetsuit Outlet) 304,000 304,000 304,000 0.6
----------- ------------- ------------- ------------
Tovey Management Limited
(trading as Access IS) 219,873 219,873 219,873 0.5
----------- ------------- ------------- ------------
Hollydale Management Limited
Company seeking to carry
on a business in the food
sector 354,000 354,000 - 0.0
----------- ------------- ------------- ------------
Backhouse Management Limited
Company seeking to carry
on a business in the motor
sector 339,400 169,700 - 0.0
----------- ------------- ------------- ------------
Barham Consulting Limited
Company seeking to carry
on a business in the textile
sector 339,400 169,700 - 0.0
----------- ------------- ------------- ------------
McGrigor Management Limited
Company seeking to carry
on a business in the pharmaceutical
sector 339,400 169,700 - 0.0
----------- ------------- ------------- ------------
Creasy Marketing Services
Limited
Company seeking to carry
on a business in the textile
sector 339,400 169,700 - 0.0
----------- ------------- ------------- ------------
Hemmels Limited
Company specialising in
the sourcing, restoration,
selling and servicing of
high price, classic cars 19,660 437,238 - 0.0
----------- ------------- ------------- ------------
Racoon International Group
Limited 139,050 - - 0.0
----------- ------------- ------------- ------------
365 Agile Group plc (formerly
Iafyds plc)
Development of energy saving
devices for domestic use 254,586 - - 0.0
----------- ------------- ------------- ------------
Turner Topco Limited (trading
as Auction Technology Group) 3,863 - - 0.0
----------- ------------- ------------- ------------
Total non-qualifying investments 3,214,516 2,562,487 1,196,615 2.5
----------- ------------- ------------- ------------
Total investment portfolio 28,713,736 26,885,112 30,039,213 61.6
----------- ------------- ------------- ------------
Cash and current asset
investments - 20,559,774 18,662,785 38.3
----------- ------------- ------------- ------------
Total investments including
cash and current asset
investments 28,713,736 47,444,886 48,701,998 99.9
----------- ------------- ------------- ------------
Other current assets - 339,187 229,113 0.5
----------- ------------- ------------- ------------
Current liabilities (185,876) (201,154) (0.4)
----------- ------------- ------------- ------------
Totals 28,713,736 - - -
----------- ------------- ------------- ------------
Net assets at the year
end - 47,598,197 48,729,957 100.0
----------- ------------- ------------- ------------
Principal risks
The Directors acknowledge the Board's responsibilities for the Company's internal control systems and have instigated systems and procedures for identifying, evaluating and managing the 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 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 principal risks identified by the Board are set out below:
Risk Possible consequence How the Board manages risk
Political Events such as a protracted period
and Economic of political uncertainty, a change * The Board monitors (1) the portfolio as a whole to
of government policy and/or an ensure that the Company invests in a diversified
economic portfolio of companies and (2) developments in the
recession and movements in interest macro-economic environment such as changes caused by
rates could affect trading withdrawal from the EU and movements in interest
conditions rates.
for smaller companies and
consequently
the value of the Company's
qualifying
investments. The impact of the UK's
withdrawal from the EU upon the
UK economy is uncertain.
------------------------------------ -------------------------------------------------------------
Investment Investment in unquoted small
and strategic companies * The Board regularly reviews the Company's investment
can involve a higher degree of risk strategy.
than investment in larger, and/or
fully listed companies and will
likely have more variable returns. * Investee companies are carefully selected by the
Smaller companies often have Investment Adviser for recommendation to the Board.
limited The investment portfolio is reviewed by the Board on
product lines, markets or financial a regular basis.
resources and may be dependent for
their management on a smaller
number * The Investment Adviser generally appoints a director
of key individuals. to the board of each investee company.
------------------------------------ -------------------------------------------------------------
Loss of The Company must comply with
approval section * The Board receives regular reports from Philip Hare &
as a Venture 274 of the Income Tax Act 2007 Associates LLP ("PHA") who have been retained to
Capital ("ITA") undertake an independent VCT status monitoring role.
Trust and which allows it to be exempted from
VCT regulatory capital gains tax on investment
changes gains. Any breach of these rules * The Company's VCT qualifying status is reviewed by
may lead to the Company losing its PHA and the Investment Adviser on a regular basis.
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 become 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 Government.
Non-compliance
could result in a loss of VCT
status.
------------------------------------ -------------------------------------------------------------
Regulatory The Company is required to comply
with the Companies Act, the listing * Regulatory and legislative developments are kept
rules of the UK Listing Authority under review by the Company's solicitors and the
and United Kingdom Accounting Board.
Standards.
Changes to and breaches of any of
these might lead to suspension of
the Company's Stock Exchange
listing,
financial penalties or a qualified
audit report.
------------------------------------ -------------------------------------------------------------
Financial Failure of the systems at any of
and operating the third party service providers * The Board carries out an annual review of the
that the Company has contracted internal controls in place and reviews the risks
with could lead to inaccurate facing the Company at each quarterly Board meeting.
reporting
or monitoring. Inadequate controls
could lead to the misappropriation * The Board reviews the performance of the service
or insecurity of assets. providers annually.
------------------------------------ -------------------------------------------------------------
Market Movements in the valuations of the
VCT's investments will, inter alia, * The Board receives quarterly valuation reports from
be connected to movements in UK the Investment Adviser and remains focused on the
Stock Market indices. 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 liquidity The Company's investments may be
difficult to realise. * The Board receives reports from the Investment
Adviser and reviews the portfolio at each quarterly
Board meeting. It carefully monitors investments
where a particular risk has been identified.
------------------------------------ -------------------------------------------------------------
Market liquidity Shareholders may find it difficult
to sell their shares at a price * The Board regularly reviews its share buyback policy
which is close to the net asset which seeks to mitigate market liquidity risk.
value given the limited secondary
market in VCT shares.
------------------------------------ -------------------------------------------------------------
Cyber and The Company and its shareholders
Data Security may suffer losses in the event of * The Board monitors and seeks assurance from the VCT's
the IT systems at principal principal suppliers in respect of the systems and
suppliers processes they have adopted to counter these risks.
being compromised by cyber attack.
------------------------------------ -------------------------------------------------------------
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 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' Annual 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 that 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
19 June 2019
FINANCIAL STATEMENTS
Income Statement
for the year ended 31 March 2019
Year ended 31 March Year ended 31 March
2019 2018
Notes Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP
------------------------------- ----- --------- --------- ----------- --------- --------- ---------
Unrealised gains/(losses)
on investments 8 - 2,531,926 2,531,926 - (755,510) (755,510)
Realised gains on investments 8 - 605,074 605,074 - 2,766,722 2,766,722
Income 3 2,189,574 - 2,189,574 1,715,664 - 1,715,664
Investment Adviser's fees 4a (259,026) (777,077) (1,036,103) (247,177) (741,530) (988,707)
Other expenses 4c (320,722) - (320,722) (348,568) - (348,568)
------------------------------- ----- --------- --------- ----------- --------- --------- ---------
Profit on ordinary activities
before taxation 1,609,826 2,359,923 3,969,749 1,119,919 1,269,682 2,389,601
Taxation on profit on ordinary
activities 5 (208,983) 147,645 (61,338) (191,512) 140,891 (50,621)
------------------------------- ----- --------- --------- ----------- --------- --------- ---------
Profit for the year and
total comprehensive income 1,400,843 2,507,568 3,908,411 928,407 1,410,573 2,338,980
------------------------------- ----- --------- --------- ----------- --------- --------- ---------
Basic and diluted earnings
per ordinary share: 7 2.84p 5.09p 7.93p 2.25p 3.43p 5.68p
The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the unrealised gains/(losses) and realised gains on investments and the proportion of the Investment Adviser's fee and performance fee charged to capital.
The total column is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS"). In order to better reflect the activities of a VCT and in accordance with the 2014 Statement of Recommended Practice ("SORP") (updated in January 2017) by the Association of Investment Companies ("AIC"), supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of profit attributable to equity shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 Income Tax Act 2007.
All the items in the above statement derive from continuing operations of the Company. No operations were acquired or discontinued in the year.
Balance Sheet
As at 31 March 2019
31 March 31 March
2019 2018
Notes GBP GBP
Fixed assets
Investments at fair value 8 30,039,213 26,885,112
Current assets
Debtors and prepayments 229,113 339,187
Current asset investments 16,117,301 18,287,301
Cash at bank 2,545,484 2,272,473
-------------------------------------- ----- ---------- ----------
18,891,898 20,898,961
Creditors: amounts falling due within
one year (201,154) (185,876)
-------------------------------------- ----- ---------- ----------
Net current assets 18,690,744 20,713,085
-------------------------------------- ----- ---------- ----------
Net assets 48,729,957 47,598,197
-------------------------------------- ----- ---------- ----------
Capital and reserves
Called up share capital 489,251 493,042
Share premium reserve 30,498,349 30,498,349
Capital redemption reserve 98,089 94,298
Revaluation reserve 4,357,307 1,398,656
Special distributable reserve 4,391,645 6,052,525
Realised capital reserve 7,600,987 7,943,475
Revenue reserve 1,294,329 1,117,852
-------------------------------------- ----- ---------- ----------
Equity shareholders' funds 48,729,957 47,598,197
-------------------------------------- ----- ---------- ----------
Basic and diluted net asset value
per ordinary share 99.60p 96.54p
-------------------------------------- ----- ---------- ----------
Statement of Changes in Equity
for the year ended 31 March 2019
Non-distributable reserves Distributable reserves
Called
up Share Capital Special Realised
share premium redemption Revaluation distributable capital Revenue
capital reserve reserve reserve reserve reserve Reserve Total
(Note (Note
(Note a) b) b)
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
(note c) (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 (3,9791) - 3,791 - (327,702) (1,224,583) (1,224,366) (2,776,651)
--------------- -------- ---------- ----------- ----------- -------------- ----------- ----------- -----------
Other movements
Realised losses
transferred to
special
reserve
(note a) - - - - (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
a): The cancellation of the formerly named C Share Fund's share premium
reserve (as approved at the Extraordinary General meeting held on
10 September 2008 and by the order of the Court dated 28 October
2009), together with the previous cancellation of the share premium
reserve attributable to the former Ordinary Share Fund and C Shares,
has provided the Company with a special distributable reserve. The
purpose of this reserve is to fund market purchases of the Company's
own shares as and when it is considered by the Board to be in the
interests of the shareholders, to write-off existing and future losses
as the Company must take into account capital losses in determining
distributable reserves, to pay dividends and for any other corporate
purpose. The total transfer of GBP1,333,178 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. This represents reserves earned through income and capital
gains being in excess of costs that are thus available for distribution
as dividends. These reserves, plus the Company's special distributable
reserve, are available for distribution, the total balance of which
stands at GBP13,286,961 at the year end (2018: GBP15,113,852).
c): During the year, the Company purchased 379,029 of its own shares
at the prevailing market price for a total cost of GBP327,702, which
were subsequently cancelled.
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
The cost of share buybacks is charged to this reserve. In addition,
any realised losses on the sale (excluding transaction costs) of
an investment or if an investment has permanently fallen in value,
and 75% of the Investment Adviser's fee and 100% of any performance
fee expense, and the related tax effect, are transferred from the
realised capital reserve to this reserve. The cost of any IFA facilitation
fee payable as part of the Offer for Subscription is also charged
to this reserve. This does not include IFA trail commission which
is an expense that is accounted for in the Revenue reserve.
Realised capital reserve
The following are accounted for in this reserve:
* Gains and losses on realisation of investments;
* Permanent diminution in value of investments;
* Transaction costs incurred in the acquisition and
disposal of investments;
* 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 together with the related tax effect, as well as
income dividends paid that are classified as revenue in nature.
Statement of Changes in Equity
for the year ended 31 March 2018
Non-distributable reserves Distributable reserves
Called
up Share Capital Special Realised
share Premium redemption Revaluation distributable capital Revenue
capital reserve reserve reserve reserve reserve Reserve Total
GBP GBP GBP GBP GBP GBP GBP GBP
-------------- ------- ---------- ---------- ------------- --------------- ----------- ---------- -------------
At 1 April
2017 356,724 15,901,497 87,583 2,001,764 7,540,615 11,142,462 1,030,340 38,060,985
Comprehensive
income for the
year
(Loss)/profit
for the year - - - (755,510) - 2,166,083 928,407 2,338,980
-------------- ------- ---------- ---------- ------------- --------------- ----------- ---------- -------------
Total
comprehensive
income for
the
year - - - (755,510) - 2,166,083 928,407 2,338,980
-------------- ------- ---------- ---------- ------------- --------------- ----------- ---------- -------------
Contributions
by and
distributions
to owners
Shares issued
via Offer for
Subscription 143,033 14,596,852 - - (103,872) - - 14,636,013
Shares bought
back (6,715) - 6,715 - (616,121) - - (616,121)
Dividends paid - - - - - (5,980,765) (840,895) (6,821,660)
-------------- ------- ---------- ---------- ------------- --------------- ----------- ---------- -------------
Total
contributions
by and
distributions
to owners 136,318 14,596,852 6,715 - (719,993) (5,980,765) (840,895) 7,198,232
-------------- ------- ---------- ---------- ------------- --------------- ----------- ---------- -------------
Other
movements
Realised
losses
transferred
to special
reserve - - - - (768,097) 768,097 - -
Realisation
of previously
unrealised
losses - - - 152,402 - (152,402) - -
-------------- ------- ---------- ---------- ------------- --------------- ----------- ---------- -------------
Total other
movements - - - 152,402 (768,097) 615,695 - -
-------------- ------- ---------- ---------- ------------- --------------- ----------- ---------- -------------
At 31 March
2018 493,042 30,498,349 94,298 1,398,656 6,052,525 7,943,475 1,117,852 47,598,197
-------------- ------- ---------- ---------- ------------- --------------- ----------- ---------- -------------
Statement of Cash Flows
for the year ended 31 March 2019
Year ended Year ended
31 March 2019 31 March 2018
Notes GBP GBP
Cash flows from operating activities
Profit for the financial year 3,908,411 2,338,980
Adjustments for:
Net unrealised (gains)/losses on investments (2,531,926) 755,510
Net gains on realisations on investments (605,074) (2,766,722)
Tax charge for the current year 61,338 50,621
Decrease/(increase) in debtors 56,764 (100,281)
Increase in creditors and accruals 4,341 20,273
-------------------------------------------------------- ----------- --------------------- --------------------
Net cash inflow from operations 893,854 298,381
Corporation tax paid (50,401) (29,118)
-------------------------------------------------------- ----------- --------------------- --------------------
Net cash inflow from operating activities 843,453 269,263
Cash flows from investing activities
Purchase of investments 8 (2,898,440) (2,733,686)
Disposal of investments 8 2,934,649 5,890,052
-------------------------------------------------------- ----------- --------------------- --------------------
Net cash inflow from investing activities 36,209 3,156,366
Cash flows from financing activities
Shares issued as part of Offer for Subscription - 14,636,013
Dividends paid 6 (2,459,246) (6,821,660)
Dividends refunded 6 10,297 -
Purchase of own shares (327,702) (616,121)
-------------------------------------------------------- ----------- --------------------- --------------------
Net cash (outflow)/inflow from financing
activities (2,776,651) 7,198,232
Net (decrease)/increase in cash and cash
equivalents (1,896,989) 10,623,861
Cash and cash equivalents at start of
year 20,559,774 9,935,913
-------------------------------------------------------- ----------- --------------------- --------------------
Cash and cash equivalents at end of the
year 18,662,785 20,559,774
Cash and cash equivalents comprise:
Cash equivalents 16,117,301 18,287,301 Cash at bank and in hand 2,545,484 2,272,473
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2019
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 within an outlined box.
These Financial Statements have been prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 ("FRS102"), with the Companies Act 2006 and the 2014 Statement of Recommended practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('the SORP') (updated in January 2017) issued by the Association of Investment Companies. The Company has a number of financial instruments which are disclosed under FRS102 s11/12 as shown in Note 15 of the Annual Report.
3. Income
Dividends receivable on quoted equity shares are brought into
account on the ex-dividend date. Dividends receivable on unquoted
equity shares are brought into account when the Company's right
to receive payment is established and there is no reasonable
doubt that payment will be received.
Interest income on loan stock is accrued on a daily basis. Provision
is made against this income where recovery is doubtful or where
it will not be received in the foreseeable future. Where the
loan stocks only require interest or a redemption premium to
be paid on redemption, the interest and redemption premium is
recognised as income or capital as appropriate once redemption
is reasonably certain. When a redemption premium is designed
to protect the value of the instrument holder's investment rather
than reflect a commercial rate of revenue return, the redemption
premium is recognised as capital. The treatment of redemption
premiums is analysed to consider if they are revenue or capital
in nature on a company by company basis. Accordingly, the redemption
premium recognised in the year ended 31 March 2019 has been classified
as capital and has been included within gains on investments.
2019 2018
GBP GBP
Income from bank deposits 13,644 11,161
------------------------------- ---------- -----------------
Income from investments
- from equities 512,578 114,698
- from overseas based OEICs 74,234 21,687
- from UK based OEICs 34,525 11,450
- from loan stock 1,521,722 1,551,995
- from interest on preference
share dividend arrears 31,481 218
------------------------------- ---------- -----------------
2,174,540 1,700,048
Other income 1,390 4,455
Total income 2,189,574 1,715,664
------------------------------- ---------- -----------------
Total income comprises
Dividends 621,337 147,835
Interest 1,566,847 1,563,374
Other 1,390 4,455
------------------------------- ---------- -----------------
2,189,574 1,715,664
------------------------------- ---------- -----------------
Total loan stock interest due but not recognised in the year was GBP421,336 (2018: GBP243,675). The increase over the year is due to the additional provision of interest of two investee companies, partially offset by two investee companies resuming interest payments once again.
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.
2019 2018
Revenue Capital Total Revenue Capital Total
Mobeus Equity Partners LLP GBP GBP GBP GBP GBP GBP
Investment Adviser's fees 259,026 777,077 1,036,103 247,177 741,530 988,707
259,026 777,077 1,036,103 247,177 741,530 988,707
======== ======== ========== ======== ======== ========
Under the terms of a revised investment management agreement dated 10 September 2010, Mobeus Equity Partners LLP ("Mobeus") 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 by 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.
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 2019, the expense cap has not been breached (2018: GBPnil). For this year only, 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% to 1% per annum.
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 GBP74,339 (2018: GBP85,289) and GBP170,217 (2018: GBP164,993) respectively. The fees for supplying directors and/or monitoring services were from 33 (2018: 34) 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 into 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 2019
The cumulative dividend shortfall at 31 March 2019 is 3.10 p per share (GBP1,185,165 in aggregate being 78.1% of the total shortfall) at the year end, (where 78.1% is the proportion of the 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 6p annual dividend hurdle was 7.99p per share at the year end after adjustment for RPI. The Base NAV was 105.99p per share at the year end and an average of 106.12p for the year, compared to an average NAV for the year of 98.38p.
Therefore no incentive fee is payable for the year (2018: 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.
2019 2018
GBP GBP
---------------------------------------------------------------------------- -------- ------------
Directors' remuneration (including NIC of GBP5,380
(2018: GBP5,318) (Note a) 99,802 104,373
IFA trail commission 49,262 47,511
Broker's fees 12,000 12,000
Auditor's fees - Audit of Company (excluding
VAT) 23,575 22,807
- tax compliance services (Note b) (excluding
VAT) 1,922 1,503
- audit related assurance services (Note b)
(excluding VAT) 4,613 4,562
Registrar's fees 28,622 46,614
Printing 38,993 41,250
Legal & professional fees 9,836 8,129
VCT monitoring fees 8,400 8,400
Directors' insurance 7,428 8,094
Listing and regulatory fees 25,702 24,760
Sundry 10,567 18,565
---------------------------------------------------------------------------- -------- ------------
Other expenses 320,722 348,568
---------------------------------------------------------------------------- -------- ------------
a): See analysis in the Directors' emoluments table in the Annual Report, which excludes the NIC above. The key management personnel are the 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 certain agreed procedures in respect of 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, tax compliance services (excluding iXBRL services) are carried out by another firm, so are included within legal and professional fees.
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.
2019 2018
Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
a) Analysis of tax charge:
UK Corporation tax on
profits for the year 208,983 (147,645) 61,338 191,512 (140,891) 50,621
------------------------------- ---------- ---------- ------------ ---------- ---------- ------------
Total current tax charge 208,983 (147,645) 61,338 191,512 (140,891) 50,621
------------------------------- ---------- ---------- ------------ ---------- ---------- ------------
Corporation tax is based
on a rate of 19% (2018:
19%)
b) Profit on ordinary
activities before tax 1,609,826 2,359,923 3,969,749 1,119,919 1,269,682 2,389,601
Profit on ordinary activities
multiplied by small company
rate of corporation tax
in the UK of 19% (2018:
19%) 305,867 448,385 754,252 212,785 241,239 454,024
Effect of:
UK dividends (97,390) - (97,390) (21,792) - (21,792)
Unrealised (gains)/losses
not taxable/deductible - (481,066) (481,066) - 143,547 143,547
Realised gains not taxable - (114,964) (114,964) - (525,677) (525,677)
Unrelieved expenditure 518 - 518 310 - 310
(Over)/under provision
in prior year (12) - (12) 209 - 209
Actual tax charge 208,983 (147,645) 61,338 191,512 (140,891) 50,621
------------------------------- ---------- ---------- ---------- ---------- ------------
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 (2018: GBPnil). There is no unrecognised deferred tax asset in 2019 (2018: 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 from a VCT compliance perspective 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 31 Pence 2019 2018
Dividend Type March per share Date Paid GBP GBP
---------------- -------- ---------- ---------- ---------- --------- ---------
Interim Capital 2018 7.00p 27/07/2017 - 2,497,067
Second interim Income 2018 1.75p 22/01/2018 - 840,894
Second interim Capital 2018 7.25p 22/01/2018 - 3,483,699
Interim Income 2019 2.50p 22/03/2019 1,229,623 -
Interim Capital 2019 2.50p 22/03/2019 1,229,623
Dividends paid in previous years not claimed
within the statutory period (10,297) -
-------------------------------------------------------------- --------- ---------
2,448,949 6,821,660
------------------------------------ ---------- ---------- --------- ---------
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 31 Pence 2019 2018
Dividend Type March per share Date Paid GBP GBP
Revenue available for distribution by way of
dividends for the year 1,400,843 928,407
------------------------------------------------------------ --------- -------
Interim Income 2018 1.75p 22/01/2018 - 840,894
Interim Income 2019 2.50p 22/03/2019 1,229,623 -
------------ --------- ----------- ---------- ---------- --------- -------
Total income dividends for the year 1,229,623 840,894
------------------------------------------------ ---------- --------- -------
7. Basic and diluted earnings and return per share
2019 2018
GBP GBP
---------------------------------------------------- ---------- ----------
Total earnings after taxation: 3,908,411 2,338,980
Basic and diluted earnings per share (note
a) 7.93p 5.68p
---------------------------------------------------- ---------- ----------
Net revenue earnings from ordinary activities
after taxation 1,400,843 928,407
Basic and diluted revenue earnings per share
(note b) 2.84p 2.25p
---------------------------------------------------- ---------- ----------
Unrealised capital gains/(losses) 2,531,926 (755,510)
Realised capital gains 605,074 2,766,722
Capital Investment Adviser's fees (net of taxation) (629,432) (600,639)
Total capital earnings 2,507,568 1,410,573
Basic and diluted capital earnings per share
(note c) 5.09p 3.43p
---------------------------------------------------- ---------- ----------
Weighted average number of shares in issue
in the year 49,247,849 41,190,198
---------------------------------------------------- ---------- ----------
Notes:
a) Basic earnings per share is total earnings after taxation divided by the weighted average number of shares in issue.
b) Revenue earnings per share is the revenue return after taxation divided by the weighted average number of shares in issue.
c) Capital earnings per share is the total capital return after taxation divided by the weighted average number of shares in issue.
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 earnings.
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. 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 subsequent
measurement dates, are reconsidered for any 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 shares may be valued by
applying a suitable price-earnings ratio, revenue or
gross profit multiple to that company's historic,
current or forecast post-tax earnings before interest
and amortisation, 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, a lack
of marketability).
or:
* where a company's underperformance against plan
indicates a diminution in the value of the investment,
provision against the price of a new investment 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 or realisation proceeds basis 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.
The methods of fair value measurement are classified into hierarchy
based on the reliability of the information used to determine the
valuation.
* Level 1 - Fair value is measured based on quoted
process in an active market
* Level 2 - Fair value is measured based on directly
observable current market prices or indirectly being
derived from market prices
* Level 3 - Fair value is measured using valuation
techniques using inputs that are not based on
observable market data.
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 2018 12,398,820 22,159 15,664,527 28,085,506
Permanent impairment at 31 March
2018 (1,704,184) (739) (894,127) (2,599,050)
Unrealised gains at 31 March
2018 36,292 377,635 984,729 1,398,656
---------------------------------- -------------- ----------- ----------- ------------
Valuation at 31 March 2018 10,730,928 399,055 15,755,129 26,885,112
Purchases at cost 1,880,310 - 1,018,130 2,898,440
Sale proceeds (Note b) (760,279) (147,099) (1,973,961) (2,881,339)
Realised gains on investments
(Note a) 232,325 - 372,749 605,074
Unrealised gains/(losses) on
investments (Note c) 2,435,304 (968) 97,590 2,531,926
---------------------------------- -------------- ----------- ----------- ------------
Valuation at 31 March 2019 14,518,588 250,988 15,269,637 30,039,213
---------------------------------- -------------- ----------- ----------- ------------
Cost at 31 March 2019 13,750,498 22,095 14,941,143 28,713,736
Permanent impairments at 31 March
2019 (Note d) (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
---------------------------------- -------------- ----------- ----------- ------------
A breakdown of the increases and the decreases in unrealised valuations of the portfolio is shown in the Investment Portfolio Summary in the Annual Report.
Major movements in investments
Note a) Disposals of investment portfolio companies during the year were:
Type Investment Disposal Opening Realised
Cost Proceeds valuation gain/(loss)
in year
GBP GBP GBP GBP
-------------------------- ----------------- ----------- ---------- ----------- -------------
Fullfield Limited
(trading as Motorclean) Full exit 1,025,152 578,568 433,939 144,629
Lightworks Software
Limited Full exit 25,727 544,420 61,163 483,257
Partial exit
and permanent
Hemmels Limited impairment 417,578 198,567 417,578 (238,671)(1)
Loan repayments
and repurchase
The Plastic Surgeon of preference
Holdings Limited shares 62,498 222,019 222,019 -
MPB Group Limited Loan repayment 89,106 89,106 89,106 -
Backhouse Management
Limited Loan repayment 101,820 169,700 101,820 -(2)
Barham Consulting
Limited Loan repayment 101,820 169,700 101,820 -(2)
Creasy Marketing
Services Limited Loan repayment 101,820 169,700 101,820 -(2)
Hollydale Management
Limited Loan repayment 212,400 354,000 212,400 -(2)
McGrigor Management
Limited Loan repayment 101,820 169,700 101,820 -(2)
Others 30,469 215,859 - 215,859
--------------------------------------------- ----------- ---------- ----------- -------------
2,270,210 2,881,339 1,843,485 605,074
-------------------------------------------- ----------- ---------- ----------- -------------
(1) Includes permanent impairment of remaining investment cost of GBP19,660.
(2) The gain on the loan repayments above of GBP413,120 has been offset against an equivalent permanent impairment in the equity instrument of the investments in these companies (see note d). Thus no gain or loss resulted.
Note b) The cash flow from investment proceeds shown above of GBP2,881,339 differs from the sales proceeds shown in the Statement of Cash Flows of GBP2,934,649, by GBP53,310. This difference arises because of proceeds relating to the disposal of Gro Group Holdings Limited that were held in debtors at the start of the year.
Note c) Within net unrealised gains of GBP2,531,926 for the year, the significant gains in value compared to last year were as follows: GBP1,063,913 in ASL Technology Holdings Limited, GBP449,113 in EOTH Limited, GBP420,523 in Turner Topco Limited (trading as Auction Technology Group), GBP365,998 in The Plastic Surgeon Holdings Limited (formerly TPSFF Holdings Limited), and GBP287,171 in Tovey Management Limited (trading as Access IS). These gains were partially offset by unrealised losses in valuation compared to last year, including GBP588,127 in BookingTek Limited, GBP519,007 in Manufacturing Services Investment Limited (trading as Wetsuit Outlet), GBP347,940 in Redline Worldwide Limited, GBP192,360 in Super Carers Limited and GBP175,431 in Bourn Bioscience Limited. The increase 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 increase 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 risen from GBP2,599,050 to GBP3,031,830. The increase of GBP432,780 is due to the impairment of one investee company's remaining investment cost and the impairments of the equity of five investee companies of GBP413,120 referred to in Note a) above.
9 . Post balance sheet events
On 10 May 2019, the Company realised its investment in The Plastic Surgeon Holdings Limited for GBP1.18 million.
On 13 May 2019, the Company invested GBP0.91 million into Arkk Consulting Limited, a service and product provider that enables companies to remain compliant with regulatory reporting requirements.
On 22 May 2019, the Company invested GBP0.55 million into Parsley Box Limited, a supplier of home delivered ambient ready meals for the elderly.
On 6 June 2019, the Company realised part of its investment in Master Removers Group Limited (MRGL) generating proceeds receivable of GBP0.28 million, as part of a transaction which also increased the Company's equity interest in MRGL from 3.4% to 5.2%.
10 . Statutory information
The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 31 March 2019 in terms of section 434 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for the year ended 31 March 2019 will be delivered to Companies House following the Company's Annual General Meeting. The auditors have reported on those accounts: their report was unqualified and did not contain a statement under Section 498 of the Companies Act 2006.
11 . Annual Report
The Annual Report for the year ended 31 March 2019 will shortly be made available on the Company's website: www.mig2vct.co.uk. and shareholders will be notified of this by email or post or will be sent a hard copy in the post in accordance with their instructions. Copies will be available thereafter to members of the public from the Company's registered office.
12 . Annual General Meeting
The Annual General Meeting of the Company will be held at 11.00 am on Wednesday, 11 September 2019 at The Clubhouse, 8 St James's Square, London SW1Y 4JU.
Contact details for further enquiries:
Robert Brittain of Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by e-mail to vcts@mobeus.co.uk.
Mark Wignall or Clive Austin at Mobeus Equity Partners LLP (the Investment Adviser) on 020 7024 7600 or by e-mail 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, or forms part of, this announcement.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR LLFSFRIIALIA
(END) Dow Jones Newswires
June 19, 2019 08:49 ET (12:49 GMT)
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