Last checked at 
12 Dec 2017 12:41
The Income & Growth VCT plc
Annual Financial Results of the Company for the Year ended 30 September 2017
The Income & Growth VCT plc (the "Company") today announces the final results for the year ended 30 September 2017. These results were approved by the Board of Directors on 12 December 2017.
You may, in due course, view the Annual Report & Financial Statements, comprising the statutory accounts of the Company by visiting www.incomeandgrowthvct.co.uk.
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Financial Highlights
- | Net asset value total return per share was 4.8% for the year. |
- | Share price total return per share was 7.0% for the year. |
- | Dividends paid and proposed in respect of the year total 21.00 pence per share. The proposed final dividend of 3.00 pence per share, if approved, will bring cumulative dividends paid to shareholders in respect of the past five years to 71.00 pence per share. |
- | The Company realised investments totalling £14.73 million of cash proceeds and generated realised gains over original investment cost of £3.81 million. |
- | £8.07 million1 was invested into six new companies and two follow-on investments during the year. |
1 This figure includes £2.76 million previously held in companies preparing to trade. | |
PERFORMANCE SUMMARY
As at 30 September 2017 the Company had net assets of £64.35 million and the net asset value ("NAV") per share was 81.24 pence.
The table below shows the recent past performance of the Company's existing class of shares for each of the last five years. |
Reporting date
| Netassets
| NAVpershare
| Share price1
| Cumulative dividends paid pershare
| Cumulative total return per share to shareholders2 | Dividends paid and proposed per share in respect of each year
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As at 30 September | (NAVbasis) | (Shareprice basis) | |||||||
(£m) | (p) | (p) | (p) | (p) | (p) | (p) | |||
2017 | 64.35 | 81.24 | 73.00 | 102.50 | 183.74 | 175.50 | 21.00 | 4 | |
2016 | 70.84 | 98.51 | 88.80 | 80.50 | 179.01 | 169.30 | 10.00 |
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2015 | 75.20 | 106.38 | 93.50 | 68.50 | 174.88 | 162.00 | 12.00 |
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2014 | 69.31 | 114.60 | 103.503 | 50.50 | 165.10 | 154.00 | 18.00 | ||
2013 | 60.47 | 113.90 | 99.50 | 40.50 | 154.40 | 140.00 | 10.00 | ||
1 | Source: Panmure Gordon & Co. (mid-market price)
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2 | Cumulative total return per share comprises the NAV per share (NAV basis) or the mid-market price per share (share price basis) plus cumulative dividends paid since the launch of the current share class.
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3 | The share price at 30 September 2014 has been adjusted to add back the dividend of 8.00 pence per share paid on 30 October 2014, as the listed share price was quoted ex this dividend at the year-end.
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4 | Dividends paid and proposed per share in respect of 2017 include the final dividend of 3.00 pence referred to above, which is subject to shareholder approval at the Annual General Meeting ("AGM").
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Chairman's Statement
I am pleased to present to shareholders the Annual Report of the Company for the year ended 30 September 2017.
Overview This has been another year of solid performance by the Company. Returns to shareholders have again been positive, due to a profitable portfolio company exit as well as a good income return. Further comment can be found under the 'Performance' section of my Statement below and in the Investment's Adviser's Review.
The Company and the Investment Adviser have responded well to the VCT Rules introduced by the Finance (No 2) Act 2015, having completed nine growth capital investments since the change in the Company's investment policy in February 2016. The Investment Adviser has continued to recruit experienced growth capital investors into its team and a healthy pipeline of investment opportunities is being evaluated.
Most recently, additional changes to VCT legislation have been proposed in the Autumn Budget. Your Board's opinion of the likely impact of these changes can be found under the 'Industry and Regulatory Changes' section of my statement below.
Fundraising Shareholders should be aware that, on 6 September 2017, the Company launched an Offer for Subscription to raise up to £15 million, with an over-allotment facility to raise up to an additional £10 million. I am pleased to report that demand for the Offer has been strong from both new and existing shareholders. To accommodate investor demand, the Board took the decision to utilize its over-allotment facility on 23 October 2017. To date, applications amount to £16.3 million have been received. 19,072,153 shares have been allotted to date at offer prices ranging from 81.21 to 87.36 pence per share, dependent upon the prevailing net asset value at the date of each allotment and the method by which each investor subscribed for the Offer. The Offer will close when fully subscribed, or on 4 April 2018, whichever is the sooner.
Performance The Company's NAV total return per share was 4.8% for the year ended 30 September 2017 (2016: 3.9%), after taking into account the dividends paid during the year. This NAV return for the year was primarily attributable to the sale of the Company's investment in Entanet Holdings Limited and another year of good revenue returns, arising principally from income from loan stock investments.
As a result of this year's performance, the cumulative NAV total return per share (being the closing net asset value plus total dividends paid to date since launch) increased during the year by 2.6% (2016: 2.4%) from 179.01 pence to 183.74 pence.
Using the benchmark of NAV cumulative total return, it is pleasing to report strong relative performance over the long-term as well as in recent years, as compared with the Company's peers. The VCT was ranked in the second quartile over five years and in the top quartile over ten years amongst generalist (including planned exit) VCTs used by the Association of Investment Companies ('AIC') to measure performance at 31 October 2017. Further details are included in the Strategic Report contained in the Annual Report.
Final dividend Your Board is proposing a final dividend in respect of the year ending 30 September 2017 of 3.00 (2016: 4.00) pence per share. The dividend, comprising 2.50 pence from capital and 0.50 pence from income, will be proposed to shareholders at the Annual General Meeting of the Company to be held on 7 February 2018, to shareholders on the register on 12 January 2018, for payment on 15 February 2018. This final dividend is in addition to the special dividend of 15.00 pence paid on 31 August 2017 and the interim dividend of 3.00 pence paid on 20 June 2017.
If approved by shareholders, this forthcoming final dividend will bring dividends paid per share in respect of the year ended 30 September 2017 to 21.00 pence (2016: 10.00 pence) and the Company will have paid dividends totalling 71.00 pence per share in respect of the last five years.
Shareholders should note, however, as a result of the changes in the VCT Rules and the Company's Investment Policy, that the Company may find it a challenge to generate a similar level of dividends over the next five years. Your Board will continue to monitor whether the current annual dividend target of 6.00 pence per share remains sustainable in the current investment environment.
The Company's Dividend Investment Scheme ("the Scheme") will apply to this dividend and new elections under the Scheme should be received by the Scheme administrator, Link Asset Services, by no later than Wednesday, 31 January 2018. For further details of the Scheme, please see the Shareholder Information section of the Annual Report.
Investment portfolio For the year under review, the portfolio as a whole achieved a net increase of £3.88 million on investment realised, but a decrease of £0.79 million on investments still held. Investment realisations produced £3.81 million in capital gains in excess of original investment cost. The portfolio still under management was valued at £48.03 million (2016: £54.36 million) at the year-end, representing 94.8% of cost. This position is mainly due to a former Investment Adviser's investments which have been written down below cost. Despite the apparent fall in value, on a like for like basis (adding back realisations and excluding new investments) the portfolio produced a positive return of 5.7% over the year.
During the year £8.07 million (including £2.76 million previously held in companies preparing to trade) was invested in six new companies and two existing portfolio companies.
Six new growth capital investments totalling £6.98 million were made during the financial year. These investments were in: BookingTek, a provider of enterprise software to major hotel groups (plus a small follow on investment); Biosite, a biometric security access control developer; Tapas Revolution, a leading Spanish restaurant chain; Buster & Punch, a London based interiors retailer; MyTutorweb, an online tutoring business; and Wetsuit Outlet, a leading online retailer in the water sports market. In addition, two follow-on investments were made: £0.94 million into Preservica, a developer of digital archiving software; and £0.15 million into Mpb, an online marketplace for used camera and video equipment.
Cash proceeds totalling £14.73 million were received from 14 companies that were either sold or which repaid loans. Of this total, £7.17 million was received cash proceeds from the substantial disposal of Entanet Holdings Limited (realising a gain of 5.48 pence per share) with a further £6.73 million being received as loan repayments and finally, £0.83 million as other receipts.
Full details of the investment activity during the year and a summary of the performance highlights can be found in the Investment Adviser's Review in the Annual Report.
Industry and regulatory developments As mentioned in my overview, the UK Government has undertaken a Patient Capital Review to identify and tackle factors considered to be adversely affecting the supply of longer term capital to small and developing firms. The consultation period closed on 22 September 2017 and strong representations were made on behalf of the VCT industry by Mobeus as Investment Adviser, the Venture Capital Trust Association and the Association of Investment Companies.
The recent Chancellor's Autumn Budget Statement outlined the key findings from the review including a number of legislative changes to the VCT scheme, the earliest of which are due to come into effect from 6 April 2018. We understand that these changes are designed to exclude tax-motivated investments where capital is not at risk (that is, principally seeking to preserve investors' capital).
Your Board notes the initiatives behind these changes. While some of these changes place further restrictions on the way investments may be structured, the Board currently has no reason to believe they will materially affect the Company's existing strategic objectives.
A summary of the current VCT regulations and those proposed in the Autumn Budget is included in the Annual Report.
Shareholder Event The Investment Adviser holds an annual VCT event for shareholders in Central London. The event will include presentations on the Mobeus advised VCTs' investment activity and performance. We have been pleased to receive positive comments from those attending in previous years. The next event will again be held at the Royal Institute of British Architects in Central London on Tuesday, 30 January 2018. There will be day-time and separate evening sessions. Shareholders have already been sent an invitation to this event with further details. If you have not replied to the invitation, but would like to attend, please apply to Mobeus (vcts@mobeusequity.co.uk) by email to register. The Board looks forward to meeting all shareholders able to join them at the event.
Outlook Your Board remains of the opinion that your Company is well positioned to take advantage of the strong demand for growth capital investment, despite the uncertainties faced by the UK economy. The fundraising is currently anticipated to be fully subscribed and this will provide the Company with sufficient funds to continue the current investment rate in the medium term. Your Board will shortly be issuing further guidance (in a joint announcement with the boards of the other Mobeus-advised VCTs) on the impact of the Budget changes, in a supplementary prospectus to the Offer. This will be available on the Company's website and the National Storage Mechanism. Finally, I would like to take this opportunity once again to thank all shareholders for their continued support. Colin HookChairman |
INVESTMENT POLICY The Company's policy is to invest primarily in a diverse portfolio of UK unquoted companies. Investments are generally structured as part loan and part equity in order to receive regular income to generate capital gains upon sale and to reduce the risk of high exposure to equities. To further spread risk, investments are made in a number of businesses across different industry sectors. The Company's cash and liquid resources are held in a range of instruments which can be of varying maturities, subject to the overriding criterion that the risk of loss of capital be minimised. The Investment Policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HMRC. For further information, please see the Strategic Report section of the Annual Report. Investment ADVISER'S Review Portfolio Review This has been a year of continued progress within the portfolio with the addition of six new growth capital investments totalling £6.98 million, two existing investments receiving follow-on funding totalling £1.09 million, and one significant profitable disposal generating net cash proceeds of £7.17 million resulting in a 2.5 times multiple over cost over the three and a half year life of the investment. The past year's investment and divestment activity has increased the proportion of the portfolio at value comprised of growth capital investments to 21.8%, excluding companies preparing to trade. The Company has now invested £9.85 million in growth capital investments since the introduction of the VCT regulations in 2015.
The value of the existing portfolio decreased by £0.79 million during the year under review. This net fall in value is due to reductions in the valuations of Jablite, Veritek Global and Media Business Insight outweighing gains elsewhere in the portfolio, such as Gro-Group, Master Removers Group and Access IS. The majority of the investment portfolio companies are generating cash and trading well in uncertain economic circumstances.
Demand for growth capital investment remains strong and there is a large pipeline of investment opportunities. It is expected that the pace and quantum of new investment will continue over the coming months.
Patient Capital Review As the Chairman's Statement noted, the UK Government has conducted a review to identify and tackle factors considered to be adversely affecting the supply of longer term capital to small and developing firms. As anticipated, the Chancellor's recent Autumn Budget outlined the key findings from the review including a number of changes to the VCT scheme, the earliest of which are due to come into effect from 6 April 2018. Mobeus, as Investment Adviser, believe these changes should not overall affect the ability of the Company to continue to make successful growth capital investments. New investment in the year A total of £8.07 million was invested in new and existing investments during the year under review. New investments of £6.98 million were made into BookingTek, Biosite, Tapas Revolution, Buster & Punch, MyTutorweb and Wetsuit Outlet; all new growth capital investments. In addition, the Company made £1.09 million of follow-on investments into Preservica (originally arising from a spin out from a former portfolio company, Tessella) and Mpb to support further growth and development.
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Further details of these investments are set out below:
Company | Business | Date of investment | Amount of new investment (£m) |
BookingTek | A provider of direct-booking systems to major hotel groups | October 2016 / March 2017 | 0.78 |
London-based BookingTek provides software that enables hotels to reduce their reliance on third-party booking systems through an enterprise-grade, real-time booking platform for meeting rooms and restaurant reservations. BookingTek's existing clients include two of the world's top 10 hotel groups and the UK's largest hotel group. On 27 March, the VCT advanced a further £0.09 million as loan as envisaged in the original investment plan. The company's latest accounts for the year ended 31 July 2016 show turnover of £2.03 million and a loss before interest, tax and amortisation of goodwill of £0.29 million. | |||
Biosite | Workforce management | November 2016 | 0.86 |
Based in the Midlands, Biosite is a fast-growing provider of biometric access control and software-based workforce management solutions for the construction sector. The investment was to support the expansion of the Biosite team to facilitate the development of new site-management tools to enable managers to oversee all aspects of a construction project. The company's latest accounts for the year ended 31 July 2016 show turnover of £4.69 million and profit before interest, tax and amortisation of goodwill of £0.49 million. | |||
Tapas Revolution | Restaurant chain | January 2017 | 0.78 |
Based in London, Ibericos Etc. Limited (which trades as Tapas Revolution) is a leading Spanish restaurant chain in the casual dining sector, focussing on shopping centre sites with high footfall. Having opened its first restaurant in Shepherd's Bush Westfield, the business has since opened a further six restaurants. The investment provided growth capital to a high-calibre team with significant restaurant rollout experience which has spent the past five years building and refining its offer and is now well placed to capitalise on a strong pipeline of new sites. The company's latest accounts for the period ended 25 October 2016 show a turnover of £4.25 million and loss before interest, tax and amortisation of goodwill of £0.25 million. | |||
Buster + Punch | Retailer | March 2017 | 0.72 |
Buster and Punch Holdings Limited (formerly Chatfield Services Limited) is a London-based interiors brand founded in 2012 by architect and industrial designer Massimo Buster Minale. Buster + Punch (www.busterandpunch.com) started in a small garage in East London, where it built the "world's first designer LED light bulb" (the Buster Bulb) and made its name with its industrial inspired lighting. Its products are now sold in over 50 countries, both directly and to end-consumers, designers and architects, and through well-known retailers including John Lewis, Harvey Nichols and Harrods. The investment will support the business's international expansion plans and the broadening of its product range. The company's latest accounts for the year ended 31 March 2016 show turnover of £1.98 million and profit before interest, tax and amortisation of goodwill of £0.47 million. | |||
MyTutorweb | Online tutoring | May 2017 | 0.63 |
MyTutorweb is a digital marketplace that connects school pupils seeking private one-to-one tuition with university students. The business is satisfying growing demand from both students and parents to improve pupil's exam results and enhance their academic and career prospects. This investment supports and opportunity to consolidate the sizable £2 billion UK tutoring market, grow MyTutorweb's market presence and drive technological development within the company. The company's latest accounts for the year ended 31 December 2016 show turnover of £0.21 million and a loss before interest, tax and amortisation of goodwill of £0.79 million. | |||
Wetsuit Outlet | Retailer | July 2017 | 3.21* |
B2C Holdings Limited (trading as Wetsuit Outlet) has established itself as a leading online retailer in the water sports market, stocking an impressive brand portfolio including Musto, Billabong, Rip Curl, O'Neill, Red Paddle (an existing Mobeus investment) and Gul. The investment is to fund working capital and growth in existing activities and enter two new markets. Established in 2005, the company has developed into a successful and profitable business achieving turnover of £11.51 million and a profit before interest, tax and amortisation of goodwill of £1.77 million in the financial year ended 31 March 2017. * £2,708,100 previously held in Manufacturing Services Investment Limited, a company preparing to trade, was used for the investment in Wetsuit Outlet. This resulted in a net repayment to the Company of £668,400. A further £1,165,482 was also invested by the Company. | |||
Further investments in existing portfolio companies
The Company made further investments of £0.94 million into Preservica, a leading provider of digital preservation solutions, and £0.15 million into Mpb, a leading online marketplace for used camera and video equipment, during the year under review. |
Company | Business | Date of investment | Amount of new investment (£m) |
Preservica | Provider of digital preservation solutions | December 2016 | 0.94 |
Preservica is a leading provider of digital preservation solutions and its access software is used around the globe by leading businesses, archives, libraries, museums and government organisations to safeguard and share valuable digital content. The company's latest audited accounts for the year ended 31 March 2017 show turnover of £2.03 million and a loss before interest, tax and amortisation of goodwill of £1.16 million. | |||
MPB Group | Online Marketplace for used camera and video equipment | September 2017 | 0.15 |
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. The investment is to fund expansion of its platform globally, with launches into both the US and German markets. The company's latest audited accounts for the year ended 31 March 2016 show turnover of £8.37 million and a loss before interest, tax and amortisation of goodwill of £0.001 million. | |||
Realisations in the year
The Company realised one investment during the year under review for cash proceeds totalling £7.17 million. This was the very successful sale of the Company's investment in Entanet Holdings Limited, detailed below. |
Company | Business | Period of investment | Total cash proceeds over the life of the investment/Multiple over cost |
Entanet | Wholesale voice and data communications provider | February 2014 to August 2017 | £8.10 million 2.5 times cost |
The Company sold its investment in Entanet to AIM quoted CityFibre Infrastructure Holdings Limited for £7.17 million in August 2017. Deferred contingent consideration of up to £0.74 million is potentially payable over the next two years. Excluding this deferred consideration, the Company has so far realised a gain over the life of the investment of £4.93 million, a multiple of 2.5 times cost and has returned an IRR of 39% to date - an excellent outcome. | |||
Mobeus Equity Partners LLP
Investment Adviser
Investment Portfolio Summary | ||||||
for the year ended 30 September 2017 | ||||||
Total cost at | Total Valuation at | Additional investments | Total valuation at | % of equity Held | % of portfolio by value | |
30-Sep-17 | 30-Sep-16 | 30-Sep-17 | ||||
£ | £ | £ | £ | |||
Tovey Management Limited (trading as Access IS) | 3,313,932 | 3,532,917 | - | 3,880,197 | 13.1% | 8.1% |
Provider of data capture and scanning hardware
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Virgin Wines Holding Company Limited | 2,745,503 | 3,706,526 | - | 3,483,880 | 13.7% | 7.3% |
Online wine retailer
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Manufacturing Services Investment Limited (trading as Wetsuit Outlet) | 3,205,182 | 2,708,100 | 1,165,482 | 3,205,182 | 8.8% | 6.7% |
Online retailer in the water sports market
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ASL Technology Holdings Limited | 2,722,106 | 2,870,789 | - | 2,845,619 | 13.3% | 5.9% |
Printer and photocopier services
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I-Dox plc | 453,881 | 2,833,470 | - | 2,687,629 | 1.0% | 5.6% |
Developer and supplier of knowledge management products
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Gro-Group Holdings Limited | 2,398,928 | 1,651,824 | - | 2,606,640 | 16.3% | 5.4% |
Baby sleep products
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Media Business Insight Holdings Limited | 3,666,556 | 2,980,641 | - | 2,443,888 | 21.2% | 5.1% |
A publishing and events business focussed on the creative production industries
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Vian Marketing Limited (trading as Red Paddle Co) | 1,207,437 | 1,593,103 | - | 1,906,790 | 9.5% | 4.0% |
Design, manufacture and sale of stand-up paddleboards and windsurfing sails
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EOTH Limited (trading as Equip Outdoor Technologies) | 1,383,313 | 1,495,307 | - | 1,809,879 | 2.5% | 3.8% |
Distributor of branded outdoor equipment and clothing including the Rab and Lowe Alpine brands
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Tharstern Group Limited | 1,454,278 | 1,777,923 | - | 1,770,484 | 16.2% | 3.7% |
Software based management Information systems for the printing industry
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Veritek Global Holdings Limited | 2,289,859 | 2,297,607 | - | 1,752,129 | 14.6% | 3.6% |
Maintenance of imaging equipment
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Fullfield Limited (trading as Motorclean) | 1,517,734 | 2,020,433 | - | 1,606,346 | 13.2% | 3.3% |
Vehicle cleaning and valet services
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Master Removers Group Limited (formerly Leap New Co Limited (trading as Anthony Ward Thomas, Bishopsgate and Aussie Man & Van)) | 682,183 | 878,989 | - | 1,379,326 | 5.8% | 3.0% |
A specialist logistics, storage and removals business
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CGI Creative Graphics International Limited | 1,943,948 | 1,768,414 | - | 1,301,638 | 8.8% | 2.7% |
Vinyl graphics to global automotive, recreation vehicle and aerospace markets
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Turner Topco Limited (trading as ATG Media) | 1,529,075 | 1,114,321 | - | 1,209,162 | 3.7% | 2.5% |
Publisher and online auction platform operator
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Redline Worldwide Limited | 1,129,121 | 1,129,121 | - | 1,145,887 | 9.1% | 2.4% |
Provider of security services to the aviation industry and other sectors
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RDL Corporation Limited | 1,441,667 | 1,409,809 | - | 1,072,527 | 13.0% | 2.3% |
Recruitment consultants within the pharmaceutical, business intelligence and IT industries
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MPB Group Limited | 804,855 | 650,075 | 154,780 | 1,023,613 | 7.3% | 2.1% |
Online marketplace for used photographic equipment
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Preservica Limited | 935,000 | - | 935,000 | 935,000 | 6.3% | 1.9% |
Seller of proprietary digital archiving software
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Bourn Bioscience Limited | 1,610,379 | 1,206,547 | - | 925,420 | 10.9% | 1.9% |
Management of In-vitro fertilisation clinics
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Pattern Analytics Limited (trading as Biosite) | 857,014 | - | 857,014 | 857,014 | 6.4% | 1.8% |
Workforce management and security services for the construction industry
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BookingTek Limited | 779,095 | - | 779,095 | 779,095 | 4.6% | 1.6% |
Software for hotel groups
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Ibericos Etc. Limited (trading as Tapas Revolution) | 776,386 | - | 776,386 | 776,386 | 7.8% | 1.6% |
Spanish restaurant chain
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TPSFF Limited (formerly The Plastic Surgeon Holdings Limited) | 239,688 | 836,215 | - | 765,694 | 7.7% | 1.6% |
Supplier of snagging and finishing services to the property sector
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Buster and Punch Holdings Limited (formerly Chatfield Services Limited) | 725,226 | 1,504,000 | - | 725,226 | 6.2% | 1.5% |
Industrial inspired lighting and interiors retailer
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Aquasium Technology Limited | 166,667 | 681,377 | - | 706,592 | 16.7% | 1.5% |
Manufacturing and marketing of bespoke electron beam welding and vacuum furnace equipment
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My Tutorweb Limited | 636,477 | - | 636,477 | 636,477 | 6.2% | 1.3% |
Digital marketplace connecting school pupils seeking one-to-one online tutoring
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Hollydale Management Limited | 994,560 | 1,554,000 | - | 621,600 | 15.5% | 1.3% |
Company seeking to carry on a business in the food sector
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Vectair Holdings Limited | 53,400 | 302,340 | - | 601,006 | 4.6% | 1.3% |
Designer and distributor of washroom products
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Omega Diagnostics Group plc | 280,026 | 367,511 | - | 501,682 | 1.8% | 1.0% |
In-vitro diagnostics for food intolerance, autoimmune diseases and infectious diseases
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Blaze Signs Holdings Limited | 418,281 | 608,241 | - | 438,320 | 12.5% | 0.9% |
Manufacturer and installer of signs
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Jablite Holdings Limited | 498,790 | 1,271,052 | - | 304,755 | 12.1% | 0.6% |
Manufacturer of expanded polystyrene products
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Backhouse Management Limited | 782,080 | 1,504,000 | - | 300,800 | 15.0% | 0.6% |
Company seeking to carry on a business in the motor sector
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Barham Consulting Limited | 782,080 | 1,504,000 | - | 300,800 | 15.0% | 0.6% |
Company seeking to carry on a business in the catering sector
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Creasy Marketing Services Limited | 782,080 | 1,504,000 | - | 300,800 | 15.0% | 0.6% |
Company seeking to carry on a business in the textile sector
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McGrigor Management Limited | 782,080 | 1,504,000 | - | 300,800 | 15.0% | 0.6% |
Company seeking to carry on a business in the pharmaceutical sector
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LightWorks Software Limited | 20,471 | 61,212 | - | 87,596 | 9.2% | 0.2% |
Provider of software for CAD and CAM vendors
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BG Training Limited | 53,125 | 70,833 | - | 26,563 | 0.0% | 0.1% |
Technical training business
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Corero Network Security plc | 600,000 | 9,577 | - | 7,866 | 0.1% | 0.0% |
Provider of e-business technologies
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Racoon International Group Limited (formerly Racoon International Holdings) | 655,851 | 104,999 | - | - | 10.8% | 0.0% |
Supplier of hair extensions, hair care products and training
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Newquay Helicopters (2013) Limited (in liquidation) | 15,234 | - | - | - | 5.0% | 0.0% |
Helicopter service operator
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CB Imports Group Limited (trading as Country Baskets) | 175,000 | - | - | - | 5.8% | 0.0% |
Importer and distributor of artificial flowers, floral sundries and home decor products
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Oxonica Limited | 2,524,527 | - | - | - | 10.6% | 0.0% |
International nanomaterials group
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NexxtDrive Limited/Nexxt E-drive Limited | 487,014 | - | - | - | 3.9% | 0.0% |
Developer and exploiter of mechanical transmission technologies
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Biomer Technology Limited | 137,170 | - | - | - | 3.0% | 0.0% |
Developer of biomaterials for medical devices
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Watchgate Limited | 1,000 | - | - | - | 33.3% | 0.0% |
Holding company | ||||||
Disposed in year | ||||||
Entanet Holdings Limited | - | 3,351,685 | - | - | 0.0% | 0.0% |
Wholesale communications provider
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Focus Pharma Holdings Limited | - | - | - | - | 0.0% | 0.0% |
Licensor and distributor of generic pharmaceuticals
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MachineWorks Software Limited | - | - | - | - | 0.0% | 0.0% |
Provider of software for CAD and CAM vendors | ||||||
Total | 50,658,259 | 54,364,958 | 5,304,234 | 48,030,308 | 100.0% | |
For further information on the Investment Portfolio, please see the Annual Report and Financial Statements
PRINCIPAL RISKS The Directors acknowledge the Board's responsibilities for the Company's internal control systems and have instigated systems and procedures for identifying, evaluating and managing the principal risks faced by the Company. This includes a key risk management review which takes place at each quarterly Board meeting. The principal risks identified by the Board, a description of the possible consequences of each risk and how the Board manages each risk are set out below.
The risk profile of the Company changed as a consequence of the VCT regulations introduced in 2015. As the Company is required to focus its investment on growth capital investments in younger companies it is anticipated that investment returns will be more volatile and will have a higher risk profile. The Board remains confident that the Company and the Investment Adviser has adapted to these new requirements and put in place appropriate resource to identify and make suitable investments.
The Board regularly sets and reviews policies for financial risk management and full details of these can be found in Note 16 to the Financial Statements.
Statement of Directors' Responsibilities The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year and the Directors have elected to prepare the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these Financial Statements, the Directors are required to:
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:
Having taken advice from the Audit Committee, the Board considers the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
Neither the Company nor the Directors accept any liability to any person in relation to the Annual Report except to the extent that such liability could arise under English law.
For and on behalf of the Board
Colin Hook Chairman
|
FINANCIAL STATEMENTS
Income Statement | |||||||
for the year ended 30 September 2017 | Year ended 30 September 2017 | Year ended 30 September 2016 | |||||
Notes | Revenue | Capital | Total | Revenue | Capital | Total | |
£ | £ | £ | £ | £ | £ | ||
Net unrealised (losses)/gains on investments | 8 | - | (794,007) | (794,007) | - | 549,889 | 549,889 |
Net gains on realisation of investments | 8 | - | 3,883,829 | 3,883,829 | - | 2,506,146 | 2,506,146 |
Income | 3 | 3,266,634 | - | 3,266,634 | 3,201,629
| - | 3,201,629 |
Investment Adviser's fees | 4a | (394,012) | (1,182,037) | (1,576,049) | (419,260) | (1,257,781) | (1,677,041) |
Investment Advisers' performance fees | 4b | - | (571,879) | (571,879) | - | (1,140,221) | (1,140,221) |
Other expenses | (423,354)
| - | (423,354) | (392,228) | - | (392,228) | |
Profit on ordinary activities before taxation | 2,449,268 | 1,335,906 | 3,785,174 | 2,390,141 | 658,033 |
3,048,174 | |
Tax on profit on ordinary activities | 5 | (421,283) | 421,283 | - | (479,600) | 479,600
| - |
Profit for the year and total comprehensive income | 2,027,985 | 1,757,189 | 3,785,174 | 1,910,541 | 1,137,633 |
3,048,174 | |
Basic and diluted earnings per ordinary share: | 6 | 2.79p | 2.42p | 5.21p | 2.68p | 1.60p | 4.28p |
The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the unrealised (losses)/gains and realised gains on investments and the proportion of the Investment Adviser's 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 reflect better the activities of a VCT and in accordance with the 2014 Statement of Recommended Practice ("SORP") (updated in January 2017) by the Association of Investment Companies ("AIC"), supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of profit attributable to equity shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 Income Tax Act 2007.
|
All the items in the above statement derive from continuing operations of the Company. No operations were acquired or discontinued in the year. |
Balance sheet | ||||
as at 30 September 2017 | ||||
Notes | as at 30 September 2017 | as at 30 September 2016 | ||
£ | £ | |||
Fixed assets | ||||
Investments at fair value | 8 | 48,030,308 | 54,364,958 | |
Current assets | ||||
Debtors and prepayments | 3,372,032 | 304,935 | ||
Current asset investments | 9 | 12,412,671 | 15,338,067 | |
Cash at bank and in hand | 9 | 1,375,065 | 2,189,856 | |
17,159,768 | 17,832,858 | |||
Creditors: amounts falling due within one year | (841,325) | (1,357,178) | ||
Net current assets | 16,318,443 | 16,475,680 | ||
Net assets | 64,348,751 | 70,840,638 | ||
Capital and reserves | ||||
Called up share capital | 10 | 792,047 | 719,140 | |
Capital redemption reserve | 14,014 | 11,985 | ||
Share premium reserve | 24,099,311 | 18,308,887 | ||
Revaluation reserve | 4,020,689 | 4,744,396 | ||
Special reserve | 23,215,643 | 24,980,045 | ||
Profit and loss account | 12,207,047 | 22,076,185 | ||
Equity shareholders' funds | 64,348,751 | 70,840,638 | ||
Basic and diluted net asset value per share | ||||
Ordinary shares | 11 | 81.24p | 98.51p | |
Statement of Changes in Equity for the year ended 30 September 2017 | ||||||||||
Non-distributable reserves | Distributable reserves | Total | ||||||||
Notes | Called up share capital | Capital redemption reserve | Share premium reserve | Revaluation reserve | Special distributable reserve | Realised capital reserve | Revenue reserve | |||
(Note a) | (Note b) | (Note b) | ||||||||
£ | £ | £ | £ | £ | £ | £ | £ | |||
At 1 October 2016 | 719,140 | 11,985 | 18,308,887 | 4,744,396 | 24,980,045 | 20,225,980 | 1,850,205 | 70,840,638 | ||
Comprehensive income for the year | ||||||||||
(Loss)/profit for the year
| - | - | - | (794,007) | - | 2,551,196 | 2,027,985 | 3,785,174 | ||
Total comprehensive income for the year
| - | - | - | (794,007) | - | 2,551,196 | 2,027,985 | 3,785,174 | ||
Contributions by and distributions to owners | ||||||||||
Shares issued via Offer for Subscription (note c) | 10 | 36,277 | - | 2,910,719 | - | (786) | - | - | 2,946,210 | |
Dividends re-invested into new shares | 10 | 38,659 | - | 2,879,705 | - | - | - | - | 2,918,364 | |
Shares bought back (note d, note e) | 10 | (2,029) | 2,029 | - | - | (160,323) | - | - | (160,323) | |
Dividends paid
| 7 | - | - | - | - | - | (14,175,466) | (1,805,846) | (15,981,312) | |
Total contributions by and distributions to owners
| 72,907 | 2,029 | 5,790,424 | - | (161,109) | (14,175,466) | (1,805,846) | (10,277,061) | ||
Other movements | ||||||||||
Realised losses transferred to special reserve (note f) | - | - | - | - | (1,603,293) | 1,603,293 | - | - | ||
Realisation of previously unrealised depreciation
| - | - | - | 70,300 | - | (70,300) | - | - | ||
Total other movements | - | - | - | 70,300 | (1,603,293) | 1,532,993 | - | - | ||
At 30 September 2017
| 792,047 | 14,014 | 24,099,311 | 4,020,689 | 23,215,643 | 10,134,703 | 2,072,344 | 64,348,751 | ||
Notes | |||||||||
a) The Company's special reserve is available to fund buy-backs of shares as and when it is considered by the Board to be in the interests of the shareholders, and to absorb any existing and future realised losses and for other corporate purposes. As at 30 September 2017, the Company has a special reserve of £23,215,643, all of which relates to reserves from shares issued on or before 5 April 2014. | |||||||||
b) The realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the Company shown in the Balance Sheet. | |||||||||
c) On 28 September 2017, 3,627,706 shares were issued under the Offer for Subscription and net funds receivable of £2,946,210 is held within debtors at 30 September 2017. This figure is net of issue costs of £45,529. | |||||||||
d) The shareholders authorised the Company to purchase its own shares for cancellation pursuant to section 701 of the Companies Act 2006 at the Annual General Meeting held on 8 February 2017. The authority was limited to a maximum number of 10,779,912 shares (this being approximately 14.99% of the issued share capital at the date of the Notice of the meeting). The minimum price which may be paid for a share is 1 penny per share, the nominal value thereof. The maximum price that may be paid for a share is an amount that is not more than 5% above the average of the middle market quotations of the shares as derived from the Daily Official List of the London Stock Exchange for the five business days preceding such purchase. The authorities provide that the Company may make a contract or contracts to purchase its own shares prior to the expiry of the authority which may be executed in whole or part after the expiry of such authority, and may purchase its shares in pursuance of any such contract. | |||||||||
e) During the year, the Company repurchased 202,886 of its own shares at the prevailing market price for a total cost of £160,323, which were subsequently cancelled. The difference between the figure shown above of £160,323, and that per the Statement of Cash Flows of £115,024 is due to an opening share buyback creditor of £37,339, offset by a share buyback creditor at 30 September 2017 of £82,638. | |||||||||
f) The transfer of £1,603,293 to the special reserve from the realised capital reserve above is the total of realised losses incurred by the Company this year. | |||||||||
Statement of Changes in Equity for the year ended 30 September 2016
| |||||||||
Non-distributable reserves | Distributable reserves | Total | |||||||
Called up share capital | Capital redemption reserve | Share premium reserve | Revaluation reserve | Special distributable reserve | Realised capital reserve | Revenue reserve | |||
£ | £ | £ | £ | £ | £ | £ | £ | ||
At 1 October 2015 | 706,930 | 9,288 | 16,977,902 | 8,997,633 | 27,147,965 | 19,653,747 | 1,708,831 | 75,202,296 | |
Comprehensive income for the year | |||||||||
Profit for the year | - | - | - | 549,889 | - | 587,744 | 1,910,541 | 3,048,174 | |
Total comprehensive income for the year
| - | - | - | 549,889 | - | 587,744 | 1,910,541 | 3,048,174 | |
Contributions by and distributions to owners | |||||||||
Dividends re-invested into new shares | 14,907 | - | 1,330,985 | - | - | - | - | 1,345,892 | |
Shares bought back | (2,697) | 2,697 | - | - | (249,518) | - | - | (249,518) | |
Dividends paid
| - | - | - | - | - | (6,737,039) | (1,769,167) | (8,506,206) | |
Total contributions by and distributions to owners
| 12,210 | 2,697 | 1,330,985 | - | (249,518) | (6,737,039) | (1,769,167) | (7,409,832) | |
Other movements | |||||||||
Realised losses transferred to special reserve | - | - | - | - | (1,918,402) | 1,918,402 | - | - | |
Realisation of previously unrealised depreciation
| - | - | - | (4,803,126) | - | 4,803,126 | - | - | |
Total other movements
| - | - | - | (4,803,126) | (1,918,402) | 6,721,528 | - | - | |
At 30 September 2016 | 719,140 | 11,985 | 18,308,887 | 4,744,396 | 24,980,045 | 20,225,980 | 1,850,205 | 70,840,638 | |
The composition of each of these reserves is explained below:
| |||||||||
Called up share capital | |||||||||
The nominal value of shares originally issued, increased for subsequent share issues either via an Offer for Subscription or Dividend Investment Scheme or reduced due to shares bought back by the Company.
| |||||||||
Capital redemption reserve | |||||||||
The nominal value of shares bought back and cancelled is held in this reserve, so that the company's capital is maintained.
| |||||||||
Share premium reserve | |||||||||
This reserve contains the excess of gross proceeds less issue costs over the nominal value of shares allotted under recent Offers for Subscription and the Company's Dividend Investment Scheme.
| |||||||||
Revaluation reserve | |||||||||
Increases and decreases in the valuation of investments held at the year-end are accounted for in this reserve, except to the extent that the diminution is deemed permanent.
In accordance with stating all investments at fair value through profit and loss (as recorded in note 8 to the Financial Statements), all such movements through both revaluation and realised capital reserves are shown within the Income Statement for the year.
| |||||||||
Special distributable reserve | |||||||||
The cost of share buybacks is charged to this reserve. In addition, any realised losses on the sale or impairment of investments (excluding transaction costs), and 75% of the Investment Adviser fee expense, and the related tax effect, are transferred from the realised capital reserve to this reserve.
| |||||||||
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 of investments; • 75% of the Investment Adviser fee expense and 100% of any performance fee payable, together with the related tax effect to this reserve in accordance with the policies, and • Capital dividends paid.
| |||||||||
Revenue reserve | |||||||||
Income and expenses that are revenue in nature are accounted for in this reserve together with the related tax effect, as well as income dividends paid that are classified as revenue in nature. | |||||||||
STATEMENT OF CASH FLOWS
for the year ended 30 September 2017
Year ended | Year ended | |||||
30 September 2017 | 30 September 2016 | |||||
Notes | £ | £ | ||||
Cash flows from operating activities | ||||||
Profit for the financial year | 3,785,174 | 3,048,174 | ||||
Adjustments for: | ||||||
Net unrealised losses/(gains) on investments | 794,007 | (549,889) | ||||
Net gains on realisations on investments | (3,883,829) | (2,506,146) | ||||
(Increase)/decrease in debtors | (120,887) | 77,630 | ||||
(Decrease)/increase in creditors and accruals | (561,152) | 190,471 | ||||
Net cash inflow from operating activities | 13,313 | 260,240 | ||||
Cash flows from investing activities | ||||||
Purchase of investments | 8 | (5,304,234) | (936,007) | |||
Disposal of investments | 8 | 14,728,706 | 10,742,834 | |||
Decrease in bank deposits with a maturity over three months | 2,028,243 | 1,960,755 | ||||
Net cash inflow from investing activities | 11,452,715 | 11,767,582 | ||||
Cash flows from financing activities | ||||||
Shares issued as part of Offer for Subscription | - | - | ||||
Equity dividends paid | 7 | (13,062,948) | (7,160,312) | |||
Purchase of own shares | (115,024) | (212,644) | ||||
Net cash outflow from financing activities | (13,177,972) | (7,372,956) | ||||
Net (decrease)/increase in cash and cash equivalents | (1,711,944) | 4,654,866 | ||||
Cash and cash equivalents at start of year | 12,347,911 | 7,693,045 | ||||
Cash and cash equivalents at end of year | 10,635,967 | 12,347,911 | ||||
Cash and cash equivalents comprise: | ||||||
Cash at bank and in hand | 9 | 1,375,065 | 2,189,856 | |||
Cash equivalents | 9 | 9,260,902 | 10,158,055 | |||
Notes to the Financial Statements
for the year ended 30 September 2017
1 Company Information The Income and Growth VCT plc is a public limited company incorporated in England, registration number 4069483. The registered office is 30 Haymarket, London, SW1Y 4EX.
2 Basis of preparation A summary of the principal accounting policies, all of which have been applied consistently throughout the year are set out at the start of the related disclosure throughout the Notes to the Financial Statements. All accounting policies are included within an outlined box at the top of each relevant note.
These Financial Statements have been prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 ("FRS102"), with the Companies Act 2006 and the 2014 Statement of Recommended practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('the SORP') (updated in January 2017) issued by the Association of Investment Companies. The Company has a number of financial instruments which are disclosed under FRS102 s11/12 as shown in Note 16 to the Financial Statements.
The Company has elected to apply early the revised disclosure requirements as set out in Amendments to FRS 102 - Fair Value hierarchy disclosures issued in March 2016.
3 Income Dividends receivable on quoted equity shares are brought into account on the ex-dividend date. Dividends receivable on unquoted equity shares are brought into account when the Company's right to receive payment is established and there is no reasonable doubt that payment will be received.
Interest income on loan stock is accrued on a daily basis. Provision is made against this income where recovery is doubtful or where it will not be received in the foreseeable future. Where the loan stocks only require interest or a redemption premium to be paid on redemption, the interest and redemption premium is recognised as income or capital as appropriate once redemption is reasonably certain. When a redemption premium is designed to protect the value of the instrument holder's investment rather than reflect a commercial rate of revenue return the redemption premium is recognised as capital. The treatment of redemption premiums is analysed to consider if they are revenue or capital in nature on a company by company basis. Accordingly, the redemption premium recognised in the year ended 30 September 2017 has been classified as capital and has been included within unrealised gains on investments |
2017 | 2016 | |
£ | £ | |
Income from bank deposits | 55,893 | 101,393 |
Income from investments | ||
- from equities | 288,843 | 114,915 |
- from OEIC funds | 21,960 | 38,412 |
- from loan stock | 2,899,869 | 2,946,909 |
3,210,672 | 3,100,236 | |
Other income | 69 | - |
Total income | 3,266,634 | 3,201,629 |
Total income comprises | ||
Revenue dividends received | 310,803 | 153,327 |
Interest | 2,955,762 | 3,048,302 |
Other income | 69 | - |
Total Income | 3,266,634 | 3,201,629 |
Income from investments comprises | ||
Listed UK securities | 36,086 | 36,086 |
Listed overseas securities | 21,960 | 38,412 |
Unlisted UK securities | 3,152,626 | 3,025,738 |
Total investment income | 3,210,672 | 3,100,236 |
Total loan stock interest due but not recognised in the year was £223,159 (2016: £525,395) due to uncertainty over its recoverability. | ||
4 Investment Adviser's fees and performance fees
25% of the Investment Adviser's fees are charged to the revenue column of the Income Statement, while 75% is charged against the capital column of the Income Statement. This is in line with the Board's expected long-term split of returns from the investment portfolio of the Company.
100% of any performance incentive fee payable for the year is charged against the capital column of the Income Statement, as it is based upon the achievement of capital growth |
a) Investment Adviser's fees
Revenue | Capital | Total | Revenue | Capital | Total | |
2017 | 2017 | 2017 | 2016 | 2016 | 2016 | |
£ | £ | £ | £ | £ | £ | |
Mobeus Equity Partners LLP | 394,012 | 1,182,037 | 1,576,049 | 419,260 | 1,257,781 | 1,677,041 |
Under the terms of a revised investment management agreement dated 29 March 2010, Mobeus Equity Partners LLP ("Mobeus") (formerly Matrix Private Equity Partners LLP ("MPEP")) provides investment advisory, administrative and company secretarial services to the Company, for a fee of 2.4% per annum of closing net assets, calculated on a quarterly basis by reference to the net assets at the end of the preceding quarter. One sixth of this fee is subject to minimum and maximum limits of £150,000 (2016: £150,000) and £170,000 (2016: £170,000) per annum respectively.
The Investment Adviser fees disclosed above are stated after applying a cap on expenses excluding IFA trail commission and exceptional items set at 3.25% of closing net assets at the year-end. In accordance with the investment management agreement any excess expenses are wholly borne by the Investment Adviser. The excess expenses during the year attributable to the Investment Adviser amounted to £nil (2016: £nil) |
b) Investment Advisers' performance fees
Revenue | Capital | Total | Revenue | Capital | Total | ||
2017 | 2017 | 2017 | 2016 | 2016 | 2016 | ||
Portfolio | £ | £ | £ | £ | £ | £ | |
Mobeus Equity Partners LLP | - | 571,879 | 571,879 | - | 1,096,391 | 1,096,391 | |
Foresight Group LLP | - | - | - | - | 43,830 | 43,830 | |
- | 571,879 | 571,879 | - | 1,140,221 | 1,140,221 | ||
Under a Deed of Termination and Variation relating to Performance Incentive Agreements dated 29 March 2010, the Investment Adviser's Incentive Agreement for the former 'O' Share Fund was continued, while the former 'S' Share Fund's Incentive Agreement was terminated. Under the terms of the pre-merger 'O' Share Fund Incentive Agreement, each of the ongoing Investment Adviser, Mobeus Equity Partners LLP and a former Investment Adviser, Foresight Group LLP ("Foresight") are entitled to a performance fee equal to 20% of the excess of the value of any realisation of an investment made after 30 June 2007, over the value of that investment in an Investment Adviser's portfolio at that date ("the Embedded Value"), which value is itself uplifted at the rate of 6% per annum subject to a High Watermark test.
On 30 September 2014, a new incentive fee agreement was signed between the Board and Mobeus, with effect from 1 October 2013, to amend and replace the previous agreement. The previous agreement remains in force, but only with the former adviser, Foresight Group LLP, to whom, for the year ended 30 September 2017, £nil (2016: £43,830) is payable. The agreement is due to expire on 10 March 2019. Mobeus waived their right to their portion of the fee, under the previous agreement.
Any payment under the new incentive agreement is now 15% of net realised gains for each year, payable in cash. It is payable only if Cumulative Net Asset Value (NAV) total return per share (being the closing NAV at a year-end plus cumulative dividends paid to that year-end, since 1 October 2013) equals or exceeds a Target Return. The Target Return is the greater of two targets, being:
i) compound growth of 6% per annum (but 5% per annum for the year ended 30 September 2014 only), before deducting any incentive fee payable (for the year of calculation only) under both this amended agreement and the existing incentive agreement with Foresight Group LLP in Cumulative NAV total return per share; or
ii) the cumulative percentage change in the Consumer Prices Index since 1 October 2013 to the relevant financial year end, the resultant figure then being multiplied by (100+A)/100, where A is the number of full 12 month periods (or part thereof) that have passed between 1 October 2013 and the relevant financial year end.
Both measures of Target Return are applied to the same opening base, being NAV per share as at 30 September 2013 of 113.90 pence. The objective of this Target Return is to enable shareholders to benefit from a cumulative NAV return of at least 6% per annum (5% in the financial year ended 30 September 2014), before any incentive fee is payable. Once a payment has been made, cumulative NAV total return is calculated after deducting past years' incentive fees paid and payable.
Under this amended agreement, any fee payments to Mobeus are subject to an annual cap of an amount equal to 2% of the net assets of the Company as at the immediately preceding year-end. This cap will include any fee payable to Foresight Group LLP under the old agreement, although any such payment to Foresight Group LLP is not capped. Any excess over the 2% remains payable to Mobeus in the following year(s), subject to the 2% annual cap in such subsequent year(s) and after any payment in respect of such subsequent year(s).
The Target Return for the year ended 30 September 2017 was a 6% uplift on the previous year's Target Return of 134.38 pence, being 142.44 pence. As Cumulative Total NAV return is 144.00 pence per share, the Target Return has been met and a fee is payable. This fee amounts to £571,879 and has been accrued in these accounts. This is payable following the approval of this Annual Report by shareholders at the AGM. |
c) Offer for Subscription fees
2017 | 2016 | |
£m | £m | |
Funds raised by I&G VCT | 2.99 | - |
Offer costs payable to Mobeus at 3.25% of funds raised by I&G VCT | 0.10 | - |
Under the terms of an Offer for Subscription, with the other Mobeus advised VCTs, launched on 6 September 2017, Mobeus is entitled to fees of 3.25% of the investment amount received from investors. This amount totalled £341,500 for the first allotment on 28 September 2017 across all four VCTs, out of which all the costs associated with the allotment were met, excluding any payments to advisers facilitated under the terms of the Offer. |
5 Taxation on ordinary activities
The tax expense for the year comprises current tax and is recognised in profit or loss. The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date.
Any tax relief obtained in respect of adviser fees allocated to capital is reflected in the capital reserve - realised and a corresponding amount is charged against revenue. The tax relief is the amount by which corporation tax payable is reduced as a result of these capital expenses.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the Company's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in the tax assessments in periods different from those in which they are recognised in the Financial Statements.
Deferred tax is measured at the average tax rates that are expected to apply in the years in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted at the balance sheet date. Deferred tax is measured on a non-discounted basis.
A deferred tax asset would be recognised only to the extent that it is more likely than not that future taxable profits will be available against which the asset can be utilised. No deferred tax asset has been recognised due to the uncertainty of available future taxable profits. |
| ||||||
2017 | 2017 | 2017 | 2016 | 2016 | 2016 | ||
Revenue | Capital | Total | Revenue | Capital | Total | ||
£ | £ | £ | £ | £ | £ | ||
a) Analysis of tax charge: | |||||||
UK Corporation tax on profits/(losses) for the year | 421,283 | (421,283) | - | 479,600 | (479,600) | - | |
Total current tax charge/(credit) | 421,283 | (421,283) | - | 479,600 | (479,600) | - | |
Corporation tax is based on a rate of 19.5% (2016: 20.0%) | |||||||
b) Profit on ordinary activities before tax | 2,449,268 | 1,335,906 | 3,785,174 | 2,390,141 | 658,033 | 3,048,174 | |
Profit on ordinary activities multiplied by main company rate of corporation tax in the UK of 19.5% (2016: 20.0%) | 477,607 | 260,502 | 738,109 | 478,028 | 131,607 | 609,635 | |
Effect of: | |||||||
UK dividends | (56,324) | - | (56,324) | (22,983) | - | (22,983) | |
Unrealised losses not allowable/(gains not taxable) | - | 154,831 | 154,831 | - | (109,978) | (109,978) | |
Realised gains not taxable | - | (757,347) | (757,347) | - | (501,229) | (501,229) | |
Losses (utilised)/carried forward | - | (79,269) | (79,269) | 24,555 | - | 24,555 | |
Actual current tax charge | 421,283 | (421,283) | - | 479,600 | (479,600) | - | |
Tax relief relating to Investment Adviser fees is allocated between revenue and capital where such relief can be utilised. The rate of corporation tax applied to the company has reduced due to a reduction in HMRC's main company rate of corporation tax to 19% on 1 April 2017, from the previous rate of 20%.
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 (2016: £nil). There is an unrecognised deferred tax asset of £965,000 (2016: £1,034,000). |
6 Basic and diluted earnings and return per share
2017 | 2016 | |
£ | £ | |
Total earnings after taxation: | 3,785,174 | 3,048,174 |
Basic and diluted earnings per share (note a) | 5.21p | 4.28p |
Revenue profit from ordinary activities after taxation | 2,027,985 | 1,910,541 |
Basic and diluted revenue earnings per share (note b) | 2.79p | 2.68p |
Net unrealised capital (losses)/gains on investments | (794,007) | 549,889 |
Net realised capital gains on investments | 3,883,829 | 2,506,146 |
Capitalised Investment Adviser fees and performance fees less taxation | (1,332,633) | (1,918,402) |
Total capital return | 1,757,189 | 1,137,633 |
Basic and diluted capital earnings per share (note c) | 2.42p | 1.60p |
Weighted average number of shares in issue in the year | 72,621,839 | 71,198,046 |
Notes: a) Basic earnings per share is total earnings after taxation divided by the weighted average number of shares in issue. b) Revenue earnings per share is the revenue return after taxation divided by the weighted average number of shares in issue. c) Capital earnings per share is the total capital return after taxation divided by the weighted average number of shares in issue. |
7 Dividends paid and payable
Dividends payable are recognised as distributions in the financial statements when the Company's liability to pay them has been established. This liability is established for interim dividends when they are paid, and for final dividends when they are approved by the shareholders, usually at the Company's Annual General Meeting.
The Company's status as a VCT means it has to comply with Section 259 of the Income Tax Act 2007, which requires that no more than 15% of the income from shares and securities in a year can be retained from the revenue available for distribution for the year. Accordingly, the Board is required to determine the amount of minimum income dividend. |
Amounts recognised as distributions to equity shareholders in the year: | ||||||
For the year ended 30 September | Pence per share | Date Paid | 2017 £ | 2016 £ | ||
Final | Income | 2015 | 1.00p | 15 February 2016 | - | 706,921 |
Final | Capital | 2015 | 5.00p | 15 February 2016 | - | 3,534,606 |
Interim | Income | 2016 | 1.00p | 07 July 2016 | - | 1,067,478 |
Interim | Capital | 2016 | 5.00p | 07 July 2016 | - | 3,202,433 |
Final | Income | 2016 | 1.00p | 15 February 2017 | 718,814 | - |
Final | Capital | 2016 | 3.00p | 15 February 2017 | 2,156,442 | - |
Interim | Income | 2017 | 1.50p | 20 June 2017 | 1,087,032 | - |
Interim | Capital | 2017 | 1.50p | 20 June 2017 | 1,087,032 | - |
Special | Capital | 2017 | 15.00p | 31 August 2017 | 10,931,992 | - |
Previous dividends not claimed within the statutory period | (5,232) | |||||
15,981,3121 | 8,506,206 | |||||
1 - £15,981,312 (30 September 2016: £8,506,206) disclosed above differs to that shown in the Statement of Cash Flows of £13,062,948; (30 September 2016: £7,160,312) due to £2,918,364 (30 September 2016: £1,345,894) of new shares issued as part of the Company's Dividend Investment Scheme. | ||||||
2017 | 2017 | 2017 | 2016 | 2016 | 2016 | |
Revenue | Capital | Total | Revenue | Capital | Total | |
£ | £ | £ | £ | £ | £ | |
Proposed distribution to equity holders at the year-end | ||||||
Final dividend for the year ended 30 September 2017 of 0.50p (income) (2016: 1.00p), 2.50p (capital) (2016: 3.00p) per ordinary share | 473,245 | 2,366,229 | 2,839,474 | 719,140 | 2,157,421 | 2,876,561 |
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. |
2017 | 2016 | |
£ | £ | |
Revenue available by way of dividends for the year | 2,027,985 | 1,910,541 |
Interim income dividend for the year - 1.50p (2016: 1.00p) | 1,087,032 | 1,067,478 |
Proposed final income dividend for the year - 0.50p (2016: 1.00 p) | 473,425 | 719,140 |
Total income dividends for the year | 1,560,457 | 1,786,618 |
8 Investments at fair value
The most critical estimates, assumptions and judgements relate to the determination of the carrying value of investments at "fair value through profit and loss" (FVTPL). All investments held by the Company are classified as FVTPL and measured in accordance with the International Private Equity and Venture Capital Valuation ("IPEV") guidelines, as updated in December 2015. This classification is followed as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income.
For investments actively traded on organised financial markets, fair value is generally determined by reference to Stock Exchange market quoted bid prices at the close of business on the balance sheet date. Purchases and sales of quoted investments are recognised on the trade date where a contract of sale exists whose terms require delivery within a time frame determined by the relevant market. Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional.
Unquoted investments are stated at fair value by the Directors in accordance with the following rules, which are consistent with the IPEV guidelines:
All investments are held at the price of a recent investment for an appropriate period where there is considered to have been no change in fair value. Where such a basis is no longer considered appropriate, each investment is considered as a whole on a 'unit of account' basis, alongside consideration of:
(i) Where a value is indicated by a material arms-length transaction by an independent third party in the shares of a company, this value will be used.
(ii) In the absence of i) and depending upon both the subsequent trading performance and investment structure of an investee company, the valuation basis will usually move to either:-
a) a multiple basis. The shares may be valued by applying a suitable price-earnings ratio or revenue multiple to that company's historic, current or forecast post-tax earnings before interest and amortisation, or revenue, (the ratio used being based on a comparable sector but the resulting value being adjusted to reflect points of difference identified by the Investment Adviser compared to the sector including, inter alia, a lack of marketability). or:-
b) where a company's underperformance against plan indicates a diminution in the value of the investment, provision against cost is made, as appropriate.
(iii) Premiums, to the extent that they are considered capital in nature, and that 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.
(iv) Where an earnings or revenue multiple or cost 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 cost, the loss is treated as a permanent impairment and as a realised loss, even though the investment is still held. The Board assesses the portfolio for such investments and, after agreement with the Investment Adviser, will agree the values that represent the extent to which an investment loss has become realised. 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 prices in an active market. - Level 2 - Fair value is measured based on directly observable current market prices or indirectly being derived from market prices. - Level 3 - Fair value is measured using valuation techniques using inputs that are not based on observable market data.
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Movements in investments during the year are summarised as follows:
Unquoted | Unquoted | ||||
Traded | equity | preference | Unquoted | ||
on AIM | shares | shares | Loan Stock | Total | |
£ | £ | £ | £ | £ | |
Cost at 30 September 2016 | 1,333,907 | 18,112,271 | 27,341 | 34,392,604 | 53,866,123 |
Permanent impairment at 30 September 2016 | (500,000) | (3,467,312) | (787) | (227,462) | (4,195,561) |
Unrealised gains/(losses) at 30 September 2016 | 2,376,651 | (2,507,427) | (3,908) | 4,829,080 | 4,694,396 |
Valuation at 30 September 2016 | 3,210,558 | 12,137,532 | 22,646 | 38,994,222 | 54,364,958 |
Purchases at cost | - | 4,745,463 | - | 558,771 | 5,304,234 |
Sale proceeds (note a) | - | (4,552,845) | (1,671) | (10,174,190) | (14,728,706) |
Reclassification at value (note b) | - | 437,022 | 87 | (437,109) | - |
Realised gains on investments | - | 1,494,881 | 1,671 | 2,387,277 | 3,883,829 |
Unrealised (losses)/gains on investments (note c) | (13,381) | 91,438 | 391,453 | (1,263,517) | (794,007) |
Valuation at 30 September 2017 | 3,197,177 | 14,353,491 | 414,186 | 30,065,454 | 48,030,308 |
Cost at 30 September 2017 | 1,333,907 | 21,758,149 | 25,757 | 27,540,446 | 50,658,259 |
Permanent impairment at 30 September 2017 (note c) | (500,000) | (6,011,453) | - | (87,187) | (6,598,640) |
Unrealised gains/(losses) at 30 September 2017 (note e) | 2,363,270 | (1,393,205) | 388,429 | 2,612,195 | 3,970,689 |
Valuation at 30 September 2017 | 3,197,177 | 14,353,491 | 414,186 | 30,065,454 | 48,030,308 |
A full breakdown of the increases and decreases in unrealised valuations of the portfolio is seen in the Investment Portfolio Summary in the Annual Report. |
Major movements in investments
Note a) Disposals of investment portfolio companies during the year were:
Company | Type | Investment Cost | Disposal Proceeds | Valuation at 30 September 2016 | Realised gain in year | |
£ | £ | £ | £ | |||
Entanet Holdings Limited1 | Realisation | 3,175,171 | 7,166,414 | 3,351,685 | 3,814,729 | |
Manufacturing Services Investment Limited | Share buyback | 668,400 | 668,400 | 668,400 | - | |
Chatfield Services Limited | Share buyback and loan repayment | 778,774 | 778,774 | 778,774 | - | |
Backhouse Management Limited | Loan repayment | 721,920 | 1,203,200 | 721,920 | - | 1 |
Barham Consulting Limited | Loan repayment | 721,920 | 1,203,200 | 721,920 | - | 1 |
Creasy Marketing Services Limited | Loan repayment | 721,920 | 1,203,200 | 721,920 | - | 1 |
McGrigor Management Limited | Loan repayment | 721,920 | 1,203,200 | 721,920 | - | 1 |
Hollydale Management Limited | Loan repayment | 559,440 | 932,400 | 559,440 | - | 1 |
Others | 442,633 | 369,918 | 300,818 | 69,100 | ||
8,512,098 | 14,728,706 | 8,546,797 | 3,883,829 |
1 - Deferred contingent consideration of £0.74 million is potentially payable over the next two years. There are conditions attached to this deferred consideration such that the amount receivable is uncertain and so has not been recognised in the current year's financial statements. 2 - The gain on the loan repayments above of £2,298,080 has been set off against an equivalent permanent impairment in the equity instrument of the investments in these companies (see note c). Thus, no gain or loss resulted.
Note b) During the year, two investee companies were reorganised whereby loan stocks held at a value of £437,109 were reclassified as ordinary shares, and ordinary shares of value £87 were reclassified as preference shares.
Note c) Within net unrealised losses of £794,007 for the year, the significant falls in value compared to last year were as follows: £966,297 in Jablite Holdings Limited, £466,776 in CGI Creative Graphics International Limited, £414,087 in Fullfield Limited (trading as Motorclean), £545,478 in Veritek Global Limited and £536,753 in Media Business Insight Holdings Limited. These losses were partially offset by unrealised gains in valuation compared to last year, including: £954,816 in Gro Group Holdings Limited, £500,337 in Master Removers Group Limited (formerly Leap New Co), £347,280 in Tovey Management Limited (trading as Access IS), £314,572 in EOTH Limited and £298,666 in Vectair Holdings.
The decrease in unrealised valuations of the loan stock investments above reflect the changes in the entitlements to loan premiums, and/or in the underlying enterprise value of the investee company. The decrease does not arise from assessments of credit risk or market risk upon these investments.
Note d) During the year, permanent impairments of the cost of investments have increased from £4,195,561 to £6,598,640. The increase of £2,403,079 is due to the impairments of equity of five investee companies referred to in note 2 to note a) above, and the impairment of £104,999 of another company's remaining investment cost.
Note e) The figure of unrealised gains as at 30 September 2017 of £3,970,689 is lower than shown on the Statement of Changes in Equity of £4,020,689 by £50,000. This is caused by £50,000 of contingent consideration at the Balance Sheet date, shown as other debtors in Note 11 to the Financial Statements in the Annual Report.
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Provisions and write-offs against unlisted investments
The amounts provided below cost at the end of the year or written-off against unlisted investments were as follows:
Total Provisions at end of year | Net write-offs in year1 | |
Financial Year | £ | £ |
2017 | 13,528,607 | 2,403,079 |
2016 | 11,500,860 | (1,115,371) |
2015 | 9,793,793 | 65,779 |
2014 | 7,709,509 | (1,876,253) |
2013 | 10,475,290 | 2,001,476 |
2012 | 11,991,733 | 313,850 |
2011 | 11,206,678 | 1,881,554 |
2010 | 11,575,422 | 2,524,527 |
1 - £2,403,079 of the cost of six investments were permanently impaired in the year.
9 Current asset investments and Cash at bank
Cash equivalents, for the purposes of the Statement of Cash Flows, comprise bank deposits repayable on up to three months' notice and funds held in OEIC money-market funds. Current asset investments are the same but also include bank deposits that mature after three months. Current asset investments are disposable without curtailing or disrupting the business and are readily convertible into known amounts of cash at their carrying values at immediate or up to one year's notice. Cash, for the purposes of the Statement of Cash Flows is cash held with banks in accounts subject to immediate access. Cash at bank in the Balance Sheet is the same. | |||
Current asset investments and Cash at bank |
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2017 | 2016 |
| |
£ | £ |
| |
OEIC Money market funds | 9,260,902 | 10,158,055 |
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Cash equivalents per Statement of Cash Flows | 9,260,902 | 10,158,055 |
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Bank deposits that mature after three months | 3,151,769 | 5,180,012 |
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Current asset investments | 12,412,671 | 15,338,067 |
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Cash at bank | 1,375,065 | 2,189,856 |
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10 Called up share capital
2017 | 2016 | ||
£ | £ | ||
Allotted, called-up and fully paid: | |||
Ordinary Shares of 1p each: 79,204,702 (2016: 71,914,023) | 792,047 | 719,140 | |
Total | 792,047 | 719,140 | |
Under the Offer for Subscription launched on 6 September 2017, a total of 3,627,706 ordinary shares were allotted at an average effective offer price of 82.49 pence per share, raising net funds of £2,946,210, after £45,529 offer costs have been deducted. | ||
Under the terms of the Dividend Investment Scheme, a total of 3,865,859 (2016: 1,490,729) ordinary shares were allotted during the year for a total consideration of £2,918,364 (2016: £1,345,892). | ||
During the year, the Company purchased 202,886 (2016: 269,713) of its own ordinary shares for cash (representing 0.3% (2016: 0.4%) of the ordinary shares in issue at the start of the year) at the prevailing market price for a total cost of £160,323 (2016: £249,518). The shares bought back were subsequently cancelled. | ||
11 Basic and diluted net asset value per share
2017 | 2016 | |
£ | £ | |
Net assets | 64,348,757 | 70,840,638 |
Number of shares in issue | 79,204,702 | 71,914,023 |
Basic and diluted net asset value per share | 81.24p | 98.51p |
12 Post balance sheet events
On 20 October 2017, 7,167,226 ordinary shares were allotted under the Company's Offer for Subscription, raising net funds of £5.82 million for the Company.
On 23 October 2017, the Company announced its intention to utilise its overallotment facility and is now seeking to raise up to £25.00 million.
On 1 November 2017 and 2 November 2017, TPSFF Holdings Limited made loan repayments of £0.04 million and £0.05 million.
On 9 November 2017, 5,214,308 ordinary shares were allotted under the Company's Offer for Subscription, raising net funds of £4.23 million.
On 20 November 2017, 1,978,451 ordinary shares were allotted under the Company's Offer for Subscription, raising net funds of £1.61 million.
On 21 November 2017, 1,084,462 ordinary shares were allotted under the Company's Offer for Subscription, raising net funds of £0.88 million.
On 21 November 2017, a further £0.09 million was invested in BookingTek Limited.
On 5 December 2017, a further £0.15 million was invested in Mpb Group Limited.
On 5 December 2017, an amount of £0.12 million was received from Alaric Systems Limited, an investment realised in a previous year.
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Statutory information The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 30 September 2017 but is derived from those accounts. Statutory accounts will be delivered to the Registrar of Companies after the Annual General Meeting. The auditors have reported on these accounts and their report was unqualified and did not contain a statement under section 498(2) of the Companies Act 2006.
Annual Report The Annual Report will be published on the Company's website at www.incomeandgrowthvct.co.uk shortly and following the adoption of electronic communications by the Company, shareholders will shortly receive notification from the Company on how to download a pdf of the Report from the website. Shareholders and members of the public who wish to receive a hard copy of the Annual Report, may request a copy by writing to the Company Secretary, Mobeus Equity Partners LLP, 30 Haymarket (4th floor), London SW1Y 4EX or by email: vcts@mobeusequity.co.uk.
Annual General Meeting The Annual General Meeting of the Company will be held at 11.00 am on Wednesday, 7 February 2018 at The Clubhouse, 8 St James's Square, London, SW1Y 4JU.
Contact details for further enquiries: Robert King or Robert Brittain of Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by e-mail to vcts@mobeusequity.co.uk.
Mark Wignall or Mike Walker at Mobeus Equity Partners LLP (the Investment Adviser) on 020 7024 7600 or by e-mail to info@mobeusequity.co.uk.
DISCLAIMER Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
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