Inc&gwth Vct Regulatory News (IGV)

THE INCOME & GROWTH VCT PLC

LEI: 213800FPC15FNM74YD92

UNAUDITED HALF-YEAR RESULTS FOR THE SIX MONTHS TO 31 MARCH 2022

The Income & Growth VCT plc ("the Company") today announces its Half-Year results for the six months to 31 March 2022.

You may, in due course, view the Half-Year Report, comprising the Unaudited Condensed Financial Statements of the Company by visiting www.incomeandgrowthvct.co.uk.

Financial Highlights

As at 31 March 2022:

Net assets: £127.65 million

Net asset value ("NAV") per share: 98.79 pence

Results for the six months to 31 March 2022:

· Net asset value ("NAV") total return¹ per share was 2.3%.

· Share price total return1 per share was 1.6%.

· The Board has declared an interim dividend in respect of the current year of 4.00 pence per share to be paid to Shareholders on 8 July 2022.

· The Company made one new investment of £0.81 million and three follow-on investments totalling £2.44 million.

· Proceeds of £6.24 million were received from realisations, generating net realised gains of £1.21 million.

1 Alternative Performance Measure ("APM"). See Glossary of Terms in the Half-Year Report.

PERFORMANCE SUMMARY

The table below shows the recent past performance of the Company's existing class of shares for each of the last five years, and the current year to date.

1 Source: Panmure Gordon & Co (mid-market price).

2 Cumulative total return per share comprises the NAV per share (NAV basis) or the mid-market price per share (share price basis) plus cumulative dividends paid since launch of the current share class.

3 An interim dividend of 4.00 pence per share, referred to in the Financial Highlights above, is payable to Shareholders on 8 July 2022.

4 The share price at 30 September 2019 has been adjusted to add back the dividend of 4.50 pence per share paid on 18 October 2019, as the listed share price was quoted ex this dividend at this year-end.

Detailed performance data, including a table of dividends paid to date for all share classes and fundraising rounds, is shown in the Performance Data appendix in the Half-Year Report. The tables, which give information by allotment date on NAVs and dividends paid per share, are also available on the Company's website at www.incomeandgrowthvct.co.uk where they can be accessed by clicking on "table" under "Reviewing the performance of your investment" on the home page.

Chairman's Statement

I present the Company's Half-Year Report for the six months to 31 March 2022.

Overview

At the time of the publication of the Company's Annual Report in December 2021, I was able to report on the Company's robust performance over what was a time of material market volatility. The first six months of the Company's financial year has largely seen a continuation of this environment, with the portfolio generating a 2.3% NAV total return for the period against a backdrop of ongoing global uncertainty.

Although the period was marked by many challenges, the portfolio proved to be resilient and adaptive in facing them. The threat from global supply issues in logistics, materials and labour resulting from COVID-19 disruption is expected to remain for some months, and the unfolding geopolitical events and instability relating to Russia's brutal aggression in Ukraine has compounded uncertainties. A more challenging environment is expected in the near future. Inevitably, this has combined with expectation of an increased risk free return on capital and, arguably, a more realistic assessment of risk in public market valuations, especially for growth and technology stories and generated an overarching negative market sentiment. This has translated into material falls in AIM market valuations and sector PE multiples which impacted overall portfolio value towards the latter stages of the period. However, for the most part, your Company's largely service and software-based portfolio has continued to trade well.

M&A activity has also remained buoyant and the Investment Adviser continues to see a healthy deal flow. The Company completed its first combined new investment across all the Gresham House VCTs in February, deploying £0.81 million into Proximity Insight. Over the six-month period, the Company deployed a total of £3.25 million of investment capital and generated £6.24 million in realisation proceeds from investment activity. In that time, it added one new investment to its portfolio, realised one investment and provided follow-on funding into three existing portfolio companies.

On 20 January 2022, the Company launched an Offer for Subscription alongside the three other Mobeus VCTs ("Offers") and the Board was very pleased to see that unprecedented demand meant that the target of £10 million was reached in less than 24 hours, at which point no further applications were accepted. It was gratifying that approximately half of the applications received were from existing Shareholders in the Company. The subsequent allotment of shares has now bolstered the Company's capital to deploy in new and exciting investment opportunities. Further details of this are set out later in my statement.

Performance

The Company's NAV total return per share was 2.3% for the six months to 

31 March 2022 (2021: 35.2%), and the share price total return was 1.6% (2021: 31.9%). The difference between the NAV total return and share price total return figures above arises principally due to the timing of NAV announcements which are usually made retrospectively. This Half-Year performance represents a modest return for Shareholders during the period when many markets have seen declines. Your Board therefore remains satisfied with the way in which the portfolio companies have been able to deal with the challenges faced over the period.

The Company's resilient performance was bolstered primarily by a combination of unrealised gains in the value of investments still held such as Preservica, MBI and MRG, as well as the notable exit of Red Paddle, generating a realised gain in the period of £1.20 million which contributed to a multiple on original cost over the life of that investment of 5.4x.

Investment portfolio

In spite of market headwinds, the portfolio has demonstrated healthy performance in the first six months of the Company's financial year. The overall value increased by £4.20 million (2021: £29.66 million), or 4.8% (2021: 58.3%) on a like-for-like basis, compared to the opening portfolio value at 1 October 2021 of £88.15 million. This increase comprised a net unrealised uplift in portfolio valuations of £2.99 million and £1.21 million in net realised gains, over the period.

At the period-end, the portfolio was valued at £89.36 million after taking account of investments purchased and sold in the period, together with the net realised and unrealised gains referred to above. The portfolio may present opportunities for further investment in the future.

Strong trading in portfolio companies improved investment values for companies such as MBI (£1.33 million), MRG (£1.13 million), EOTH (£0.96 million) and Bella & Duke (£0.65 million) as well as a significant funding round and positive re-rating of Preservica (£5.86 million) were the primary drivers of unrealised gains for Shareholders during the period. The negative market sentiment meant that the impacts of dips in the trading performance of AIM-listed stocks were magnified and represent some of the portfolio's most significant valuation falls over the period, in Virgin Wines (£4.61 million) and Parsley Box (£0.72 million). MyTutor (£2.49 million), was similarly impacted by reduced PE sector multiples.

During the six months under review, the Company invested £0.81 million into one new investment:

In addition, three follow-on investments totalling £2.44 million were made into:

We expect follow-on investments to continue to be a feature of the growth capital investments as they seek to achieve scale. Since the period-end, the Company has made one follow-on investment of £0.19 million into Northern Bloc and one new investment of £0.64 million into Bidnamic, a marketing technology business.

Details of this investment activity and the performance of the portfolio are contained in the Investment Adviser's Review and the Investment Portfolio Summary below.

Revenue account

The results for the period are set out in the Unaudited Condensed Income Statement and show a revenue return (after tax) of 0.51 pence per share (2021: 0.70 pence per share). The revenue return for the period of £0.61 million represents a decrease from last year's comparable figure of £0.83 million. This is due to lower dividend receipts, combined with higher other expenses and Investment Adviser fees, the latter resulting from the growth in net assets.

Dividends

The Board intends to continue to provide an attractive dividend stream to Shareholders and is pleased to declare an Interim dividend of 4.00 pence per share for the year ending 30 September 2022.

This dividend will be paid on 8 July 2022, to Shareholders on the Register on 6 June 2022, and will bring cumulative dividends paid per share to 144.50 pence per share.

Shareholders wishing to amend their participation in the Dividend Investment Scheme in time for their preference to come into effect for this dividend payment must submit their instruction to the Scheme Administrator, Link Group, by no later than 23 June 2022. For further details, please see the Company's website at www. incomeandgrowthvct.co.uk, under the "Dividends" heading.

The Company's target of paying a dividend of at least 6.00 pence per share in respect of each financial year has been met or exceeded in each of the last ten financial years. The Board continues to monitor the sustainability of its dividend target.

Offer for Subscription and Dividend Investment Scheme

On 20 January 2022, the Company took part in a Joint Offer for Subscription ("Offer") alongside the other Mobeus VCTs. Following unprecedented demand, the Offer became fully subscribed in record time, with an allotment of 10,191,964 shares taking place on 9 March 2022 raising net funds of £9.67 million for the Company. Shareholders should have now received their share certificates. If you applied for shares, but have not received your share certificate, please contact Link Group, details as shown within the Half-Year Report.

Due to the rapid, and unforeseen, response to the Offer, the Board acknowledges that not all of our existing Shareholders were able to subscribe for shares and were disappointed by this outcome. For any future fundraising, the Board will consider lessons learned and seek to apply them where practical but we would encourage all Shareholders to register for, and respond to, communications digitally to improve their access and opportunity.

The Company's Dividend Investment Scheme ("DIS") provides Shareholders with the opportunity to reinvest their cash dividends into new shares in the Company at the latest published NAV per share (adjusted for any subsequent dividends). New VCT shares attract the same tax reliefs as shares purchased through an Offer for Subscription.

There were 901,031 shares allotted through the DIS during the period at a price of 95.45 pence. Since its reinstatement in 2020, 6,357,651 Ordinary shares have been allotted to participants.

Shareholders can opt-in to the DIS by completing a mandate form available on the Company's website at: www.incomeandgrowthvct.co.uk or can opt-out by contacting Link Group, using the details provided in the Half Year Report. Please note that instructions take 15 days to become effective.

Cash Available for investment

The Board continues to monitor credit risk in respect of its cash balances and to prioritise the security and protection of the Company's capital. Cash and liquidity fund balances as at 31 March 2022 amounted to £38.62 million. This figure has been boosted by the funds raised under the Offer and includes £34.05 million held in money market funds with AAA credit ratings and £4.57 million held in deposit accounts with several well-known financial institutions across a range of maturities.

Share buybacks

During the six months ended 31 March 2022, the Company bought back and cancelled 430,175 of its own shares, representing 0.4% (2021: 0.4%) of the shares in issue at the beginning of the period, at a total cost of £0.40 million (2021: £0.32 million), inclusive of expenses.

It is the Company's policy to cancel all shares bought back in this way. The Board regularly reviews its buyback policy, where its priority is to act prudently and in the interest of remaining Shareholders, whilst considering other factors, such as levels of liquidity and reserves, market conditions and applicable law and regulations. Under this policy, the Company seeks to maintain the discount at which the Company's shares trade at no more than 5% below the latest published NAV.

Shareholder Event & Communications

May I remind you that the Company has its own website which is available at: www.incomeandgrowthvct.co.uk. The Investment Adviser last held a Shareholder Event on behalf of the Mobeus VCTs in February 2022, a recording of which can be found on the Company's website at the web address above. The event was well received and the Investment Adviser plans to hold another shareholder event in 2023. Further details will be circulated to Shareholders and shown on the Company's website in due course.

Fraud Warning

Shareholders continue to be contacted in connection with sophisticated but fraudulent financial scams which purport to come from the Company or to be authorised by it. This is often by a phone call or an email usually originating from outside of the UK, claiming or appearing to be from a corporate finance firm offering to buy your shares at an inflated price.

Further information and fraud advice plus details of who to contact, can be found in the Information for Shareholders section in the Half-Year Report.

Environmental, Social and Governance ("ESG")

Following the novation of the investment advisory agreement to Gresham House, who have a dedicated team which is focused on sustainability, the Board views this as an opportunity to enhance the Company's existing protocols and procedures through the adoption of the highest industry standards. Under the new enlarged investment team, each investment executive is responsible for their own individual ESG objectives in support of the wider overarching ESG goals of the Investment Adviser. For further details, Gresham House published its second Sustainable Investment Report in April 2022, which can be found on its website at: www.greshamhouse.com.

Board Constitution

Helen Sinclair resigned as a Director of the Company following the Annual General Meeting held on 23 February 2022. The Board is extremely grateful for Helen's invaluable time, experience and commitment to her role during her tenure. The Board has since been constituted of two directors who will continue to consider the composition and succession of the Board particularly in light of the new UKLA listing rules on diversity and inclusion.

Outlook

There is no doubt that the six months under review has been a challenging environment for businesses in general, but the majority of the portfolio has continued to trade well and deliver value growth. The Board is pleased to report that the Company has achieved a positive net return for the period but remains cautious in the face of a range of macroeconomic risks.

Whilst the residual threat of further lockdowns from new variants of the virus appears to have lessened to some extent as we progress through 2022, we anticipate that the indirect effects of the COVID-19 pandemic and Brexit will continue to impact the UK economy and bring an element of uncertainty for some time to come, most notably in the form of supply chain and inflationary pressures. More recently, Russia's flagrant breach of the rules-based international order has of course resulted, inter alia, in global economic financial disruption and trade dislocation, including accelerated inflation. Nonetheless, your Board considers that your Company is well positioned to adapt as necessary.

In closing, the Board was very pleased to have witnessed such a positive response to the launch of the Company's Offer for subscription in January and would like to thank all Shareholders for their interest in applying for the Company's shares. The Board has been satisfied with the Company's ability to maintain a high rate of investment in quality opportunities over the period. It believes that the additional fundraising will provide the necessary capital to continue to create value growth for Shareholders in what has, to date, proven to be a successful investment strategy. The portfolio has performed well and appears robust.

I would like to take this opportunity once again to thank all Shareholders for your continued support and to extend a warm welcome to new Shareholders.

Maurice Helfgott

Chairman

25 May 2022

Investment Policy

The Company's policy is to invest primarily in a diverse portfolio of UK unquoted companies.

Asset Mix and Diversification

The Company will seek to make investments in UK unquoted companies in accordance with the requirements of prevailing VCT legislation.

Investments are made selectively across a wide variety of sectors, principally in established companies.

Investments are generally structured as part loan and part equity in order to receive regular income and to generate capital gain 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.

No single investment may represent more than 15% (by VCT tax value) of the Company's total investments at the date of investment.

Save as set out above, the Company's other investments are held in cash and liquid funds.

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 borrowing of 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

Portfolio review

The first six months of the Company's financial year have been marked by volatile markets and uncertainty resulting from global events such as the War in Ukraine as well as inflationary pressures. We are starting to see that these factors are now beginning to have a noticeable impact on consumer confidence but underlying trading to date has largely remained healthy.

Widespread volatility of global markets and negative sentiment have hampered the ability of businesses to sustain the exceptional performance of the previous financial year. However, a continuation of steady underlying trading by the majority of investee companies has ensured that the portfolio has nonetheless been able to record value growth of 4.8% over the six-month period, with combined net unrealised and realised gains of £4.20 million.

The Company received unprecedented demand for its Offer for Subscription in January 2022, raising the full £10 million capacity of the Offer in less than 24 hours. This supports the Company's continued momentum in deploying capital, having completed its first combined investment across all the Gresham House VCTs during the period, investing £0.81 million into retail software platform Proximity Insight in February. In addition to this, strong trading activity levels have created investment opportunities for the Company as portfolio companies sought to enhance their positions by building capability in light of demand. The Company therefore delivered follow-on investments into three portfolio companies during the period, Preservica (£1.71 million), ActiveNav (£0.43 million) and Caledonian Leisure (£0.30 million). Further investments totalling £0.83 were made after the period-end (details below).

The Company continues to generate healthy returns from the realisation of investments, completing the disposal of Red Paddle in November, generating net proceeds of £5.52 million in the period and contributing to a multiple of original cost of 5.4x and an IRR of 33.2%. As has been noted in previous reports, the traditional investments, as well as the growth investments, are continuing to make good progress. In challenging periods such as these for global markets, the diverse portfolio has demonstrated its robustness and resilience. The Investment Adviser remains confident that the portfolio is well positioned as it enters the second half-year.

The portfolio movements in the period are summarised as follows:

Valuation changes of portfolio investments still held

The portfolio generated net unrealised gains of £2.99 million in the first half of its financial year. A substantial portion of the valuation increases were generated within the growth portfolio, many of which operate with direct-to-consumer business models that have been able to capitalise on the continuing trend of remote working and online shopping for goods and services. Gresham House believes that much of this will prove to be permanent. The more traditional assets that form part of the older portfolio have begun to trade well again either by re-engineering their business or benefiting as COVID-19 restrictions have receded.

The total valuation increases were £11.98 million. The main valuation increases were in:

● Preservica - £5.86 million

● Media Business Insight - £1.33 million

● Master Removers Group - £1.13 million

Preservica has benefitted from a significant re-rating as part of a further funding round and increased scale. Media Business Insight has continued to reap the rewards of the success of its diversification to online income streams and a more flexible cost base, whilst Master Removers Group has been effective in taking advantage of strong property markets and a structural shift in demand for storage and logistics.

The total valuation decreases were £(8.99) million. The main valuation decreases were:

· Virgin Wines - £4.61 million

· MyTutor - £2.49 million

· Parsley Box - £0.72 million

Virgin Wines and Parsley Box have been impacted by negative market sentiment compounded by more challenging customer recruitment over the period, whilst MyTutor's valuation has been affected by a combination of smaller factors such as downgraded sector PE multiples and a reduction in surplus cash used for valuation purposes.

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

New investments during the period

The Company made one new investment of £0.81 million during the period, as detailed below:

Further investments during the period

The Company made three further investments into existing portfolio companies in the period, totalling £2.44 million, as detailed below:

Realisations during the period

The Company realised its investment in Red Paddle during the period, as detailed below:

Loan repayments and other proceeds in the period

The Company received loan repayments totalling £0.70 million from Media Business Insight during the period as well as receiving additional nominal proceeds from Bourn Bioscience and Vectair, both of which were investments realised in a previous year.

Investment portfolio yield

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

1 Total portfolio income in the period is generated solely from investee companies within the portfolio

New investments made after the period-end

The Company made one new investment of £0.64 million after the period-end, as detailed below:

Further investments made after the period-end

The Company made one further investment into an existing portfolio company of £0.19 million after the period end, as detailed below:

Environmental, Social, Governance considerations

Following the novation of the advisory agreement to Gresham House on 30 September 2021, a market leader that is well-resourced with knowledge and expertise in sustainability, the Investment Adviser aims to establish ESG procedures and protocols of the highest standards as set out and informed by Gresham House plc. The first tangible example of movement towards this revised approach is that that the individual members of the investment team now have their own individual ESG objectives set which align with the wider ESG goals of the Investment Adviser.

Gresham House published its second Sustainable Investment Report in April 2022 that, along with existing asset specific policies, including the Public Equity Policy, can be found on its website www.greshamhouse.com. These reports and policies cover the Investment Adviser's sustainable investment commitments, how the investment processes meet these commitments and the application of the sustainable investment framework. The Gresham House Board and General Management Committee assess the adherence to the commitments in the Sustainable Investment Policies on an annual basis.

In a changing world, the Investment Adviser believes that this approach will contribute towards the enhancement of Shareholder value going forward.

Outlook

Whilst the period under review has been marked with volatility and uncertainty as a result of a number of factors affecting both the global and UK economy, the portfolio has continued to trade well. Even so, negative market sentiment has impacted valuations, particularly those of the AIM-listed stocks. Global supply issues and inflationary pressures are starting to cause a noticeable impact on consumer confidence. Although there are challenging times ahead, nevertheless the Company has achieved a positive return for the period and with new investment remaining buoyant. The Investment adviser therefore remains cautiously optimistic that the portfolio will continue to provide healthy returns for shareholders.

Gresham House Asset Management Limited

Investment Adviser

25 May 2022

INVESTMENT PORTFOLIO SUMMARY as at 31 March 2022

Statement of the Directors' Responsibilities 

Responsibility statements

In accordance with Disclosure and Transparency Rule (DTR) 4.2.10, Maurice Helfgott (Chairman) and Justin Ward

(Chairman of the Audit, Investment and Nomination & Remuneration Committees), being the Directors of the Company, confirm that to the best of their knowledge:

a) The condensed set of financial statements, which has been prepared in accordance with Financial Reporting Standard 104 "Interim Financial Reporting" gives a true and fair view of the assets, liabilities, financial position and profit of the Company as required by DTR 4.2.10;

b) the Half-Year Management Report, which comprises the Chairman's Statement, Investment Policy, Investment Review and Investment Portfolio Summary, includes a fair review of the information required by DTR 4.2.7, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements;

c) a description of the principal risks and uncertainties facing the Company for the remaining six months is set out under the following heading, in accordance with DTR 4.2.7; and

d) there were no related party transactions in the first six months of the current financial year that are required to be disclosed, in accordance with DTR 4.2.8.

Principal risks and uncertainties

In accordance with DTR 4.2.7, the Board confirms that the principal risks and uncertainties facing the Company have not materially changed from those identified in the Annual Report and Financial Statements for the year ended 30 September 2021 ("the Annual Report"). The occurrence of the COVID-19 pandemic and the war in Ukraine have created heighted uncertainty but has not changed the nature of the principal risks. The Board considers that the present processes for mitigating those risks remain appropriate.

The principal risks faced by the Company are:

· Investment and liquidity;

· Loss of approval as a Venture Capital Trust;

· Regulatory;

· Economic, political and other external risks;

· Financial and operating; and

· Market liquidity;

A detailed explanation of the principal risks facing the Company can be found in the Annual Report as well as in Note 16 on Financial Instruments in that report. Copies can be viewed or downloaded from the Company's website: www.incomeandgrowthvct.co.uk.

Going concern

The Board has assessed the Company's operation as a going concern. The Company's business activities, together with the factors likely to affect its future development, performance and position are set out earlier in the Half Year management report which comprises the Chairman's Statement, Investment Policy, Investment Adviser's Review and Investment Portfolio Summary. The Directors have satisfied themselves that the Company continues to maintain a significant cash position. The majority of companies in the portfolio are well funded and the portfolio taken as a whole remains resilient and well diversified, although the continuing impact of COVID-19, Brexit, and Russia's invasion of Ukraine, may impose further considerable demands upon the liquidity and trading prospects of some of these companies in the near-term. The major cash outflows of the Company (namely investments, share buybacks and dividends) are within the Company's control. The Board's assessment of liquidity risk and details of the Company's policies for managing its capital and financial risks are shown in Notes 16 and 17 of the Annual Report and Financial Statements. Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the Interim report and financial statements.

Cautionary statement

This report may contain forward looking statements with regard to the financial condition and results of the Company, which are made in the light of current economic and business circumstances. Nothing in this report should be construed as a profit forecast.

For and on behalf of the Board:

Maurice Helfgott

Chairman

25 May 2022

UNAUDITED CONDENSED FINANCIAL STATEMENTS

Unaudited Condensed Income Statement for the six months to 31 March 2022

The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the net investment portfolio gains (unrealised gains 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") issued by the Association of Investment Companies ("AIC") and updated in April 2021, 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 period/year.

The notes to the unaudited financial statements below form part of these Half-Year Financial Statements.