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19 Jun 2019 13:49
MOBEUS INCOME & GROWTH 2 VCT PLC
Annual Results Announcement for the financial year ended 31 March 2019
Mobeus Income & Growth 2 VCT plc (the "Company") today announces its final results for the financial year ended 31 March 2019. These results were approved by the Board of Directors on 19 June 2019.
You may, in due course, view the Annual Report & Financial Statements, comprising the statutory accounts of the Company, by visiting www.mig2vct.co.uk.
FINANCIAL HIGHLIGHTS
As at 31 March 2019:
Net assets: £48.73 million
Net asset value ("NAV") per share: 99.60 pence
· | Net asset value ("NAV") total return per share was 8.4%* and share price total return per share was 4.6%* for the year. |
· | Shareholders received an interim dividend of 5.00 pence per share in respect of the year ended 31 March 2019, which was paid on 22 March 2019. |
· | The Company realised investments for a total of £2.88 million, a gain of £0.60 million for the year. |
· | The Company invested a total of £2.90 million into two new growth capital and five follow-on investments during the year. |
*Further details on these alternative performance measures ("APMs") are contained in the Strategic Report within the Annual Report.
Performance Summary
The table below shows the recent past performance of the current share class, first raised in 2005/06 at an original subscription price of 100 pence per share before the benefit of income tax relief. Performance data for all fundraising rounds can be found in the Annual Report.
Reporting date as at | Net assets (£ m) | Net asset value (NAV) per share (p) | Share price1 (mid-market price) (p) | Cumulative dividends paid per share (p) | Cumulative total return per share since launch2 | Dividends paid and proposed in respect of each year (p) | |
(NAV basis) | (Share price basis) | ||||||
(p) | (p) | ||||||
31 March 2019 | 48.73 | 99.60 | 85.50 | 83.00 | 182.60 | 168.50 | 5.00 |
31 March 2018 | 47.60 | 96.54 | 86.50 | 78.00 | 174.54 | 164.50 | 16.00 |
31 March 2017 | 38.06 | 106.70 | 94.50 | 62.00 | 168.70 | 156.50 | 15.00 |
31 March 2016 | 43.14 | 119.61 | 105.25 | 47.00 | 166.61 | 152.25 | 5.00 |
31 March 2015 | 42.10 | 115.45 | 104.50 | 42.00 | 157.45 | 146.50 | 19.00 |
1 Source: Panmure Gordon & Co (mid-market price).
2 Cumulative total return per share comprises the NAV per share (NAV basis) or the mid-market price per share (share price basis) plus cumulative dividends paid to date on the current share class launched in 2005.
CHAIRMAN'S STATEMENT
I am pleased to present the annual results of Mobeus Income & Growth 2 VCT plc for the year ended 31 March 2019.
Overview
This has been a year of good performance by the Company. Returns to shareholders have been positive, principally due to a rise in the value of the unrealised portfolio and an increase in income. During the year, the Company made investments into two new companies, provided follow-on funding to five existing portfolio companies and realised its investment in three portfolio companies. Further details of this investment activity can be found under the 'Investment portfolio' section of my Statement below and in the Investment Review in the Annual Report.
The Company and the Investment Adviser have responded well to the significant changes in the VCT Rules introduced by the Finance (No 2) Act 2015. At the year end, the investment portfolio was divided almost equally between more mature, MBO type investments, and younger growth capital investments. Within this, 14 growth capital investments valued at £10.37 million have been completed since the 2015 VCT rule changes.
The Investment Adviser continues to report an interesting pipeline of further growth capital opportunities and a further two new investments have been completed since the year end. Meanwhile, the more mature portfolio constructed under the previous rules continues to provide a healthy income yield.
Performance
The NAV total return per share for the year was 8.4% (2018: 5.5%) (closing NAV per share plus dividends paid per share in the year less the opening NAV per share, as a percentage of the opening NAV per share). These returns, expressed on a pence per share basis, were derived as follows:
Year ended 31 March | 2019 | 2018 |
(pence per share) | (pence per share) | |
Net realised and unrealised gains on the investment portfolio | 6.41 | 4.08 |
Income from the investment portfolio and on liquid assets | 4.48 | 3.48 |
Share buybacks and adjustments | 0.07 | 1.09 |
Gross return | 10.96 | 8.65 |
Less: Investment Adviser's fees and other expenses | (2.90) | (2.81) |
Net return | 8.06 | 5.84 |
NAV total return per share | 8.4% | 5.5% |
After accounting for interim dividends of 5.00 pence per share paid during the year and a net return of 8.06 pence, the NAV per share at the year end was 99.60 pence, compared to 96.54 pence at the start of the financial year.
The share price total return for the year, also after accounting for the dividends paid, was 4.6% (compared with 8.5% for the previous year).
Your Board regards these returns as very encouraging in the context of the significant changes in the VCT rules. Most of the positive returns were derived from the more mature investments within the portfolio, whereas the growth portfolio investments will take time to achieve scale and improve profitability.
At the year end, your Company was ranked 15th out of 39 Generalist VCTs, over the last five years, in the Association of Investment Companies' analysis of NAV cumulative total return.
For further details on the performance of the Company, please refer to the Performance section of the Strategic Report and the Performance Data in the Annual Report.
Target Return
Since the start of the financial year ended 31 March 2018, the Board has reintroduced its target of achieving an average NAV total return of 8.0% per annum, following a year in which the target was suspended after the introduction of the new VCT rules. For the year under review this was 8.4% (2018: 5.5%), while the average over two years is 6.9% per annum.
Dividends
The Board declared an interim dividend of 5.00 pence per share (2018: 16.00 pence) in respect of the year ended 31 March 2019, which was paid to shareholders on 22 March 2019. This dividend brought cumulative dividends paid since inception to 83.00 pence (2018: 78.00 pence) per share.
The Board's policy of paying a regular dividend, at a level of not less than its target (currently 5.00 pence per share) in respect of each financial year, has been exceeded in each of the last nine years.
While the Board still believes in the attainment of the dividend target, the increasing proportion of the portfolio comprised of growth capital investments is likely to result, at least in the short to medium-term, in lower income returns and potentially lower dividend payments than have been paid in the recent past.
However, shareholders should also note that there may be circumstances where the Company is required to pay dividends in order to maintain its regulatory status as a VCT, for example to stay above the minimum percentage of assets required to be held in qualifying investments, which will increase to 80% on 1 April 2020. Shareholders should note that, to the extent this is necessary, it will correspondingly reduce the Company's NAV per share.
A chart showing the annual and cumulative dividends paid in respect of each of the last five years is included in the Performance section of the Strategic Report within the Annual Report.
Investment Portfolio
For the year under review, the value of the investment portfolio increased by £3.13 million, due to an increase of £0.60 million from investments realised and an increase of £2.53 million on investments still held.
The portfolio valuation movements for the year were as follows:
£m | |
Portfolio value at 31 March 2018 | 26.89 |
Valuation movements | 2.53 |
New and follow-on investments | 2.90 |
Disposal proceeds | (2.88) |
Realised gains | 0.61 |
Portfolio value at 31 March 2019 | 30.04 |
The portfolio achieved a net increase of £2.53 million on unrealised investments still held in the portfolio during the year, with positive increases from ASL, EOTH (Rab and Lowe Alpine) and Auction Technology Group, partially offset by valuation decreases at BookingTek, Wetsuit Outlet and Redline.
During the year, £2.90 million was invested into two new growth capital investments and five existing portfolio companies (analysed in the Investment Adviser's Review and explained within Note 8 to the Financial Statements in the Annual Report) as follows:
New - (£0.65 million):
· Rotageek, a provider of workforce management software; and
· Grow Kudos, a digital platform for dissemination of research.
Follow on - (£2.25 million):
· MyTutor, a digital marketplace connecting people seeking online tutoring;
· Preservica, a seller of proprietary digital archiving software;
· Biosite, a provider of biometric access control and software-based workforce management solutions for the construction sector;
· Proactive, a provider of investor media services; and
· MPB, an online marketplace for used camera and video equipment.
The new and follow-on investments may require further capital investments as they seek to achieve scale.
After the year end, further amounts totalling £1.46 million were invested into two new companies, comprising an investment of £0.91 million into Arkk Consulting, a regulatory and reporting requirement service and product provider, and an investment of £0.55 million into Parsley Box, a supplier of home delivered ambient ready meals for the elderly.
Cash proceeds totalling £2.88 million for the year were received from portfolio companies. Of this total, £1.32 million was received as cash proceeds from the sales of Fullfield (trading as Motorclean), Hemmels and Lightworks, with a further £1.56 million being received as loan and share capital repayments, and deferred consideration.
For the year under review, the portfolio generated a net gain of £0.60 million from the realisation of investments. The majority of this gain was from the sale of the Company's investments in Lightworks and Motorclean (which were realised at a profit over opening valuation of £0.48 million and £0.14 million respectively). The Company also gained £0.22 million from further receipts relating to companies realised in a prior year. The gains were partially offset by a loss incurred from the sale of Hemmels (£0.24 million). The loss on the sale of Hemmels is explained further in the Investment Adviser's Review. It serves to remind shareholders that investing in relatively early stage smaller companies (as required by the terms of the new VCT regulations) is inherently riskier than investing in more established companies with longer track records.
After the year end, the Company realised its investment in Plastic Surgeon realising proceeds of £1.18 million and generating a multiple on cost of 5.6x over the life of the investment.
For further information on all aspects of the investment portfolio above, please read the Investment Adviser's Review.
Liquidity
At 31 March 2019, the Company had net assets of £48.73 million (2018: £47.60 million), comprised of £30.04 million in investments (2018: £25.85 million) and liquid assets of £18.66 million (2018: £21.59 million). Liquid assets thus represented 38.3% (2018: 45.4%) of net assets at the year end.
Fundraising
From its ongoing assessment of the Company's future cash flows, the Board presently expects that it will be necessary to raise funds within the 2019/20 tax year. The Board will notify shareholders of any intention to launch an offer for subscription at the earliest opportunity.
Share buybacks
During the year under review, the Company bought back a total of 379,029 shares for cancellation. The buybacks represented 0.8% (2018: 1.9%) of the issued share capital of the Company at the beginning of the financial year. Further details of the Company's Share Buyback Policy are included in the Directors' Report in the Annual Report.
Shareholder Event
This year's annual shareholder event was held on 5 February 2019 at the Royal Institute of British Architects in central London. Separate day-time and evening sessions included presentations on the Mobeus advised VCTs' investment activity and performance. We have received positive feedback from those who attended the event, which numbered around 350, and were pleased to hear that they found the day informative and worthwhile. The next shareholder event will be held in the first quarter of 2020.
Annual General Meeting
The Annual General Meeting of the Company will be held at 11.00 am on Wednesday, 11 September 2019 at The Clubhouse, 8 St James's Square, London SW1Y 4JU. Both the Board and the Investment Adviser look forward to welcoming shareholders to the meeting which will include a presentation from the Investment Adviser on the investment portfolio. Shareholders are encouraged to attend and to ask questions of the Board and Investment Adviser. The Notice of the meeting is included in the Annual Report and an explanation of the resolutions to be proposed can be found in the Directors' Report in the Annual Report.
Outlook
Your Board considers that your Company is well positioned, with the portfolio equally divided between more mature investments providing attractive income returns, and younger growth capital companies seeking to achieve scale, and hence value.
The demand for growth capital investment is strong and the amount of capital available for investment in the sector is currently substantial, giving rise to increased competition and higher entry valuations for the most attractive investment opportunities.
While the new growth capital element of the portfolio is still young, both your Board and the Investment Adviser will seek to assess, balance and diversify the risks within the growing proportion of the overall portfolio that these investments will represent. Your Board cautions that investing in such earlier stage companies involves increased risk, as those that succeed often take longer to achieve scale, while those less successful may emerge first. Returns could therefore take longer to emerge and the performance of these businesses may be more volatile, but it is anticipated that these factors will be offset by longer-term gains.
The Board and Investment Adviser have carried out an analysis of the possible impact of Brexit on the investment portfolio. The portfolio as a whole is predominantly UK centric and the greatest risk from Brexit is from the boarder impact on the UK economy. Some value impact is possible over time, but Mobeus believes that the portfolio companies have appropriate plans in place and are as well prepared for Brexit as they can be at this point. The Board continues to monitor closely the impact of Brexit and the present political uncertainties upon the economic environment within which the Company operates.
Finally, I would like to take this opportunity to thank all shareholders for their continued support.
Ian Blackburn
Chairman
19 June 2019
INVESTMENT POLICY
The investment policy is designed to meet the Company's objective.
Investments
The Company invests primarily in a diverse portfolio of UK unquoted companies. Investments are made selectively across a number of sectors, principally in established companies. Investments are usually structured as part loan stock and part equity in order to produce a regular income stream and to generate capital gains from realisations.
There are a number of conditions within the VCT legislation which need to be met by the Company and which may change from time to time. The Company will seek to make investments in accordance with the requirements of prevailing VCT legislation.
Asset allocation and risk diversification policies, including the size and type of investment the Company makes, are determined in part by the requirements of prevailing VCT legislation. No single investment may represent more than 15% (by VCT tax value) of the Company's total investments at the date of investment.
Liquidity
The Company's cash and liquid funds are held in a portfolio of readily realisable interest bearing investments, deposit and current accounts, of varying maturities, subject to the overriding criterion that the risk of loss of capital be minimised.
Borrowing
The Company's articles of association permit borrowings of amounts up to 10% of the adjusted capital and reserves (as defined therein). However, the Company has never borrowed and the Board would only consider doing so in exceptional circumstances.
INVESTMENT ADVISER'S REVIEW
Demand for growth capital investment remains strong and there is a significant pipeline of investment opportunities. It is expected that the current pace and quantum of new and follow-on investments will continue or increase in the short to medium-term.
Portfolio Review
The portfolio's activity in the year is summarised as follows:
2019 £m | 2018 £m | |
Opening portfolio value | 26.89 | 28.08 |
New and follow-on investments | 2.90 | 2.73 |
Disposal proceeds | (2.88) | (5.94) |
Net realised gains | 0.60 | 2.77 |
Valuation movements | 2.53 | (0.75) |
Portfolio value at 31 March | 30.04 | 26.89 |
This has been a year of further solid progress building the growth capital portfolio with two investments into new growth businesses totalling £0.65 million and five existing growth portfolio companies receiving follow-on funding totalling £2.25 million. Net cash proceeds of £2.88 million were received, primarily from three realisations.
Further details are contained later in this Review.
Since the change in VCT rules in 2015, the Company has invested £10.37 million (by latest value) in younger growth capital investments, bringing the proportion of the portfolio held in growth capital investments since the rule change to 50% by value at the year end.
After the year end, the Company made two further investments totalling £1.46 million into Arkk Consulting and Parsley Box, further details of which are given later in this Review.
Details of the valuation movements for each investee company are provided at the end of this Investment Review.
The portfolio's contribution to the overall results of the VCT is as follows:
Investment Portfolio Capital Movement | 2019 £m | 2018 £m |
Increase in the value of unrealised investments | 4.74 | 3.14 |
Decrease in the value of unrealised investments | (2.21) | (3.89) |
Net increase/(decrease) in the value of unrealised investments | 2.53 | (0.75) |
Realised gains | 0.84 | 2.77 |
Realised (losses) | (0.24) | - |
Net realised gains in the year | 0.60 | 2.77 |
Valuation changes of portfolio investments still held
The principal contributors to the valuation increases of £4.74 million were: ASL Technology £1,064k, EOTH (Rab and Lowe Alpine) £449k, and Turner Topco (trading as Auction Technology Group) £421k.
ASL's core business is trading well and, following two recent corporate acquisitions, is beginning to benefit from associated synergies. EOTH achieved a record period of profitability, underpinned by continued growth in its Rab brand. Auction Technology Group, which the VCT part realised in 2014, is trading well ahead of budget with growth showing in all areas of its business.
The main reductions within total valuation decreases of (£2.21) million were: BookingTek (£588k), Wetsuit Outlet (£519k) and Redline (£348k). BookingTek has experienced delays to the roll out of its software which has resulted in turnover being lower than budget. Wetsuit Outlet has had a disappointing year post investment, with growth in profitability not being achieved as envisaged. Management has since implemented several measures to restore margins. Finally, Redline's revenues have been unpredictable and sales in recent months have been lower than planned which has impacted valuation.
A small number of new growth investments have shown initial uplifts from cost, due in large part to the structure of the Company's investment, but, in some cases, also due to the underlying investee company performance.
Realised gains and losses from sales of investments
During the financial year, the Company achieved a net realised gain on the sale of investments of £0.60 million. The largest gain was £0.48 million from the sale of Lightworks to Siemens PLM Software. The gain from the sale of Motorclean back to its management was £0.14 million, whereas a loss of (£0.24) million was incurred from the sale of Hemmels to its largest customer. Although the Hemmels loss was modest, arising shortly after the initial investment, it was unexpected and illustrates the inherent higher risk of investing in early stage growth companies.
The Company also realised a gain in the year from deferred consideration of £0.22 million from past realisations.
In addition to deferred consideration receipts of £0.22 million and sales proceeds from disposals of investments of £1.32 million referred to above, the Company also received loan stock repayments of £1.20 million and preference share repurchases of £0.14 million, both at cost.
After the year end, the Company realised its investment in Plastic Surgeon realising proceeds of £1.18 million and generating a multiple on cost of 5.6x over the life of the investment. These proceeds exceed the valuation of Plastic Surgeon at the year end by £0.30 million.
Investment portfolio yield and capital repayments
During the year under review, the Company received the following amounts in interest and dividend income:
Investment Portfolio Yield | 2019 £m | 2018 £m |
Interest received in the year | 1.55 | 1.55 |
Dividends received in the year | 0.51 | 0.11 |
Total portfolio income in the year1 | 2.06 | 1.66 |
Portfolio Value at 31 March | 30.04 | 26.89 |
Portfolio Income Yield (income as a % of Portfolio value at 31 March) | 6.9% | 6.2% |
1 Total portfolio income in the year is generated solely from investee companies within. See the Financial Statements for all income receivable by the Company.
New investments in the year
£0.65 million was invested into two new investments during the year as detailed below:
Company | Business | Date of Investment | Amount of new investment (£m) |
Rotageek | Workforce management software | August 2018 | 0.37 |
Rotageek is a provider of cloud-based enterprise software to help larger retail and leisure organisations predict and meet demand to schedule staff effectively. This investment will be used for further technology development and to grow sales from enterprise clients. The company's unaudited accounts for the year ended 31 December 2017 show revenues of £0.90 million and a loss before interest, tax and amortisation of goodwill of £(1.57) million. | |||
Grow Kudos | Platform for the dissemination of research | November 2018 | 0.28 |
Grow Kudos is an online platform which provides and promotes research dissemination. The Kudos product was developed to allow researchers to increase the impact and readership of their work and to track and analyse distribution both within academia and across broader audiences. The investment will be used principally to increase its head count to support sales growth. The company's unaudited accounts for the year ended 31 December 2017 show revenues of £0.53 million and a loss before interest, tax and amortisation of goodwill of £(0.59) million. | |||
Further investments in existing portfolio companies in the year
£2.25 million was invested into five existing portfolio companies during the year as detailed below:
Company | Business | Date of investment | Amount of new investment (£m) |
MyTutor | Online tutoring | May 2018 | 0.63 |
My Tutor is a digital marketplace that connects school pupils who are seeking private one-to-one tutoring with university students. The business is satisfying a growing demand from both schools and parents to improve pupils' exam results to enhance their academic and career prospects. This investment supports an opportunity to consolidate the sizeable £2bn UK tutoring market, grow My Tutor's market presence and drive technological development within the company. The company's unaudited accounts for the year ended 31 December 2017 show turnover of £0.56 million and a loss before interest, tax and amortisation of goodwill of £(1.40) million. | |||
Preservica | Seller of proprietary digital archiving software | September 2018 | 0.65 |
Preservica has developed market leading software for the long-term preservation of digital records ensuring that digital content can remain accessible, irrespective of future changes in technology. Previously a division of the Company's former portfolio company Tessella, Preservica was demerged prior to the sale of Tessella in December 2015. The investment provides additional growth capital to finance the development of the business. The company's audited accounts for the year ended 31 March 2018 show turnover of £2.85 million and a loss before interest, tax and amortisation of goodwill of £(1.93) million. | |||
Biosite | Workforce management and security services | October 2018 | 0.54 |
Based in the Midlands, Biosite is a provider of biometric access control and software-based workforce management solutions for the construction sector. The business is growing significantly and this investment will support the further development of software and hardware products. The company's audited accounts for the year ended 31 July 2018 show turnover of £9.76 million and a loss before interest, tax and amortisation of goodwill of £(0.64) million. | |||
Proactive Investors | Investor media services | October 2018 | 0.34 |
Proactive Investors specialises in timely multi-media news provision, events organisation, digital services and investor research. Proactive provides breaking news, commentary and analysis on hundreds of small-cap listed companies and pre-IPO businesses across the globe. This planned follow-on investment will enable Proactive to continue to expand its services into the US market, which is the largest global market for investor media services. The company's unaudited accounts for the year ended 30 June 2018 show turnover of £4.75 million and a loss before interest, tax and amortisation of goodwill of £(0.31) million. | |||
MPB Group | Online marketplace for used camera and video equipment | October and December 2018 | 0.09 |
MPB is Europe's leading online marketplace for used camera and video equipment. Based in Brighton, its custom-designed pricing technology enables MPB to offer both buy and sell services through the same platform and offers a one-stop shop for all its customers. Having expanded into the US (opening a New York office) and German markets as part of the initial VCT investment round, this follow-on investment, alongside funds provided by the Proven VCTs, is to support its continued growth plan. Having doubled its sales over the last year, this investment will give the company sufficient capital to achieve its next phase of expansion. The company's audited accounts for the year ended 31 March 2018 show turnover of £21.71 million and a loss before interest, tax and amortisation of goodwill of £(2.00) million. | |||
Realisations during the year
The Company realised its investments in Fullfield (trading as Motorclean), Hemmels and Lightworks during the year, generating an aggregate net realised gain of £0.38 million. Net cash proceeds received from the sale of these investments totalled £1.32 million, as detailed below.
Company | Business | Period of investment | Total cash proceeds over the life of the investment / Multiple over cost | ||
Fullfield (Motorclean) | Vehicle cleaning and valet services | July 2011 to August 2018 | £2.13 million 1.2 times cost | ||
The Company sold its investment in Fullfield (trading as Motorclean) back to management in August 2018, receiving cash proceeds of £0.58 million (realised gain in the year: £0.14 million). This realisation contributed to a return of 1.2 times the original investment cost and an IRR of 5.0% in the seven years that this investment was held. | |||||
Hemmels | Classic car restorer | March 2018 to September 2018 | £0.21 million 0.5 times cost | ||
The Company sold its investment in Hemmels to the business's largest customer for £0.20 million in September 2018, resulting in a realised loss of £(0.24) million on the original investment cost over the six months the investment was held. The investment was realised six months after the original investment after it became clear that the company's financial situation and prospects were significantly at variance to expectations. | |||||
Lightworks | Provider of software for CAD and CAM vendors | March 2011 to September 2018 | £0.56 million 21.7 times cost | ||
The Company sold its investment in Lightworks to Siemens PLM Software for £0.54 million (realised gain in the year: £0.48 million) in September 2018, generating a realised a gain over the life of the investment of £0.53 million. This equates to a multiple of 21.7 times the investment cost of £0.03 million and an IRR of 55.9%. | |||||
The Company also received loan repayments totalling £1.20 million (notably Hollydale Management: £0.35 million), deferred consideration from investments realised in a previous year of £0.22 million and preference share repurchases of £0.14 million.
Net realised gains on the three disposals above of £0.38 million, increased by deferred consideration gains of £0.22 million, equal the total realised gain for the year of £0.60 million, as shown in both tables at the start of this Review.
New investments made after the year end
The Company made two new investments totalling £1.46 million after the year end, as detailed below:
Company | Business | Date of Investment | Amount of new investment (£m) |
Arkk Consulting | Regulatory and reporting requirement service provider | May 2019 | 0.91 |
Arkk Consulting (trading as Arkk Solutions) provides services and software to enable organisations to remain compliant with regulatory reporting requirements. Arkk was established in 2009 and currently has over 800 clients across 20 countries. These include more than 80 of the FTSE 350, and half of the largest 20 accountancy firms in the UK. The investment will build on Arkk's reputation and customer base, to target the cloud based period end reporting market by building the sales and marketing team. The company's unaudited accounts for the year ended 31 December 2017 show turnover of £3.18 million and a profit before interest, tax and amortisation of goodwill of £0.52 million. | |||
Parsley Box | Home delivered ambient ready meals for the elderly | May 2019 | 0.55 |
Parsley Box is a UK direct to consumer supplier of home delivered ambient ready meals for the elderly. Founded in 2017, Parsley Box has grown rapidly and has developed a unique meal delivery solution for its customers. The company supplies a diverse range of ambient meals via next day delivery which are easy to store and aim to contribute to a more independent and healthier lifestyle. The investment will scale the company's marketing strategy, enable it to process larger order volumes and continue to build out its team. The company's unaudited accounts for the period ended 31 March 2018 show revenues of £0.25 million and a loss before interest, tax and amortisation of goodwill of £(0.21) million. | |||
Realisation after the year end
The Company realised its investment in Plastic Surgeon after the year end, as detailed below:
Company | Business | Period of investment | Total cash proceeds over the life of the investment / Multiple over cost |
Plastic Surgeon | Supplier of snagging and finishing services to the property sector | April 2008 to May 2019 | £2.19 million 5.6 times cost |
The Company sold its remaining investment in Plastic Surgeon to Polygon Group for £1.18 million. Over the eleven years this investment was held, it generated proceeds of £2.19 million compared to an original investment cost of £0.39 million which is a multiple on cost of 5.6x and an IRR of 20.5%. | |||
Mobeus Equity Partners LLP
Investment Adviser
19 June 2019
Investment Portfolio Summary
at 31 March 2019
Qualifying investments | Total Book Cost at 31 March 2019 £ | Valuation at 31 March 2018 £ | Valuation at 31 March 2019 £ | % of Net assets by value |
Unquoted investments | ||||
ASL Technology Holdings Limited Printer and photocopier services | 2,092,009 | 2,126,379 | 3,190,292 | 6.5 |
Tovey Management Limited (trading as Access IS) Provider of data capture and scanning hardware | 1,733,500 | 2,027,582 | 2,314,753 | 4.8 |
EOTH Limited (trading as Rab and Lowe Alpine) Branded outdoor equipment and clothing | 817,185 | 1,521,873 | 1,970,986 | 4.0 |
Preservica Limited Seller of proprietary digital archiving software | 1,133,464 | 865,666 | 1,620,741 | 3.3 |
Virgin Wines Holding Company Limited Online wine retailer | 1,284,333 | 1,371,490 | 1,556,726 | 3.2 |
Pattern Analytics Limited (trading as Biosite) Workforce management and security services for the construction industry | 1,036,002 | 743,219 | 1,531,481 | 3.1 |
Turner Topco Limited (trading as Auction Technology Group) SaaS based online auction market place platform | 1,317,100 | 77,645 | 1,198,168 | 2.5 |
MPB Group Limited Online marketplace for used photographic and video equipment | 819,773 | 1,254,114 | 1,180,748 | 2.4 |
Vian Marketing Limited (trading as Red Paddle Co) Design, manufacture and sale of stand-up paddleboards and windsurfing sails | 717,038 | 987,179 | 1,180,612 | 2.4 |
Master Removers Group Limited (trading as Anthony Ward Thomas, Bishopsgate and Aussie Man & Van) A specialist logistics, storage and removals business | 369,625 | 874,317 | 1,113,167 | 2.3 |
My Tutorweb Limited Digital marketplace connecting school pupils seeking one-to-one online tutoring | 979,834 | 349,661 | 979,834 | 2.0 |
Vectair Holdings Limited Designer and distributor of washroom products | 60,293 | 740,670 | 972,093 | 2.0 |
CGI Creative Graphics International Limited Vinyl graphics to global automotive, recreation vehicle and aerospace markets | 999,568 | 1,030,727 | 964,132 | 2.0 |
Manufacturing Services Investment Limited (trading as Wetsuit Outlet) Online retailer in the water sports market | 1,412,992 | 1,412,992 | 893,985 | 1.8 |
Proactive Group Holdings Inc Provider of media services and investor conferences for companies primarily listed on secondary public markets | 635,346 | 288,952 | 883,102 | 1.8 |
The Plastic Surgeon Holdings Limited (formerly TPSFF Holdings Limited) Snagging and finishing of domestic and commercial properties | 39,444 | 731,523 | 875,502 | 1.8 |
Tharstern Group Limited Software based management information systems to the print sector | 789,815 | 887,870 | 842,506 | 1.7 |
Ibericos Etc. Limited (trading as Tapas Revolution) Spanish restaurant chain | 812,248 | 854,224 | 811,028 | 1.7 |
Blaze Signs Holdings Limited Manufacturer and installation of signs | 437,030 | 639,342 | 807,949 | 1.7 |
Media Business Insight Holdings Limited A publishing and events business focused on the creative production industries | 1,447,188 | 651,225 | 770,532 | 1.6 |
Rota Geek Limited Workforce management software | 366,600 | - | 619,101 | 1.3 |
Buster and Punch Holdings Limited Industrial inspired lighting and interiors retailer | 436,391 | 553,896 | 608,509 | 1.2 |
RDL Corporation Limited Recruitment consultants for the pharmaceutical, business intelligence and IT industries | 1,000,000 | 515,476 | 494,929 | 1.0 |
Bourn Bioscience Limited Management of In-vitro fertilisation clinics | 757,101 | 558,620 | 383,189 | 0.8 |
Redline Worldwide Limited Provider of security services to the aviation industry | 682,222 | 689,047 | 341,107 | 0.7 |
Kudos Innovations Limited Online platform that provides and promotes research dissemination | 277,950 | - | 277,950 | 0.6 |
Super Carers Limited Online platform that connects people seeking home care from experienced independent carers | 384,720 | 384,720 | 192,360 | 0.4 |
BookingTek Limited Direct booking software for hotel groups | 504,336 | 714,211 | 126,084 | 0.3 |
Jablite Holdings Limited Manufacturer of expanded polystyrene products | 281,398 | 171,931 | 91,600 | 0.2 |
Veritek Global Holdings Limited Maintenance of imaging equipment | 967,780 | 102,972 | 49,432 | 0.1 |
Racoon International Group Limited Supplier of hair extensions, hair care products and training | 906,935 | - | - | 0.0 |
Fullfield Limited (trading as Motorclean) Vehicle cleaning and valet services | - | 433,939 | - | 0.0 |
Lightworks Software Limited Provider of software for CAD and CAM vendors | - | 61,163 | - | 0.0 |
Total qualifying investments | 25,499,220 | 24,322,625 | 28,842,598 | 59.1 |
Non-qualifying Investments | ||||
Media Business Insight Limited | 561,884 | 568,576 | 672,742 | 1.4 |
Manufacturing Services Investment Limited (trading as Wetsuit Outlet) | 304,000 | 304,000 | 304,000 | 0.6 |
Tovey Management Limited (trading as Access IS) | 219,873 | 219,873 | 219,873 | 0.5 |
Hollydale Management Limited Company seeking to carry on a business in the food sector | 354,000 | 354,000 | - | 0.0 |
Backhouse Management Limited Company seeking to carry on a business in the motor sector | 339,400 | 169,700 | - | 0.0 |
Barham Consulting Limited Company seeking to carry on a business in the textile sector | 339,400 | 169,700 | - | 0.0 |
McGrigor Management Limited Company seeking to carry on a business in the pharmaceutical sector | 339,400 | 169,700 | - | 0.0 |
Creasy Marketing Services Limited Company seeking to carry on a business in the textile sector | 339,400 | 169,700 | - | 0.0 |
Hemmels Limited Company specialising in the sourcing, restoration, selling and servicing of high price, classic cars | 19,660 | 437,238 | - | 0.0 |
Racoon International Group Limited | 139,050 | - | - | 0.0 |
365 Agile Group plc (formerly Iafyds plc) Development of energy saving devices for domestic use | 254,586 | - | - | 0.0 |
Turner Topco Limited (trading as Auction Technology Group) | 3,863 | - | - | 0.0 |
Total non-qualifying investments | 3,214,516 | 2,562,487 | 1,196,615 | 2.5 |
Total investment portfolio | 28,713,736 | 26,885,112 | 30,039,213 | 61.6 |
Cash and current asset investments | - | 20,559,774 | 18,662,785 | 38.3 |
Total investments including cash and current asset investments | 28,713,736 | 47,444,886 | 48,701,998 | 99.9 |
Other current assets | - | 339,187 | 229,113 | 0.5 |
Current liabilities | (185,876) | (201,154) | (0.4) | |
Totals | 28,713,736 | - | - | - |
Net assets at the year end | - | 47,598,197 | 48,729,957 | 100.0 |
Principal risks
The Directors acknowledge the Board's responsibilities for the Company's internal control systems and have instigated systems and procedures for identifying, evaluating and managing the significant risks faced by the Company. This includes a key risk management review which takes place at each quarterly Board meeting. Further details of these are contained in the Corporate Governance section of the Directors' Report in the Annual Report.
The risk profile of the Company has changed as a result of the changes to the VCT Rules. As the Company's investment focus is on growth capital investments in younger companies it is anticipated that investment returns will be more volatile and will have a higher risk profile. The Board is confident that the Investment Adviser will continue to adapt to changes in investment requirements.
The principal risks identified by the Board are set out below:
Risk | Possible consequence | How the Board manages risk |
Political and Economic | Events such as a protracted period of political uncertainty, a change of government policy and/or an economic recession and movements in interest rates could affect trading conditions for smaller companies and consequently the value of the Company's qualifying investments. The impact of the UK's withdrawal from the EU upon the UK economy is uncertain.
| · The Board monitors (1) the portfolio as a whole to ensure that the Company invests in a diversified portfolio of companies and (2) developments in the macro-economic environment such as changes caused by withdrawal from the EU and movements in interest rates.
|
Investment and strategic | Investment in unquoted small companies can involve a higher degree of risk than investment in larger, and/or fully listed companies and will likely have more variable returns. Smaller companies often have limited product lines, markets or financial resources and may be dependent for their management on a smaller number of key individuals.
| · The Board regularly reviews the Company's investment strategy. · Investee companies are carefully selected by the Investment Adviser for recommendation to the Board. The investment portfolio is reviewed by the Board on a regular basis. · The Investment Adviser generally appoints a director to the board of each investee company. |
Loss of approval as a Venture Capital Trust and VCT regulatory changes | The Company must comply with section 274 of the Income Tax Act 2007 ("ITA") which allows it to be exempted from capital gains tax on investment gains. Any breach of these rules may lead to the Company losing its approval as a VCT, qualifying shareholders who have not held their shares for the designated holding period having to repay the income tax relief they obtained and that future dividends paid by the Company become subject to tax. The Company would also lose its exemption from corporation tax on capital gains.
The Company is required to comply with frequent changes to the VCT specific regulations relating to European State Aid regulations as enacted by the UK Government. Non-compliance could result in a loss of VCT status. | · The Board receives regular reports from Philip Hare & Associates LLP ("PHA") who have been retained to undertake an independent VCT status monitoring role. · The Company's VCT qualifying status is reviewed by PHA and the Investment Adviser on a regular basis. |
Regulatory | The Company is required to comply with the Companies Act, the listing rules of the UK Listing Authority and United Kingdom Accounting Standards. Changes to and breaches of any of these might lead to suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report. | · Regulatory and legislative developments are kept under review by the Company's solicitors and the Board. |
Financial and operating | Failure of the systems at any of the third party service providers that the Company has contracted with could lead to inaccurate reporting or monitoring. Inadequate controls could lead to the misappropriation or insecurity of assets.
| · The Board carries out an annual review of the internal controls in place and reviews the risks facing the Company at each quarterly Board meeting. · The Board reviews the performance of the service providers annually. |
Market | Movements in the valuations of the VCT's investments will, inter alia, be connected to movements in UK Stock Market indices.
| · The Board receives quarterly valuation reports from the Investment Adviser and remains focused on the investments being at fair value, after considering many factors, including the impact of market movements. · The Investment Adviser alerts the Board about any adverse movements. |
Asset liquidity | The Company's investments may be difficult to realise. | · The Board receives reports from the Investment Adviser and reviews the portfolio at each quarterly Board meeting. It carefully monitors investments where a particular risk has been identified.
|
Market liquidity | Shareholders may find it difficult to sell their shares at a price which is close to the net asset value given the limited secondary market in VCT shares. | · The Board regularly reviews its share buyback policy which seeks to mitigate market liquidity risk.
|
Cyber and Data Security | The Company and its shareholders may suffer losses in the event of the IT systems at principal suppliers being compromised by cyber attack. | · The Board monitors and seeks assurance from the VCT's principal suppliers in respect of the systems and processes they have adopted to counter these risks. |
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year and the Directors have elected to prepare the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for the Company for that period.
In preparing these Financial Statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· state whether the Financial Statements have been prepared in accordance with United Kingdom accounting standards, subject to any material departures disclosed and explained in the Financial Statements;
· prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;
· prepare a Strategic Report, a Directors' Report and Directors' Annual Remuneration Report which comply with the requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial Statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the Financial Statements contained therein.
Directors' responsibilities pursuant to Disclosure and Transparency Rule 4 of the UK Listing Authority
The Directors confirm to the best of their knowledge that:
(a) The Financial Statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, give a true and fair view of the assets, liabilities, financial position and the profit of the Company.
(b) The Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
Having taken advice from the Audit Committee, the Board considers that the Annual Report and Financial Statements, taken as a whole, as fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
Neither the Company nor the Directors accept any liability to any person in relation to the Annual Report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A and schedule 10A of the Financial Services and Markets Act 2000.
The names and functions of the Directors are stated in the Annual Report.
For and on behalf of the Board
Ian Blackburn
Chairman
19 June 2019
FINANCIAL STATEMENTS
Income Statement
for the year ended 31 March 2019
Year ended 31 March 2019 | Year ended 31 March 2018 | ||||||
Notes | Revenue | Capital | Total | Revenue | Capital | Total | |
£ | £ | £ | £ | £ | |||
Unrealised gains/(losses) on investments | 8 | - | 2,531,926 | 2,531,926 | - | (755,510) | (755,510) |
Realised gains on investments | 8 | - | 605,074 | 605,074 | - | 2,766,722 | 2,766,722 |
Income | 3 | 2,189,574 | - | 2,189,574 | 1,715,664 | - | 1,715,664 |
Investment Adviser's fees | 4a | (259,026) | (777,077) | (1,036,103) | (247,177) | (741,530) | (988,707) |
Other expenses | 4c | (320,722) | - | (320,722) | (348,568) | - | (348,568) |
Profit on ordinary activities before taxation | 1,609,826 | 2,359,923 | 3,969,749 | 1,119,919 | 1,269,682 | 2,389,601 | |
Taxation on profit on ordinary activities | 5 | (208,983) | 147,645 | (61,338) | (191,512) | 140,891 | (50,621) |
Profit for the year and total comprehensive income | 1,400,843 | 2,507,568 | 3,908,411 | 928,407 | 1,410,573 | 2,338,980 | |
Basic and diluted earnings per ordinary share: | 7 | 2.84p | 5.09p | 7.93p | 2.25p | 3.43p | 5.68p |
The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the unrealised gains/(losses) and realised gains on investments and the proportion of the Investment Adviser's fee and performance fee charged to capital.
The total column is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS"). In order to better reflect the activities of a VCT and in accordance with the 2014 Statement of Recommended Practice ("SORP") (updated in January 2017) by the Association of Investment Companies ("AIC"), supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of profit attributable to equity shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 Income Tax Act 2007.
All the items in the above statement derive from continuing operations of the Company. No operations were acquired or discontinued in the year.
Balance Sheet
As at 31 March 2019
31 March 2019 | 31 March 2018 | ||
Notes | £ | £ | |
Fixed assets | |||
Investments at fair value | 8 | 30,039,213 | 26,885,112 |
Current assets | |||
Debtors and prepayments | 229,113 | 339,187 | |
Current asset investments | 16,117,301 | 18,287,301 | |
Cash at bank | 2,545,484 | 2,272,473 | |
18,891,898 | 20,898,961 | ||
Creditors: amounts falling due within one year | (201,154) | (185,876) | |
Net current assets | 18,690,744 | 20,713,085 | |
Net assets | 48,729,957 | 47,598,197 | |
Capital and reserves | |||
Called up share capital | 489,251 | 493,042 | |
Share premium reserve | 30,498,349 | 30,498,349 | |
Capital redemption reserve | 98,089 | 94,298 | |
Revaluation reserve | 4,357,307 | 1,398,656 | |
Special distributable reserve | 4,391,645 | 6,052,525 | |
Realised capital reserve | 7,600,987 | 7,943,475 | |
Revenue reserve | 1,294,329 | 1,117,852 | |
Equity shareholders' funds | 48,729,957 | 47,598,197 | |
Basic and diluted net asset value per ordinary share | 99.60p | 96.54p | |
Statement of Changes in Equity
for the year ended 31 March 2019
Non-distributable reserves | Distributable reserves | Total | ||||||
Called up share capital | Share premium reserve | Capital redemption reserve | Revaluation reserve | Special distributable reserve | Realised capital reserve | Revenue Reserve | ||
(Note a) | (Note b) | (Note b) | ||||||
£ | £ | £ | £ | £ | £ | £ | £ | |
At 1 April 2018 | 493,042 | 30,498,349 | 94,298 | 1,398,656 | 6,052,525 | 7,943,475 | 1,117,852 | 47,598,197 |
Comprehensive income for the year | ||||||||
Profit/(loss) for the year | - | - | - | 2,531,926 | - | (24,358) | 1,400,843 | 3,908,411 |
Total comprehensive income for the year | - | - | - | 2,531,926 | - | (24,358) | 1,400,843 | 3,908,411 |
Contributions by and distributions to owners |
| |||||||
Shares bought back (note c) | (3,791) | - | 3,791 | - | (327,702) | - | - | (327,702) |
Dividends paid | - | - | - | - | - | (1,229,623) | (1,229,623) | (2,459,246) |
Dividends refunded | - | - | - | - | - | 5,040 | 5,257 | 10,297 |
Total contributions by and distributions to owners | (3,9791) | - | 3,791 | - | (327,702) | (1,224,583) | (1,224,366) | (2,776,651) |
Other movements | ||||||||
Realised losses transferred to special reserve (note a) | - | - | - | - | (1,333,178) | 1,333,178 | - | - |
Realisation of previously unrealised losses | - | - | - | 426,725 | - | (426,725) | - | - |
Total other movements | - | - | - | 426,725 | (1,333,178) | 906,453 | - | - |
At 31 March 2019 | 489,251 | 30,498,349 | 98,089 | 4,357,307 | 4,391,645 | 7,600,987 | 1,294,329 | 48,729,957 |
Notes a): The cancellation of the formerly named C Share Fund's share premium reserve (as approved at the Extraordinary General meeting held on 10 September 2008 and by the order of the Court dated 28 October 2009), together with the previous cancellation of the share premium reserve attributable to the former Ordinary Share Fund and C Shares, has provided the Company with a special distributable reserve. The purpose of this reserve is to fund market purchases of the Company's own shares as and when it is considered by the Board to be in the interests of the shareholders, to write-off existing and future losses as the Company must take into account capital losses in determining distributable reserves, to pay dividends and for any other corporate purpose. The total transfer of £1,333,178 from the realised capital reserve to the special distributable reserve above is the total of realised losses incurred by the Company in the year.
b): The realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the Company. This represents reserves earned through income and capital gains being in excess of costs that are thus available for distribution as dividends. These reserves, plus the Company's special distributable reserve, are available for distribution, the total balance of which stands at £13,286,961 at the year end (2018: £15,113,852).
c): During the year, the Company purchased 379,029 of its own shares at the prevailing market price for a total cost of £327,702, which were subsequently cancelled.
The composition of each of these reserves is explained below:
Called up share capital The nominal value of shares originally issued, increased for subsequent share issues either via an Offer for Subscription or reduced due to shares bought back by the Company.
Capital redemption reserve The nominal value of shares bought back and cancelled is held in this reserve, so that the company's capital is maintained.
Share premium reserve This reserve contains the excess of gross proceeds less issue costs over the nominal value of shares allotted under Offers for Subscription.
Revaluation reserve Increases and decreases in the valuation of investments held at the year-end are accounted for in this reserve, except to the extent that the diminution is deemed permanent. In accordance with stating all investments at fair value through profit and loss (as recorded in note 8), all such movements through both revaluation and realised capital reserves are shown within the Income Statement for the year.
Special distributable reserve The cost of share buybacks is charged to this reserve. In addition, any realised losses on the sale (excluding transaction costs) of an investment or if an investment has permanently fallen in value, and 75% of the Investment Adviser's fee and 100% of any performance fee expense, and the related tax effect, are transferred from the realised capital reserve to this reserve. The cost of any IFA facilitation fee payable as part of the Offer for Subscription is also charged to this reserve. This does not include IFA trail commission which is an expense that is accounted for in the Revenue reserve.
Realised capital reserve The following are accounted for in this reserve:
· Gains and losses on realisation of investments; · Permanent diminution in value of investments; · Transaction costs incurred in the acquisition and disposal of investments; · 75% of the Investment Adviser's fee (subsequently transferred to the Special distributable reserve along with the related tax effect) and 100% of any performance fee payable, together with the related tax effect to this reserve in accordance with the policies, and · Capital dividends paid.
Revenue reserve Income and expenses that are revenue in nature are accounted for in this reserve together with the related tax effect, as well as income dividends paid that are classified as revenue in nature.
| |||||||||||||
Statement of Changes in Equity for the year ended 31 March 2018
| |||||||||||||
|
| ||||||||||||
| Non-distributable reserves | Distributable reserves | Total |
| |||||||||
| Called up share capital | Share Premium reserve | Capital redemption reserve | Revaluation reserve | Special distributable reserve | Realised capital reserve | Revenue Reserve |
| |||||
| £ | £ | £ | £ | £ | £ | £ | £ |
| ||||
| At 1 April 2017 | 356,724 | 15,901,497 | 87,583 | 2,001,764 | 7,540,615 | 11,142,462 | 1,030,340 | 38,060,985 |
| |||
| Comprehensive income for the year |
| |||||||||||
| (Loss)/profit for the year | - | - | - | (755,510) | - | 2,166,083 | 928,407 | 2,338,980 |
| |||
| Total comprehensive income for the year | - | - | - | (755,510) | - | 2,166,083 | 928,407 | 2,338,980 |
| |||
| Contributions by and distributions to owners |
| |||||||||||
| Shares issued via Offer for Subscription | 143,033 | 14,596,852 | - | - | (103,872) | - | - | 14,636,013 |
| |||
| Shares bought back | (6,715) | - | 6,715 | - | (616,121) | - | - | (616,121) |
| |||
| Dividends paid | - | - | - | - | - | (5,980,765) | (840,895) | (6,821,660) |
| |||
| Total contributions by and distributions to owners | 136,318 | 14,596,852 | 6,715 | - | (719,993) | (5,980,765) | (840,895) | 7,198,232 |
| |||
| Other movements |
| |||||||||||
| Realised losses transferred to special reserve | - | - | - | - | (768,097) | 768,097 | - | - |
| |||
| Realisation of previously unrealised losses | - | - | - | 152,402 | - | (152,402) | - | - |
| |||
| Total other movements | - | - | - | 152,402 | (768,097) | 615,695 | - | - |
| |||
| At 31 March 2018 | 493,042 | 30,498,349 | 94,298 | 1,398,656 | 6,052,525 | 7,943,475 | 1,117,852 | 47,598,197 |
| |||
Statement of Cash Flows for the year ended 31 March 2019 | |||||||||||||
|
| ||||||||||||
| Notes
| Year ended 31 March 2019 £ | Year ended 31 March 2018 £ |
| |||||||||
|
| ||||||||||||
| Cash flows from operating activities |
| |||||||||||
| Profit for the financial year | 3,908,411 | 2,338,980 |
| |||||||||
| Adjustments for: |
| |||||||||||
| Net unrealised (gains)/losses on investments | (2,531,926) | 755,510 |
| |||||||||
| Net gains on realisations on investments | (605,074) | (2,766,722) |
| |||||||||
| Tax charge for the current year | 61,338 | 50,621 |
| |||||||||
| Decrease/(increase) in debtors | 56,764 | (100,281) |
| |||||||||
| Increase in creditors and accruals | 4,341 | 20,273 |
| |||||||||
| Net cash inflow from operations | 893,854 | 298,381 |
| |||||||||
| Corporation tax paid | (50,401) | (29,118) |
| |||||||||
| Net cash inflow from operating activities | 843,453 | 269,263 |
| |||||||||
|
| ||||||||||||
| Cash flows from investing activities |
| |||||||||||
| Purchase of investments | 8 | (2,898,440) | (2,733,686) |
| ||||||||
| Disposal of investments | 8 | 2,934,649 | 5,890,052 |
| ||||||||
| Net cash inflow from investing activities | 36,209 | 3,156,366 |
| |||||||||
|
| ||||||||||||
| Cash flows from financing activities |
| |||||||||||
| Shares issued as part of Offer for Subscription | - | 14,636,013 |
| |||||||||
| Dividends paid | 6 | (2,459,246) | (6,821,660) |
| ||||||||
| Dividends refunded | 6 | 10,297 | - |
| ||||||||
| Purchase of own shares | (327,702) | (616,121) |
| |||||||||
| Net cash (outflow)/inflow from financing activities | (2,776,651) | 7,198,232 |
| |||||||||
|
| ||||||||||||
| Net (decrease)/increase in cash and cash equivalents | (1,896,989) | 10,623,861 |
| |||||||||
| Cash and cash equivalents at start of year | 20,559,774 | 9,935,913 |
| |||||||||
| Cash and cash equivalents at end of the year | 18,662,785 | 20,559,774 |
| |||||||||
| Cash and cash equivalents comprise: |
| |||||||||||
| Cash equivalents | 16,117,301 | 18,287,301 |
| |||||||||
| Cash at bank and in hand | 2,545,484 | 2,272,473 |
| |||||||||
|
| ||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2019
1. Company Information
Mobeus Income and Growth 2 VCT plc is a public limited company incorporated in England, registration number 03946235. The registered office is 30 Haymarket, London, SW1Y 4EX.
2. Basis of preparation
A summary of the principal accounting policies, all of which have been applied consistently throughout the year are set out at the start of the related disclosure throughout the Notes to the Financial Statements within an outlined box.
These Financial Statements have been prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 ("FRS102"), with the Companies Act 2006 and the 2014 Statement of Recommended practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('the SORP') (updated in January 2017) issued by the Association of Investment Companies. The Company has a number of financial instruments which are disclosed under FRS102 s11/12 as shown in Note 15 of the Annual Report.
3. Income
Dividends receivable on quoted equity shares are brought into account on the ex-dividend date. Dividends receivable on unquoted equity shares are brought into account when the Company's right to receive payment is established and there is no reasonable doubt that payment will be received. Interest income on loan stock is accrued on a daily basis. Provision is made against this income where recovery is doubtful or where it will not be received in the foreseeable future. Where the loan stocks only require interest or a redemption premium to be paid on redemption, the interest and redemption premium is recognised as income or capital as appropriate once redemption is reasonably certain. When a redemption premium is designed to protect the value of the instrument holder's investment rather than reflect a commercial rate of revenue return, the redemption premium is recognised as capital. The treatment of redemption premiums is analysed to consider if they are revenue or capital in nature on a company by company basis. Accordingly, the redemption premium recognised in the year ended 31 March 2019 has been classified as capital and has been included within gains on investments. |
2019 | 2018 | |
£ | £ | |
Income from bank deposits | 13,644 | 11,161 |
Income from investments | ||
- from equities | 512,578 | 114,698 |
- from overseas based OEICs | 74,234 | 21,687 |
- from UK based OEICs | 34,525 | 11,450 |
- from loan stock | 1,521,722 | 1,551,995 |
- from interest on preference share dividend arrears | 31,481 | 218 |
2,174,540 | 1,700,048 | |
Other income | 1,390 | 4,455 |
Total income | 2,189,574 | 1,715,664 |
Total income comprises | ||
Dividends | 621,337 | 147,835 |
Interest | 1,566,847 | 1,563,374 |
Other | 1,390 | 4,455 |
2,189,574 | 1,715,664 |
Total loan stock interest due but not recognised in the year was £421,336 (2018: £243,675). The increase over the year is due to the additional provision of interest of two investee companies, partially offset by two investee companies resuming interest payments once again.
4. Investment Adviser's fees and Other expenses
All expenses are accounted for on an accruals basis. |
a) Investment Adviser's fees
25% of the Investment Adviser's fees are charged to the revenue column of the Income Statement, while 75% is charged against the capital column of the Income Statement. This is in line with the Board's expected long-term split of returns from the investment portfolio of the Company. 100% of any performance incentive fee payable for the year is charged against the capital column of the Income Statement. This is because although the incentive fee is linked to an annual dividend target, it is ultimately based upon the achievement of capital growth. |
2019 | 2018 | |||||
Revenue | Capital | Total | Revenue | Capital | Total | |
Mobeus Equity Partners LLP | £ | £ | £ | £ | £ | £ |
Investment Adviser's fees | 259,026 | 777,077 | 1,036,103 | 247,177 | 741,530 | 988,707 |
259,026 | 777,077 | 1,036,103 | 247,177 | 741,530 | 988,707 | |
Under the terms of a revised investment management agreement dated 10 September 2010, Mobeus Equity Partners LLP ("Mobeus") provides investment advisory, administrative and company secretarial services to the Company, for a fee of 2% per annum calculated on a quarterly basis by reference to the net assets at the end of the preceding quarter, plus a fee of £113,589 per annum, the latter being subject to changes in the retail prices index each year. In 2013, Mobeus has agreed to waive such further increases due to indexation, until otherwise agreed by the Board. In accordance with the policy statement published under "Management and Administration" in the Company's prospectus dated 10 May 2000, the Directors have charged 75% of the investment management expenses to the capital account. This is in line with the Board's expectation of the long-term split of returns from the investment portfolio of the Company.
Under the terms of the management agreement the total Investment Adviser and administration expenses of the Company excluding any irrecoverable VAT, exceptional costs and any performance incentive fee, are linked to a maximum of 3.6% of the value of the Company's closing net assets. For the year ended 31 March 2019, the expense cap has not been breached (2018: £nil). For this year only, the Investment Adviser's fee upon the net funds raised from use of the over-allotment facility of £5 million under the 2017/18 offer was reduced from 2% to 1% per annum.
The Company is responsible for external costs such as legal and accounting fees, incurred on transactions that do not proceed to completion ("abort expenses") subject to the cap on total annual expenses referred to above.
In accordance with general market practice, the Investment Adviser earned arrangement fees and fees for supplying Directors and/or monitoring services from investee companies. The share of such fees attributable to the investments made by the Company were £74,339 (2018: £85,289) and £170,217 (2018: £164,993) respectively. The fees for supplying directors and/or monitoring services were from 33 (2018: 34) investee companies during the year.
b) Performance fees
Performance incentive agreement
The following performance incentive fee arrangement dated 20 September 2005 continues to be in place, and operated as detailed below:
New Ordinary and former C share fund shares
Basis of Calculation
The performance incentive fee payable is calculated as an amount equivalent to 20 per cent of the excess of a "Target rate" comprising:-
(i) an annual dividend target (indexed each year for RPI), and
(ii) a requirement that any cumulative shortfalls below the annual dividend target must be made up in later years. Any excess is not carried forward, whether a fee is payable for that year or not.
Payment of a fee is also conditional upon the average Net Asset Value ("NAV") per share for each such year equalling or exceeding the average "Base NAV" per share for the same year. Base NAV commenced at £1 per share when C fund shares were first issued in 2005, which is adjusted for subsequent shares issued and bought back.
Any performance fee will be payable annually. It will be reduced to the proportion which the number of "Incentive Fee Shares" represent of the total number of shares in issue at any calculation date. Incentive Fees Shares are the only shares upon which an incentive fee is payable. They will be the number of C fund shares in issue just before the Merger of the two former share classes on 10 September 2010, (which subsequently became Ordinary shares) plus Ordinary shares issued under new fundraisings since the Merger. This total is then reduced by an estimated proportion of the shares bought back by the Company since the Merger, that are attributable to the Incentive Fee Shares.
Clarifications to the agreement
During the year ended 31 March 2016, the Board and the Investment Adviser agreed to confirm and clarify in more detail a number of principles and interpretations applied to the agreement. The principal ones are reflected in the paragraphs above and explained below:-
First, the incentive fee is paid upon dividends paid in a year, not declared and paid in a year, as the original agreement stated. Secondly, the average NAV referred to above is calculated on a daily weighted average basis throughout the year. In turn, this average NAV is compared to a Base NAV that is also calculated on a daily weighted average basis throughout the year. Thirdly, the methodologies to account for new shares issued and buybacks of shares, their inclusion in the incentive fee calculations and to identify the proportion of all shares upon which an incentive fee is payable have been clarified.
Finally, it has been agreed that any excess of cumulative dividends paid over the cumulative annual dividend target is not carried forward, whether a fee is paid for that year or not.
These clarifications have been incorporated into the performance incentive agreement. The Board has been advised that, as these and a number of more minor clarifications, are clarifications of the Incentive Agreement, rather than changes to it, there was no need to seek shareholder approval for them.
Position at 31 March 2019
The cumulative dividend shortfall at 31 March 2019 is 3.10 p per share (£1,185,165 in aggregate being 78.1% of the total shortfall) at the year end, (where 78.1% is the proportion of the Incentive Fee Shares to the total number of shares in issue at the year end date) and taking into account the target rate of dividends and the dividends paid to shareholders.
The 6p annual dividend hurdle was 7.99p per share at the year end after adjustment for RPI. The Base NAV was 105.99p per share at the year end and an average of 106.12p for the year, compared to an average NAV for the year of 98.38p.
Therefore no incentive fee is payable for the year (2018: £nil).
c) Other expenses
Expenses are charged wholly to revenue, with the exception of expenses incidental to the acquisition or disposal of an investment, which are written off to the capital column of the Income Statement or deducted from the disposal proceeds as appropriate. |
2019 | 2018 | |
£ | £ | |
Directors' remuneration (including NIC of £5,380 (2018: £5,318) (Note a) | 99,802 | 104,373 |
IFA trail commission | 49,262 | 47,511 |
Broker's fees | 12,000 | 12,000 |
Auditor's fees - Audit of Company (excluding VAT) | 23,575 | 22,807 |
- tax compliance services (Note b) (excluding VAT) | 1,922 | 1,503 |
- audit related assurance services (Note b) (excluding VAT) | 4,613 | 4,562 |
Registrar's fees | 28,622 | 46,614 |
Printing | 38,993 | 41,250 |
Legal & professional fees | 9,836 | 8,129 |
VCT monitoring fees | 8,400 | 8,400 |
Directors' insurance | 7,428 | 8,094 |
Listing and regulatory fees | 25,702 | 24,760 |
Sundry | 10,567 | 18,565 |
Other expenses | 320,722 | 348,568 |
a): See analysis in the Directors' emoluments table in the Annual Report, which excludes the NIC above. The key management personnel are the non-executive directors. The Company has no employees.
b): The Directors consider the Auditor was best placed to provide the other services disclosed above. The audit related assurance services are in relation to certain agreed procedures in respect of the Company's Half Year Report. The Audit Committee reviews the nature and extent of these services to ensure that auditor independence is maintained. In this regard, tax compliance services (excluding iXBRL services) are carried out by another firm, so are included within legal and professional fees.
5 . Taxation on ordinary activities
The tax expense for the year comprises current tax and is recognised in profit or loss. The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date. Any tax relief obtained in respect of Investment Adviser fees allocated to capital is reflected in the realised capital reserve and a corresponding amount is charged against revenue. The tax relief is the amount by which corporation tax payable is reduced as a result of these capital expenses. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the Company's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in the tax assessments in periods different from those in which they are recognised in the Financial Statements. Deferred tax is measured at the average tax rates that are expected to apply in the years in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted at the balance sheet date. Deferred tax is measured on a non-discounted basis. A deferred tax asset would be recognised only to the extent that it is more likely than not that future taxable profits will be available against which the asset can be utilised. |
2019 | 2018 | |||||||
Revenue | Capital | Total | Revenue | Capital | Total | |||
£ | £ | £ | £ | £ | £ | |||
a) Analysis of tax charge: | ||||||||
UK Corporation tax on profits for the year | 208,983 | (147,645) | 61,338 | 191,512 | (140,891) | 50,621 | ||
Total current tax charge | 208,983 | (147,645) | 61,338 | 191,512 | (140,891) | 50,621 | ||
Corporation tax is based on a rate of 19% (2018: 19%) | ||||||||
b) Profit on ordinary activities before tax | 1,609,826 | 2,359,923 | 3,969,749 | 1,119,919 | 1,269,682 | 2,389,601 | ||
Profit on ordinary activities multiplied by small company rate of corporation tax in the UK of 19% (2018: 19%) | 305,867 | 448,385 | 754,252 | 212,785 | 241,239 | 454,024 | ||
Effect of: | ||||||||
UK dividends | (97,390) | - | (97,390) | (21,792) | - | (21,792) | ||
Unrealised (gains)/losses not taxable/deductible | - | (481,066) | (481,066) | - | 143,547 | 143,547 | ||
Realised gains not taxable | - | (114,964) | (114,964) | - | (525,677) | (525,677) | ||
Unrelieved expenditure | 518 | - | 518 | 310 | - | 310 | ||
(Over)/under provision in prior year | (12) | - | (12) | 209 | - | 209 | ||
Actual tax charge | 208,983 | (147,645) | 61,338 | 191,512 | (140,891) | 50,621 | ||
Tax relief relating to Investment Adviser fees is allocated between revenue and capital where such relief can be utilised.
No asset or liability has been recognised for deferred tax in relation to capital gains or losses on revaluing investments as the Company is exempt from corporation tax in relation to capital gains or losses as a result of qualifying as a Venture Capital Trust.
There is no potential liability to deferred tax (2018: £nil). There is no unrecognised deferred tax asset in 2019 (2018: £nil).
6. Dividends paid and payable
Dividends payable are recognised as distributions in the Financial Statements when the Company's liability to pay them has been established. This liability is established for interim dividends when they are paid, and for final dividends when they are approved by the shareholders, usually at the Company's annual general meeting. A key judgement from a VCT compliance perspective is in determining the amount of minimum income dividend to be paid in respect of a year. The Company's status as a VCT means it has to comply with Section 259 of the Income Tax Act 2007, which requires that no more than 15% of the income from shares and securities in a year can be retained from the revenue available for distribution for the year. |
Amounts recognised as distributions to equity shareholders in the year: | ||||||
Dividend | Type | For year ended 31 March | Pence per share | Date Paid | 2019 £ | 2018 £ |
Interim | Capital | 2018 | 7.00p | 27/07/2017 | - | 2,497,067 |
Second interim | Income | 2018 | 1.75p | 22/01/2018 | - | 840,894 |
Second interim | Capital | 2018 | 7.25p | 22/01/2018 | - | 3,483,699 |
Interim | Income | 2019 | 2.50p | 22/03/2019 | 1,229,623 | - |
Interim | Capital | 2019 | 2.50p | 22/03/2019 | 1,229,623 | |
Dividends paid in previous years not claimed within the statutory period | (10,297) | - | ||||
|
|
|
|
| 2,448,949 | 6,821,660 |
Any proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these Financial Statements.
Set out below are the total income dividends payable in respect of the financial year, which is the basis on which the requirements of section 274 of the Income Tax Act 2007 are considered.
Recognised income distributions in the financial statements for the year: | ||||||
Dividend | Type | For year ended 31 March | Pence per share | Date Paid | 2019 £ | 2018 £ |
Revenue available for distribution by way of dividends for the year | 1,400,843 | 928,407 | ||||
Interim | Income | 2018 | 1.75p | 22/01/2018 | - | 840,894 |
Interim | Income | 2019 | 2.50p | 22/03/2019 | 1,229,623 | - |
Total income dividends for the year | 1,229,623 | 840,894 | ||||
7. Basic and diluted earnings and return per share
2019 | 2018 | |
£ | £ | |
Total earnings after taxation: | 3,908,411 | 2,338,980 |
Basic and diluted earnings per share (note a) | 7.93p | 5.68p |
Net revenue earnings from ordinary activities after taxation | 1,400,843 | 928,407 |
Basic and diluted revenue earnings per share (note b) | 2.84p | 2.25p |
Unrealised capital gains/(losses) | 2,531,926 | (755,510) |
Realised capital gains | 605,074 | 2,766,722 |
Capital Investment Adviser's fees (net of taxation) | (629,432) | (600,639) |
Total capital earnings | 2,507,568 | 1,410,573 |
Basic and diluted capital earnings per share (note c) | 5.09p | 3.43p |
Weighted average number of shares in issue in the year | 49,247,849 | 41,190,198 |
Notes:
a) Basic earnings per share is total earnings after taxation divided by the weighted average number of shares in issue.
b) Revenue earnings per share is the revenue return after taxation divided by the weighted average number of shares in issue.
c) Capital earnings per share is the total capital return after taxation divided by the weighted average number of shares in issue.
d) There are no instruments that will increase the number of shares in issue in future. Accordingly, the above figures currently represent both basic and diluted earnings.
8. Investments at fair value
The most critical estimates, assumptions and judgements relate to the determination of the carrying value of investments at "fair value through profit and loss" (FVTPL). All investments held by the Company are classified as FVTPL and measured in accordance with the International Private Equity and Venture Capital Valuation ("IPEV") guidelines, as updated in December 2018. This classification is followed as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income.
Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional. For investments actively traded on organised financial markets, fair value is generally determined by reference to Stock Exchange market quoted bid prices at the close of business on the balance sheet date. Purchases and sales of quoted investments are recognised on the trade date where a contract of sale exists whose terms require delivery within a time frame determined by the relevant market where the terms of a disposal state that consideration may be received at some future date and, subject to the conditionality and materiality of the amount of deferred consideration, an estimate of the fair value discounted for the time value of money may be recognised through the Income Statement. In other cases, the proceeds will only be recognised once the right to receive payment is established and there is no reasonable doubt that payment will be received.
Unquoted investments are stated at fair value by the Directors at each measurement date in accordance with appropriate valuation techniques, which are consistent with the IPEV guidelines: (i) Each investment is considered as a whole on a 'unit of account' basis, i.e. that the value of each portfolio company is considered as a whole, alongside consideration of: The price of new investments made, if deemed to be made as part of an orderly transaction, are considered to be at fair value at the date of the transaction. The inputs that derived the investment price are calibrated within individual valuation models and at subsequent measurement dates, are reconsidered for any changes in light of more recent events or changes in the market performance of the investee company. The valuation bases used are the following: - a multiple basis. The shares may be valued by applying a suitable price-earnings ratio, revenue or gross profit multiple to that company's historic, current or forecast post-tax earnings before interest and amortisation, or revenue, or gross profit (the ratio used being based on a comparable sector but the resulting value being adjusted to reflect points of difference identified by the Investment Adviser compared to the sector including, inter alia, a lack of marketability). or: - where a company's underperformance against plan indicates a diminution in the value of the investment, provision against the price of a new investment is made, as appropriate. (ii) Premiums, to the extent that they are considered capital in nature, and that they will be received upon repayment of loan stock investments are accrued at fair value when the Company receives the right to the premium and when considered recoverable. (iii) Where a multiple or the price of recent investment less impairment basis is not appropriate and overriding factors apply, a discounted cash flow, net asset valuation or realisation proceeds basis may be applied. Capital gains and losses on investments, whether realised or unrealised, are dealt with in the profit and loss and revaluation reserves, and movements in the period are shown in the Income Statement. All investments are initially recognised and subsequently measured at fair value. Changes in fair value are recognised in the Income Statement. A key judgement made in applying the above accounting policy relates to investments that are permanently impaired. Where the value of an investment has fallen permanently below the price of recent investment, the loss is treated as a permanent impairment and as a realised loss, even though the investment is still held. The Board assesses the portfolio for such investments and, after agreement with the Investment Adviser, will agree the values that represent the extent to which an investment loss has become realised. This is based upon an assessment of objective evidence of that investment's future prospects, to determine whether there is potential for the investment to recover in value. The methods of fair value measurement are classified into hierarchy based on the reliability of the information used to determine the valuation. - Level 1 - Fair value is measured based on quoted process in an active market - Level 2 - Fair value is measured based on directly observable current market prices or indirectly being derived from market prices - Level 3 - Fair value is measured using valuation techniques using inputs that are not based on observable market data. |
Movements in investments during the year are summarised as follows:
Unquoted equity shares | Unquoted preference shares | Unquoted Loan Stock | Total | |
£ | £ | £ | £ | |
Cost at 31 March 2018 | 12,398,820 | 22,159 | 15,664,527 | 28,085,506 |
Permanent impairment at 31 March 2018 | (1,704,184) | (739) | (894,127) | (2,599,050) |
Unrealised gains at 31 March 2018 | 36,292 | 377,635 | 984,729 | 1,398,656 |
Valuation at 31 March 2018 | 10,730,928 | 399,055 | 15,755,129 | 26,885,112 |
Purchases at cost | 1,880,310 | - | 1,018,130 | 2,898,440 |
Sale proceeds (Note b) | (760,279) | (147,099) | (1,973,961) | (2,881,339) |
Realised gains on investments (Note a) | 232,325 | - | 372,749 | 605,074 |
Unrealised gains/(losses) on investments (Note c) | 2,435,304 | (968) | 97,590 | 2,531,926 |
Valuation at 31 March 2019 | 14,518,588 | 250,988 | 15,269,637 | 30,039,213 |
Cost at 31 March 2019 | 13,750,498 | 22,095 | 14,941,143 |
28,713,736 |
Permanent impairments at 31 March 2019 (Note d) | (2,117,304) | (739) | (913,787) | (3,031,830) |
Unrealised gains at 31 March 2019 | 2,885,394 | 229,632 | 1,242,281 | 4,357,307 |
Valuation at 31 March 2019 | 14,518,588 | 250,988 | 15,269,637 | 30,039,213 |
A breakdown of the increases and the decreases in unrealised valuations of the portfolio is shown in the Investment Portfolio Summary in the Annual Report.
Major movements in investments
Note a) Disposals of investment portfolio companies during the year were:
Type | Investment Cost | Disposal Proceeds | Opening valuation | Realised gain/(loss) in year | |
£ | £ | £ | £ | ||
Fullfield Limited (trading as Motorclean) | Full exit | 1,025,152 | 578,568 | 433,939 | 144,629 |
Lightworks Software Limited | Full exit | 25,727 | 544,420 | 61,163 | 483,257 |
Hemmels Limited | Partial exit and permanent impairment | 417,578 | 198,567 | 417,578 | (238,671)1 |
The Plastic Surgeon Holdings Limited | Loan repayments and repurchase of preference shares | 62,498 | 222,019 | 222,019 | - |
MPB Group Limited | Loan repayment | 89,106 | 89,106 | 89,106 | - |
Backhouse Management Limited | Loan repayment | 101,820 | 169,700 | 101,820 | -2 |
Barham Consulting Limited | Loan repayment | 101,820 | 169,700 | 101,820 | -2 |
Creasy Marketing Services Limited | Loan repayment | 101,820 | 169,700 | 101,820 | -2 |
Hollydale Management Limited | Loan repayment | 212,400 | 354,000 | 212,400 | -2 |
McGrigor Management Limited | Loan repayment | 101,820 | 169,700 | 101,820 | -2 |
Others | 30,469 | 215,859 | - | 215,859 | |
2,270,210 | 2,881,339 | 1,843,485 | 605,074 |
1 Includes permanent impairment of remaining investment cost of £19,660.
2The gain on the loan repayments above of £413,120 has been offset against an equivalent permanent impairment in the equity instrument of the investments in these companies (see note d). Thus no gain or loss resulted.
Note b) The cash flow from investment proceeds shown above of £2,881,339 differs from the sales proceeds shown in the Statement of Cash Flows of £2,934,649, by £53,310. This difference arises because of proceeds relating to the disposal of Gro Group Holdings Limited that were held in debtors at the start of the year.
Note c) Within net unrealised gains of £2,531,926 for the year, the significant gains in value compared to last year were as follows: £1,063,913 in ASL Technology Holdings Limited, £449,113 in EOTH Limited, £420,523 in Turner Topco Limited (trading as Auction Technology Group), £365,998 in The Plastic Surgeon Holdings Limited (formerly TPSFF Holdings Limited), and £287,171 in Tovey Management Limited (trading as Access IS). These gains were partially offset by unrealised losses in valuation compared to last year, including £588,127 in BookingTek Limited, £519,007 in Manufacturing Services Investment Limited (trading as Wetsuit Outlet), £347,940 in Redline Worldwide Limited, £192,360 in Super Carers Limited and £175,431 in Bourn Bioscience Limited. The increase in unrealised valuations of the loan stock investments above reflects the changes in the entitlements to loan premiums, and/or in the underlying enterprise value of the investee company. The increase does not arise from assessments of credit risk or market risk upon these investments.
Note d) During the year, permanent impairments of the cost of investments have risen from £2,599,050 to £3,031,830. The increase of £432,780 is due to the impairment of one investee company's remaining investment cost and the impairments of the equity of five investee companies of £413,120 referred to in Note a) above.
9 . Post balance sheet events
On 10 May 2019, the Company realised its investment in The Plastic Surgeon Holdings Limited for £1.18 million.
On 13 May 2019, the Company invested £0.91 million into Arkk Consulting Limited, a service and product provider that enables companies to remain compliant with regulatory reporting requirements.
On 22 May 2019, the Company invested £0.55 million into Parsley Box Limited, a supplier of home delivered ambient ready meals for the elderly.
On 6 June 2019, the Company realised part of its investment in Master Removers Group Limited (MRGL) generating proceeds receivable of £0.28 million, as part of a transaction which also increased the Company's equity interest in MRGL from 3.4% to 5.2%.
10 . Statutory information
The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 31 March 2019 in terms of section 434 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for the year ended 31 March 2019 will be delivered to Companies House following the Company's Annual General Meeting. The auditors have reported on those accounts: their report was unqualified and did not contain a statement under Section 498 of the Companies Act 2006.
11 . Annual Report
The Annual Report for the year ended 31 March 2019 will shortly be made available on the Company's website: www.mig2vct.co.uk. and shareholders will be notified of this by email or post or will be sent a hard copy in the post in accordance with their instructions. Copies will be available thereafter to members of the public from the Company's registered office.
12 . Annual General Meeting
The Annual General Meeting of the Company will be held at 11.00 am on Wednesday, 11 September 2019 at The Clubhouse, 8 St James's Square, London SW1Y 4JU.
Contact details for further enquiries:
Robert Brittain of Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by e-mail to vcts@mobeus.co.uk.
Mark Wignall or Clive Austin at Mobeus Equity Partners LLP (the Investment Adviser) on 020 7024 7600 or by e-mail to info@mobeus.co.uk.
DISCLAIMER
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.