Mobeus I&g 4 Regulatory News (MIG4)

MOBEUS INCOME & GROWTH 4 VCT PLC

LEI: 213800IFNJ65R8AQW943

UNAUDITED HALF-YEAR RESULTS FOR THE SIX MONTHS TO 30 JUNE 2022

Mobeus Income & Growth 4 VCT plc ("the Company") announces its Half-Year results for the six months to 30 June 2022. These results were approved by the Board of Directors on 13 September 2022.

You may, in due course, view the Half-Year Report, comprising the Unaudited Condensed Financial Statements of the Company by visiting www.mig4vct.co.uk.

Financial Highlights

As at 30 June 2022:

Net assets: £86.13 million

Net asset value ("NAV") per share: 94.66 pence

Results for the six months to 30 June 2022:

➤ There was a negative Net Asset Value ("NAV") total return¹ per share of (11.3)%.

➤ Share price total return1 per share was 2.8%.

➤ The Board declared an interim dividend in respect of the current year of 4.00 pence per share, which was paid to Shareholders on 8 July 2022. Payment of this dividend increased cumulative dividends paid1 since inception in 1998 to 147.20 pence per share.

➤ A further interim dividend for the year of 6.00 pence per share has been declared for payment on 7 November 2022.

➤ The Company made two new investments totalling £1.09 million and four follow-on investments totalling £0.80 million.

➤ £11.05 million of unrealised losses were incurred in the period.

➤ The Company realised investments totalling £4.34 million of cash proceeds and a net realised gain of £0.78 million for the six months to 30 June 2022.

1  Definitions of key terms and alternative performance measures ("APMs") / Key performance indicators ("KPIs") shown above and throughout this Report are shown in the Glossary of terms within the Half-Year Report. 

PERFORMANCE SUMMARY

The longer-term trend of performance based upon cumulative total return per share (NAV basis) is shown in the chart below:-

1 These figures exclude the impact of a dividend in respect of the year ending 31 December 2022 of 4.00 pence per share paid after the period-end on 8 July 2022. Payment of this dividend will reduce the Company's NAV per share and increase cumulative dividends paid to date by 4.00 pence per share.

The chart above shows the recent past performance of the original funds raised in 1999. The original subscription price was 200p per share before the benefit of income tax relief. Subscription prices from subsequent fundraisings and historic performance data from 2008 are shown in the Investor Performance Appendix at 30 June 2022 on the Company's website at: www.mig4vct.co.uk where they can be accessed by clicking on the word "table" under "Reviewing the performance of your investment" heading on the home page.

On 1 August 2006, Mobeus became sole Investment Adviser to the Company. The cumulative NAV total return at this date was 122.51 pence.

Chairman's Statement

I am pleased to present the Company's Half-Year Report for the six months to 30 June 2022.

Overview

The first six months of the Company's financial year have been notable for significant economic disruption both domestically and internationally. December 2021 was a high watermark in many technology and growth markets, and since then we have experienced a number of significant global events such as the Russian invasion of Ukraine, the return of inflation to 40-year highs and heightened political uncertainty in the UK and across Europe. All of this has led to marked volatility across markets and a general de-rating of growth stocks.

Performance

As a consequence of the factors described above, the Company has experienced a negative NAV total return of (11.3)% over the six months to 30 June 2022 (2021: positive 28.5%). Share price total return was in positive territory at 2.8% (2021: 34.1%) but markets remain very volatile and the results for the six months to 30 June 2022 necessarily provide only a snapshot as at the reporting period end.

This value decline has been largely driven by market multiples rather than underlying trading performance at this stage, as markets have factored in the likely impact of inflation and higher interest rates on consumer spending and business investment.

The negative NAV total return for the period was principally comprised of unrealised falls in the value of investments still held, tempered somewhat by the successful exit from Media Business Insight ("MBI"), loan repayments and deferred proceeds received from the realisation of Red Paddle in December 2021.

Investment portfolio

In the face of the current testing environment the portfolio has, thus far, remained relatively resilient. Nevertheless, the Investment Adviser has started to see indicators of customer retrenchment as consumer confidence declines. There was a fall of £10.27 million, or 15.7%, in the overall value of the portfolio across the six months to 30 June 2022 (2021: increase of £19.95 million, or 47.9%) on a like for like basis compared to the opening value of the portfolio at 1 January 2022. A significant proportion of this asset movement reflected a value decline in the AIM-listed Virgin Wines investment which, in spite of positive news flows and the relative outperformance of its peers, has suffered from the de-rating of its sector.

The Company completed one successful exit during the period, generating proceeds of £3.84 million from the sale of Media Business Insight. Returns received over the life of this investment amounted to 2.2x multiple of cost and an IRR of 13.7%. Further proceeds from loan repayments and deferred consideration amounted to £0.49 million.

Global supply shortages remain a significant factor and are expected to continue to cause disruption going forward. The economic backdrop falls largely outside of the experience of this generation of management teams and advisers. As such, the experience of seasoned investment managers will be increasingly important in the coming months.

Investment activity during the period has been strong, with two new and four follow-on investments completed during the period, totalling £1.89 million. History suggests that, although the economic backdrop is challenging, investing throughout the cycle is a fruitful strategy, with investments made in previous downturns in many cases subsequently yielding very strong returns.

During the six months under review, the Company invested a total of £1.09 million into two new investments: a retail software provider (Proximity Insight) and a marketing technology business (Bidnamic).

In addition, four follow-on investments totalling £0.80 million were made into a provider of UK leisure and experience breaks (Caledonian Leisure), a dairy and allergen-free ice cream brand (Northern Bloc), a provider of premium electric vehicle chargers (Andersen EV) and a workforce management software business (RotaGeek). Access to additional resources following the move to Gresham House is very welcome in this regard.

Since the period-end, the Company has also made two follow-on investments and two new investments. £0.62 million into an AI and Urban Traffic Control business (Vivacity) and £0.33 million into a hair colourants brand (Bleach London), both existing businesses. £0.50 million was newly invested into FocalPoint, a navigation and positioning technology company and £0.44 million into Orri Limited, a specialist private clinic, for those aged 16+, for expert treatment of Anorexia, Bulimia and Binge Eating

Disorder.

During such turbulent times, doing everything in our power to support the portfolio is an imperative. The Investment Adviser is making full use of its Talent Management teams in helping to support management teams across the portfolio. Such specialist skills are a key benefit of the move to Gresham House.

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

Revenue account

The results for the period are set out in the Unaudited Condensed Income Statement on pages 12 to 13 of the Half-Year Report and show a revenue return (after tax) of 0.19 pence per share (2021: 0.11 pence per share). The revenue return for the period of £0.17 million has increased from last year's figure of £0.09 million. This is mainly due to a significant loan interest receipt upon the sale of MBI.

Dividends

The Board continues to be committed to providing an attractive dividend stream to Shareholders and was pleased to declare an Interim dividend of 4.00 pence per share for the year ending 31 December 2022.

This dividend was paid on 8 July 2022, to Shareholders on the Register on 27 May 2022, and brought cumulative dividends paid per share since inception to 147.20 pence.

An additional interim dividend of 6.00 pence per share is declared for payment on 7 November 2022 for those shareholders on the Register of Members at 16 September 2022.

The Company's ongoing target of paying a dividend of at least 4.00 pence per share in respect of each financial year has been achieved and often exceeded in all 12 years since it was established. Whilst the Board still believes this dividend target is attainable, it should be noted that the continued movement of the portfolio to a larger share of younger growth capital investments could lead to increased volatility, which may affect the return in any given year.

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 dividends paid). New VCT shares attract the same tax reliefs as shares purchased through an Offer for Subscription.

There were 508,732 shares allotted through the DIS during the period at an average price of 99.57 pence.

Shareholders can opt-in to the DIS by completing a mandate form available on the Company's website at www.mig4vct.co.uk or can opt-out by contacting Link Group, using the details provided under Shareholder Information on pages 24-25 of the Half-Year Report. Please note that instructions received take 15 days to become effective.

To the extent that dividends are paid other than out of income or from gains on investments, for instance out of special distributable reserves, Shareholders should note this may result in a reduction in NAV over the period.

Offer for Subscription

As announced recently, the Board intends to launch joint offers for subscription for new ordinary shares in the 2022/23 tax year alongside the other Mobeus VCTs. The Board expects to convene a general meeting of shareholders to seek the necessary authority to allot shares and disapply pre-emption rights in connection with the fundraising. Shareholders will have received a Circular in September confirming the amount to be raised and the purposes for which the funds will be used in advance of the General meeting for consideration. We urge all Shareholders to submit their proxy votes online in respect of the resolutions proposed via the Link Group shareholder portal: www.signalshares.com.

If Shareholder approval is obtained, the Board expects to be in a position to launch the offer for subscription later this month, full details of which will be contained in the prospectus on the Company's website: www.mig4vct.co.uk.

Liquidity

The Board continues to monitor credit risk in respect of its cash and near cash resources and to prioritise the security and protection of the Company's capital. Cash and liquidity fund balances as at 30 June 2022 amounted to £33.36 million representing 38.7% of net assets. After the period-end, following the payment of a 4.00 pence per share dividend, the pro-forma level of liquidity will be £30.29 million (36.5% of net assets).

Share buy-backs

During the six months to 30 June 2022, the Company bought back and cancelled 269,283 of its own shares, representing 0.3% (2021: 0.8%) of the shares in issue at the beginning of the period, at a total cost of £0.26 million (2021: £0.60 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 approximately 5% below the latest published NAV.

Shareholder communications

May I remind you that the Company has its own website which is available at:  www.mig4vct.co.uk.

The Investment Adviser held its most recent Shareholder Event on behalf of all four Mobeus VCTs in early 2022. The event was well received and the Investment Adviser plans to hold another event in 2023.Further details will be circulated to Shareholders and shown on the Company's website in due course.

Fraud Warning

We are aware of a number of cases where Shareholders are being fraudulently contacted or are being subjected to attempts of identity fraud. Shareholders should remain vigilant of all potential financial scams or requests for them to disclose personal data. The Board strongly recommends Shareholders take time to read the Company's Fraud warning section, including details of who to contact, contained within the Information for Shareholders section on pages 24 and 25 of the Half-Year Report.

Succession Planning

I have stated my intention to retire as Chairman and a Director of the Company following the conclusion of the Company's Annual General Meeting in May 2023. The Board intends to appoint Graham Paterson as Chairman of the Company to succeed me. It has therefore begun its recruitment process for a Non-Executive Director to succeed Graham, who will step down from his role as Chairman of the Audit Committee. In its recruitment process, the Nomination & Remuneration Committee will give careful consideration to the diversity of skills, experience, gender and background of the wider Board, whilst also ensuring that the candidate selected has the requisite skills and experience to discharge their duties effectively as a Director and Chairman of the Audit Committee.

Outlook

The economic impacts for the next twelve months and perhaps beyond can be expected to be challenging. However, such conditions can provide a good opportunity to make high quality investments and build strategic stakes in businesses with great potential for the future. The exit environment is likely to dampen somewhat, although this is not foreseen to be a significant issue given that the VCT fund is not time-limited. On the whole, your Board is confident that, with continued and targeted support, the portfolio remains on track to overcome its challenges and achieve its growth ambitions.

Jonathan Cartwright

Chairman

13 September 2022

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 investments 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 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 Review

Portfolio review

Demand for growth capital investment remains strong and there continues to be a healthy pipeline of investment opportunities. The current economic climate, whilst challenging for businesses across the portfolio, also presents great opportunities to develop potential through investment.

The portfolio movements in the period are summarised as follows:

The six months to 30 June 2022 has seen volatility translate into a decline in market ratings. The portfolio value has reduced as a result of this, in spite of largely resilient underlying trading performances. The Company made two new growth capital investments during the period: £0.61 million into Proximity Insight and £0.48 million into Bidnamic. Both these companies are retail technology businesses.

The Company also achieved a satisfying exit from Media Business Insight ("MBI") during the period, receiving a total of £3.84 million in proceeds, contributing to total receipts of £4.23 million during the period.

The investment and divestment activity during the period has further increased the proportion of the portfolio comprised of growth substantially made up of investments made since the 2015 VCT rule change. These investments amount to 89.2% by value at the period-end (31 December 2021: 77.1%).

After the period-end, the Company invested a further £0.62 million into Vivacity, an existing portfolio company. Vivacity is a developer of artificial intelligence and Urban Traffic Control systems. Following its initial series A funding in 2021, the business has doubled the size of its team and partnered with leading firms in the automotive and environmental measurement industries. Also, after the period end, £0.33 million was further invested into Bleach (London). It also made a new investment  of £0.50 into FocalPoint, a next-generation navigation and positioning technology company and £0.44 million was invested into Orri Limited, a specialist private clinic, for those aged 16+, for expert treatment of Anorexia, Bulimia and Binge Eating Disorder.

The portfolio's valuation changes in the six-month period to 30 June are summarised as follows:

Valuation changes of portfolio investments still held

From the total value increases of £0.81 million within the portfolio, the principal movements were in Bella and Duke: £0.40 million and Tharstern: £0.36 million.

Bella and Duke has relatively maintained its existing customer base despite the slowdown in securing new customers due to the current economic environment. Improved trading for Tharstern through new business wins and cost controls have enhanced its valuation.

The main reductions within total valuation decreases of (£11.86) million, were in Virgin Wines £(6.02) million; MyTutor £(1.51) million and MPB Group £(1.24) million. The portfolio's largest asset by value at the start of the year, Virgin Wines, has consistently delivered robust trading performance relative to its peers and continued to release positive news flow. Nevertheless, the value of the AIM-listed stock has been impacted by the general de-rating of its sector. MyTutor has generated strong revenues in the year to date. However, a significant reduction in comparator multiples has reduced the value of this investment. Finally, MPB has seen a reduction in benchmark multiples and accelerated its cash spend for growth but is yet to see this translate into revenues for valuation purposes.

Realised gains and deferred consideration receipts

The Company realised its investment in MBI during the period under review, generating gains in the period of £0.38 million. These contributed to a multiple of cost of 2.2x over the life of the investment. The Company also received deferred proceeds of £0.40 million from the realisation of Red Paddle in a previous period.

Investment portfolio yield and capital repayments

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

New investments during the period

The Company made two new investments totalling £1.09 million during the period, as detailed below:

Follow-on investments during the period

The Company made four further investments into existing portfolio companies, totalling £0.80 million,

as detailed below:

Realisations during the period

The Company realised its investment in MBI, as detailed below:

New investments made after the period-end

The Company made two further investments totalling £0.94 million, as detailed below:

Further investments made after the period-end

The Company made two further investments into existing portfolio companies, totalling £0.95 million, as detailed below:

Environmental, Social, Governance considerations

Following the novation of the investment advisory agreement to Gresham House, who have a dedicated team which is focused on sustainability, this provides 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.

Gresham House Asset Management Limited

Investment Adviser

13 September 2022

INVESTMENT PORTFOLIO SUMMARY as at 30 June 2022

1 - The growth focused portfolio contains all investments made after the change in the VCT regulations in 2015 plus some investments that are growth in nature made before this date. The MBO focused portfolio contains investments made prior to 2015 as part of the previous MBO strategy.

Statement of the Directors' Responsibilities 

Responsibility statements

In accordance with Disclosure and Transparency Rule (DTR) 4.2.10, Jonathan Cartwright (Chairman), Graham Paterson (Chairman of the Audit Committee and Nomination and Remuneration Committee) and Chris Burke (Chairman of the Investment Committee), 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 the Investment Portfolio Summary includes a fair review of the information required by DTR 4.2.7, being an indication of the 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 below, 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 31 December 2021 ("the Annual Report") and are not expected to change ahead of the year-end.

The principal risks faced by the Company are:

· Loss of approval as a Venture Capital Trust;

· economic and political risk;

· investment risk;

· regulatory risk;

· financial and operating risk;

· market risk;

· asset liquidity risk; and

· environmental, social and governance emerging risk.

A detailed explanation of the principal risks can be found in the Annual Report on pages 34 and 35 and in Note 15 on pages 72 to 79 of the Annual Report and Financial Statements for the year ended 31 December 2021, copies of which are available on the Investment Adviser's website, www.greshamhouse.com or by going directly to the VCT's website,  www.mig4vct.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 in the Half-Year Management Report. The Directors have satisfied themselves that Company's cash position, bolstered by the fundraising completed at the beginning of 2022 is adequate for the Company to continue as a going concern under any plausible stress scenario. The majority of companies in the portfolio continue to trade well and the portfolio taken as a whole remains resilient and well-diversified, although supply chain constraints and inflationary pressures are beginning to impact. The major cash outflows of the Company (namely investments, 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 financial risks and capital are shown in Note 15 on pages 72 to 79 of the Annual Report and Financial Statements for the year ended 31 December 2021. Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the Half-Year report and annual financial statements.

Cautionary statement

This report may contain forward looking statements with regards 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:

Jonathan Cartwright

Chairman

13 September 2022

UNAUDITED CONDENSED FINANCIAL STATEMENTS

Unaudited Condensed Income Statement for the six months to 30 June 2022