MOBEUS INCOME & GROWTH VCT PLC LEI: 213800HKOSEVWS7YPH79 ANNUAL FINANCIAL RESULTS OF THE COMPANY FOR THE YEAR ENDED 31 DECEMBER 2020 Mobeus Income & Growth VCT plc (the "Company") announces the final results for the year ended 31 December 2020. These results were approved by the Board of Directors on 30 March 2021. You may, in due course, view the Annual Report & Financial Statements, comprising the statutory accounts of the Company by visiting www.migvct.co.uk. FINANCIAL HIGHLIGHTS As at 31 December 2020: Net assets: £84.69 million Net asset value ("NAV") per share: 67.03 pence - Net asset value ("NAV") total return1 per share was 19.3%2. - Share price total return1 per share was 13.7%. - Dividends declared and paid in respect of the financial year totalled 11.00 pence per share. Cumulative dividends paid since inception in 2004 stand at 139.80 pence per share. - £5.43 million was invested into three new growth capital investments and four existing portfolio companies during the year. - £10.47 million of unrealised gains were achieved in the year from strong portfolio performance. - The Company realised investments totalling £20.80 million of cash proceeds and generated net realised gains in the year of £4.34 million. 1 - Definitions of key terms and alternative performance measures shown above and throughout this report are provided in the Glossary of Terms within the Annual Report & Financial Statements. 2 - Further details on the NAV total return are shown in the Performance section of the Strategic Report within the Annual Report & Financial Statements. PERFORMANCE SUMMARY Cumulative NAV Total return1 performance over the last 3, 5 and 10 years is 37%, 36% and 92% respectively. The table below shows the recent past performance of the Company's existing class of shares for each of the last five years. Reporting date as at | Net assets | NAV per share | Share price2 | Cumulative dividends paid per share | Cumulative total return per share to Shareholders | Dividends paid and proposed in respect of each year (p) | (£m) | p | p | (NAV Basis) (p) | (Share Price Basis) (p) | 31 December 2020 | 84.69 | 67.03 | 57.50 | 139.80 | 206.83 | 197.30 | 11.00 | 31 December 2019 | 71.89 | 68.78 | 63.753 | 124.80 | 193.58 | 188.55 | 10.00 | 31 December 2018 | 75.08 | 70.25 | 62.00 | 113.80 | 184.05 | 175.80 | 7.00 | 31 December 2017 | 69.90 | 71.75 | 63.00 | 108.80 | 180.55 | 171.80 | 16.00 | 31 December 2016 | 63.15 | 83.53 | 74.75 | 89.80 | 173.33 | 164.55 | 14.50 | | | | | | | | |
1 Definitions of key terms and alternative performance measures shown above and throughout this report are shown in the Glossary of Terms in the Annual Report. 2 Source: Source: Panmure Gordon & Co (mid-market price). The Share price derives from the last published NAV at 30 September, adjusted for any dividends paid in the following quarter, resulting in an adjusted NAV of 60.69 pence per share at 31 December 2020. Applying a c.5% discount to this figure, which is the basis on which the Company was willing to repurchase shares at that date, gives the share price of 57.50 pence per share. 3 The share price at 31 December 2019 has been adjusted for a 4.00 pence dividend paid after the year-end on 8 January 2020 which was ex-div at 31 December 2019. CHAIRMAN'S STATEMENT I am pleased to present the annual results of Mobeus Income & Growth VCT plc for the year ended 31 December 2020. Overview This year has been a very good one for Shareholder returns overall, despite the unprecedented and significant challenges resulting from the COVID-19 outbreak. Your Company's NAV total return per share for the year was 19.3%, a very pleasing result. Before the pandemic, the Company's year began with a successful fundraising ensuring the Company continues to be well-funded. The good performance achieved in 2019 initially continued with strong portfolio progress as well as two well-timed and profitable realisations in February. In March, substantial uncertainty and instability resulted from the COVID-19 pandemic and the UK Government's lockdown measures. A significant decline in consumer and business confidence followed with public markets falling sharply. The impact was an immediate reduction in portfolio values at the March quarter end - the low point of the year. These adjustments were only partly market related and mainly in response to the Investment Adviser's assessment of COVID-19's potential impact on investee companies and specific market segments. However, greater clarity emerged as the year progressed and, for most of the investee companies, the environment was less volatile and uncertain than was initially assumed in March. Over time, favourable trading conditions emerged for a number of the technology-related companies in the portfolio, and also those companies operating with direct to consumer business models. The valuation of the portfolio subsequently recovered strongly and progressed further during the latter half of the year. Whilst the current lockdown and potential for further restrictions may impact the portfolio going forward, your Board is pleased with how well so many portfolio companies have been able to take advantage of the opportunities that have arisen and with the overall performance achieved. Despite restrictions imposed on the ability of entrepreneurs to fund-raise due to COVID-19, the Company has remained an active investor during the year. Investments were made into three new portfolio companies, four existing portfolio companies and profitable realisations were achieved of five portfolio companies. One of these exits, Auction Technology Group, generated the Company's highest absolute profit in its history. Details on this investment activity and the portfolio valuation movements are discussed in the Investment Portfolio section of my Statement as well as in the Investment Adviser's Review below. The Investment Adviser continues to report a healthy pipeline of investment opportunities along with strong trading performance by most of the portfolio companies. Performance The Company's NAV total return per share for the year was 19.3% (being the closing NAV of 67.03 pence plus 15.00 pence of dividends paid in the year, made up of 4.00 pence declared for 2019 and 11.00 pence declared for 2020, divided by the opening NAV of 68.78 pence) (2019: 13.6%). The share price total return for the year was 13.7% (2019: 20.5%), compared to the NAV return of 19.3%. The difference arises because the share price relates to the latest NAV at 30 September 2020. This is explained more fully in the Strategic Report of the Annual Report, under Performance. The positive NAV total return for the year was primarily due to: I. Substantial net unrealised gains in portfolio valuations; II. Significant realised gains on disposals; and III. A strong revenue return. The Board believes that the Company's performance has demonstrated both strong resilience and further progress during this volatile year. The valuations at the year-end reflect that many of the investee companies have become beneficiaries of consumer behaviour changes as lockdown accelerated the shift to online business. The Adviser believes many of these changes have become structural. The Company's revenue return increased to £3.47 million during the year (2019: £1.74 million). This was mainly due to significant investment income received on the disposal of Auction Technology Group as well as higher dividend income, but partially offset by deferral of loan interest payments to support portfolio companies impacted by COVID-19. Dividends A further interim dividend for the year to 31 December 2019 of 4.00 pence per share was paid on 8 January 2020. Dividends declared and paid in respect of the year ended 31 December 2020 total 11.00 pence (2019: 10.00 pence) per share, comprising 6.00 pence per share paid on 7 May 2020 and 5.00 pence per share paid on 17 December 2020. The cumulative dividends paid since inception in 2004 are 139.80 pence (2019: 128.80 pence) per share. 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. 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. 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. A full dividend history is contained in the Performance Data appendix at the end of the Annual Report and on the Company's website: www. mobeus.co.uk/investor-area/ Investment portfolio The portfolio was valued at £51.14 million (2019: £51.70 million) at the year-end representing 124.1% of cost (2019: 116.9%). The overall value has increased by £14.81 million (2019: £9.14 million), or 28.7% (2019: 19.0%) on a like-for-like basis, compared to the start of the year. This increase was comprised of a net unrealised uplift in portfolio valuations of £10.47 million and £4.34 million in net realised gains over the year. COVID-19 and lockdown restrictions have been the dominant influence on the portfolio and its valuations for most of the year. The Board liaised closely with the Investment Adviser during this unprecedented time, to ensure that pragmatic steps were taken to enable each portfolio company to weather the crisis as best it could in the hope of subsequently resuming a growth in value. All investee companies were alerted to, and some utilised, the available government support packages. The Company initially provided loan interest payment holidays to some portfolio companies, generating vital cash headroom over the subsequent period. Although some portfolio companies remain disadvantaged by the COVID-19 pandemic, it was evident in the second half of the year that a number had actually been beneficiaries of the associated moved to online/digital solutions. The Company has now completed 22 new growth capital investments totalling £27.58 million since the change in the VCT rules introduced in 2015. At the year-end 65.3% (2019: 45.2%) of the portfolio was held in younger growth capital investments, while 34.7% (2019: 54.8%) of the value of the investment portfolio was held in more mature investments made before the rules changed. During the year, £5.43 million was invested in three new investments and four existing portfolio companies (analysed in the Investment Adviser's Review below and explained within Note 8 to the Financial Statements). The new investments, at a cost of £1.86 million, were: · Andersen EV, Electric vehicle chargers: £0.27 million · Northern Bloc, Vegan and plant-based ice cream producer: £0.42 million · Connect Childcare, Nursery management software provider: £1.17 million These businesses may present opportunities for further investment in the future as they may require additional capital to achieve their plans to expand. In addition, four follow-on investments totalling £3.57 million were made into: · Rota Geek, Workforce management software: £0.57 million · MyTutor, Digital education marketplace: £0.84 million · Buster & Punch, Lighting and interiors brand: £1.41 million · Preservica, Digital archiving software: £0.75 million We expect follow-on investments to continue to be a feature of the growth capital investments as they seek to achieve scale. Cash proceeds totalling £20.80 million for the year were received from portfolio companies that were either sold, repaid loans or settled other capital proceeds. Of this total, £20.15 million was received as cash proceeds from the sales of Biosite, Auction Technology Group, Access IS, Blaze Signs and Vectair Holdings. Proceeds of £0.65 million were also received from loan repayments and other capital proceeds. The portfolio achieved a net increase in unrealised valuations of £10.47 million for the year on investments still held, with substantial increases from Virgin Wines, MPB Group and Parsley Box partially offset by modest valuation falls at Tapas Revolution, CGI Creative Graphics and Media Business Insight. After the year-end, new and further investments were made into the following companies: New investments: · Vivacity, Artificial intelligence & urban traffic control system: £1.16 million · Caledonian Leisure, UK leisure and experience breaks: £0.18 million Further investments: · Parsley Box, Ambient ready meals for the over 60s: £0.33 million · Arkk Consulting, Regulatory reporting software: £0.62 million · Bleach, Branded hair treatments: £0.14 million · Tapas Revolution, Spanish restaurant chain in the casual dining sector: £0.14 million The flotation of Virgin Wines on the AIM market took place on 2 March 2021, at a Placing Price per share that increased the value of the Company's investment in Virgin Wines by £5.86 million. This increase reflects a premium generated by the strong support received from investors in the public offer. In isolation, this has resulted in a 4.64 pence uplift in NAV per share compared to the 31 December 2020 NAV per share contained within this Annual Report. As part of this transaction, the Company received repayment of its remaining loan stock, leaving Virgin Wines ungeared. The Board and Investment Adviser remain strong supporters of Virgin Wines and the Company has retained its entire equity holding. The flotation on the AIM market of another portfolio company, Parsley Box, is expected to take place on 31 March 2021. Subject to Admission to trading, the Placement Price of £2.00 per share will increase the year-end value of the Company's investment by £2.11 million. Again, in isolation, this will result in a further 1.67 pence uplift in NAV per share compared to the 31 December 2020 NAV per share contained within this Annual Report. Further details on these portfolio movements are contained in the Investment Adviser's Review in the Annual Report. Review of longer-term performance The Board also regularly reviews the Company's total (income and capital) return performance on both a NAV and Share Price basis compared to its peer group. Based on the statistics prepared by Morningstar at 31 December 2020 over the last five years, the Company was ranked 2nd on a NAV total return basis and 1st on a Share Price total return basis out of 41 generalist VCTs, both assuming dividends are reinvested (source: AIC). Additionally, the Company was ranked 1st on a NAV total return basis and 4th on a Share Price total return basis, out of 30 generalist VCTs, assuming dividends are reinvested, over the last ten years. Shareholders should note that these figures are based on the last available published data at 30 September 2020 and do not therefore reflect the increased NAV per share in the fourth quarter, disclosed in this Report. Shareholders who invested in 2004 at the launch of the Company have seen a NAV cumulative total return of 206.83 pence per share compared with their initial investment cost of 100 pence per share, or a net cost of 60 pence per share (after initial income tax relief of 40 pence of their investment). As part of this return, 139.80 pence per share has been paid to Shareholders in dividends up to the year-end. This represents an average annual yield on the initial 100 pence investment of 8.6% and 14.3% on the adjusted investment cost after income tax relief of 60.00 pence. The balance of the total return is the December 2020 NAV of 67.03 pence per share. Share buybacks During the year, the Company bought back and cancelled 1,423,180 shares, allowing Shareholders who wanted to sell their shares to do so. The buybacks represented 1.4% (2019: 2.2%) of the issued share capital of the Company at the beginning of the year. Further details are included in the Report of the Directors in the Annual Report. The Company's policy is to cancel all shares bought back in this way. The Board regularly reviews its buyback policy and currently seeks to maintain the discount at which the Company's shares trade at no more than 5% below the latest published NAV. Shareholder communications May I remind you that the Company has its own website containing useful information for Shareholders: www.migvct.co.uk. The annual Shareholder event was held on Tuesday, 4 February 2020 at the National Gallery in central London. Feedback from attendees was that this was a successful and informative event. Due to the uncertainty of when it may be possible to meet in a physical location again and for the safety of all concerned, the Investment Adviser is planning to hold a virtual Shareholder event later in 2021. Details will be notified to Shareholders once finalised and will be shown on the Company's website. Environmental, Social and Governance (ESG) Whilst the requirements under company law to detail ESG matters are not directly applicable to the Company, the Board is conscious of its potential impact on the environment as well as its social and corporate governance responsibilities. The Investment Adviser takes ESG considerations into account when investing and has presented its ESG strategy to the Board and has started to provide regular updates regarding the ESG responsibilities of its portfolio of investee companies. Your Board would like to assure Shareholders that it is taking these issues seriously. The future FCA reporting requirements consistent with the Task Force on Climate-related Financial Disclosures commencing from 1 January 2021 do not currently apply to the Company. However, it will be kept under review in light of any recommended changes. Fraud Warnings - Boiler Room Fraud 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 attempts for them to disclose personal data for fraudulent gains. 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 of the Annual Report. Annual General Meeting The Annual General Meeting ("AGM") of the Company will be held at 2:00 pm on Monday, 10 May 2021. Shareholders should note that physical meetings will still not be permitted due to the UK Government's COVID-19 restrictions and therefore Shareholders will not be allowed to attend the AGM in person as a precaution. In planning our AGM we have sought to prioritise the safety and wellbeing of our Shareholders and all attendees. The AGM will be held as a closed meeting with Shareholders able to join the meeting as attendees by electronic means. You will be able to see the Board members and Investment Adviser on your screen. A link to attend the meeting can be found in the Notice of Meeting at the rear of the Annual & Financial Statements. This link is also available on the Company's website at www.migvct.co.uk under the red AGM bubble on the front page. You do not need to download or have an electronic account to access the event. The meeting will also be accessible by telephone conference call for those without a suitable device and/or Wi-Fi connection. Once the formal business of the meeting is concluded, a presentation by the Investment Adviser will commence followed by Shareholders' questions. Shareholders will not be able to vote at the meeting. Voting will be conducted by way of a poll, by the quorum of members present, of all the valid proxy votes lodged. The Board encourages Shareholders to submit their vote by proxy either by completing and returning the form enclosed or otherwise proxy votes may also be submitted electronically via Computershare's Investor Centre at: www.investorcentre.co.uk/eproxy Shareholders are also strongly advised to appoint the Chairman of the Meeting as their proxy as any other nominated proxy may not be able to attend the meeting and the vote would not then count. Shareholders can also submit any questions by 4 May 2021 about the resolutions to be passed at the AGM before the meeting, using the agm@mobeus.co.uk email address and a response will be provided prior to the deadline for lodging proxy votes of 6 May 2021. You can also register a question for the AGM by using the same email address or alternatively, use the question facility available during the meeting. Outlook The impact of COVID-19 was and will continue to be widespread although your Board considers that the Company is well positioned to continue to adapt and respond to the most likely scenarios as can be foreseen at present. The five successful realisations and the fundraising completed earlier in the year gave the Company strong liquidity to support the existing portfolio, but also to take advantage of opportunities as they arise for new investment, like those we have seen during the year. The year-end valuations reflect the strong performance by many of our investee companies and a robust, adequately-funded and resilient portfolio, that is well equipped to meet the ever-changing environment. The results achieved for the year include valuation increases across the portfolio, underpinned by the five successful realisations. The Investment Adviser is seeing a good pipeline of new and interesting investment opportunities and also of opportunities to realise investments. The COVID-19 uncertainties and economic instability may still cause global markets and economies to be more volatile in the short-term. As a result of teething problems in the application of the new EU trade agreement post Brexit, UK and European businesses in particular, will continue to operate in a slightly uncertain trading environment for the near future (although no material issues have been experienced by the investee companies to date). The companies in the portfolio have been well prepared for the impact of Brexit for some time and this seems to be working well. Whilst the degree of any future lockdowns or other restrictions to the UK economy remains unclear, both the Investment Adviser and the portfolio companies are well equipped to respond appropriately. Consequently, your Board is cautiously optimistic about the future of the Company. I would like to take this opportunity, once again, to thank all Shareholders for their continued support and I hope you and your families remain healthy and well. Clive Boothman Chairman 30 March 2021 INVESTMENT POLICY The Company's 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 wide variety of sectors, principally in established companies. Investments are generally structured as part loan and part equity in order to receive regular income and to generate capital gain from realisations. There are a number of conditions within the VCT legislation which need to be met by the Company and which may change from time to time. 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 ADVISER'S REVIEW Overview This has been an unprecedented year in terms of initial value decline and the subsequent recovery and further progress. The Company's year started well with a strong portfolio performance and two highly successful realisations. The UK Government introduced lockdown and social distancing measures in response to the COVID-19 pandemic in March. These measures had an immediate and adverse impact on UK businesses, resulting in many companies experiencing a substantial reduction in demand, restrictions on their working practices and disruption to their supply chains. Global markets also fell significantly at the same time. The valuations of the portfolio companies reflected all of this, with a majority experiencing a significant decline at the end of the March quarter. Once the immediate impact of lockdown subsided, the pandemic's continuing influence on business generally and portfolio companies in particular, became far clearer. The impact has been far less negative than was initially feared with markets recovering and business activity levels quickly returning to pre COVID-19 levels in most cases. There have been a few portfolio companies which have experienced major disruption during this time but a significant proportion have benefited from the structural change in consumer purchasing habits and are now trading at or above the level pre COVID-19. The FTSE General Retail sector now comprises over 50% of the portfolio and all these companies have significant direct to consumer channels, a business model that has performed very well. Most of the portfolio has demonstrated a high degree of resilience with nearly 90% of companies showing revenue and/or earnings progression over the previous year. Software and other technology enabled businesses have also in the main performed strongly and the portfolio has benefited from limited exposure to more challenging sectors such as hospitality and travel. Strong trading activity levels created investment opportunities for the Company as portfolio companies sought to consolidate their positions by building capacity in response to demand. Several further growth capital investments were therefore made into the existing portfolio over the year. Mobeus continues to review the opportunities for follow-on investments and, due to the Company's strong liquidity, is in a good position to capitalise on these. M&A sentiment also remained buoyant with a continuing stream of attractive realisations throughout the year. The outlook for both follow-on investment and realisations continues to be positive. Although quoted markets have rallied somewhat since March, the principal driver of the rise in valuations over the recent months was strong underlying trading performance. Although a small number of companies have clearly struggled, they are in the minority and their impact on overall shareholder returns has been minimal. Increase in revenues and earnings achieved across most of the portfolio have driven the significant overall uplift in the value of the portfolio at 31 December 2020. In two cases, this increase in portfolio valuations at the year-end has been further validated by post balance sheet events: 1) The flotation of Virgin Wines on the AIM market on 2 March 2021, at a price per share that further materially increases the value of the Company's investment since the December year-end valuation, and; 2) The flotation on the AIM market of Parsley Box, which is expected to take place on 31 March 2021, again at a price per share that will increase the value of the Company's investment since the 31 December year-end valuation. The social and economic consequences of COVID-19 will be experienced for some time to come and the practical impact of Brexit is as yet still emerging. However, the majority of the portfolio is well prepared, in robust shape and is comfortably placed to respond to the challenges and opportunities that will arise. Overall, the portfolio has demonstrated great resilience and potential in trying times. Nevertheless, we remain mindful of the macro-economic uncertainties and market volatility. We are cautiously optimistic, based upon the recent evidence of improved trading performance experienced by many constituents of the portfolio. Mobeus believes much of this uplift will become permanent in many cases and should underpin further potential growth within the portfolio. New and further investments The Company made new and follow-on investments totalling £5.43 million (2019: £5.85 million), comprising £1.86 million (2019: £5.27 million) into three new investments and £3.57 million (2019: £0.58 million) into four existing investments. This level of new and follow-on investment is pleasing given that there was effectively a pause in new investment going into the summer months as entrepreneurs temporarily deferred fundraising, but a healthy pipeline of suitable opportunities has been seen more recently. Overall, the level of follow on investment has increased over the previous year and the Investment Adviser is confident that opportunities to back growing portfolio companies will continue. New investments during the year A total of £1.86 million was invested into three new investments during the year, as detailed below: Company | Business | Date of Investment | Amount of new investment (£m) | Andersen EV | Electric vehicle chargers | June 2020 | 0.27 | Muller EV Limited (trading as Andersen EV) is a design led manufacturer of premium electric vehicle (EV) chargers. Incorporated in 2016, this business has secured high profile partnerships with Original Equipment Manufacturers such as Porsche, establishing an attractive niche position in charging points for the high end EV market. The manufacturer's funds will be used to scale the business through investment in further products and software, sales and marketing and electric vehicle manufacturer partnerships. Given the current strong political and social emphasis on decarbonisation and air quality, Andersen is well positioned and has already generated significant growth in sales by over 350% for its most recent financial year. | Northern Bloc | Vegan and dairy-free ice cream producer | December 2020 | 0.42 | Northern Bloc Ice Cream is an established food brand in the emerging and rapidly growing vegan market. By focusing on chef quality and natural ingredients, Northern Bloc has carved out an early mover position in the vegan ice cream sector. The company's focus on plant-based alternatives has strong environmental credentials as well as it being the first ice cream brand to move wholly into sustainable packaging. The investment is aimed at capitalising on the company's market position and accelerating growth. It has obtained key listings across several large supermarkets and is well placed to benefit from the food service recovery as it continues to secure menu placings. Northern Bloc has doubled its retail store presence in 2020 and saw a 60% increase in retail sales over the year. | Connect Childcare | Nursery management software provider | December 2020 | 1.17 | Connect Childcare is a fully integrated nursery management system for childcare providers in the UK. Its market leading Core Connect product provides nurseries and preschools with an enterprise software solution enabling more efficient administrative processes. The investment will be used to drive product marketing and commercialise their new SaaS product (Foundations), as well as support the roll out of a payment facility to its underlying customer base. Supplying 14 of the top 25 largest nursery groups in the UK, the company has strong recurring revenues which have grown 20% for each of the last three years. |
Further investments during the year A total of £3.57 million was invested into four existing portfolio companies during the year, as detailed below: Company | Business | Date of Investment | Amount of further investment (£m) | RotaGeek | Workforce management software | May 2020 | 0.57 | RotaGeek is a provider of cloud-based enterprise software to help larger retail, leisure and healthcare organisations predict and meet demand to schedule staff effectively. This investment, alongside funds from a new investor and existing shareholders, will be used to capitalise on opportunities that will emerge as the retail sector recovers from lockdown restrictions. RotaGeek will also be expanding its presence in healthcare to help address the workforce management issues of a sector that is chronically overburdened at present. For the year ended 31 December 2019, revenues have grown over 45% on the prior year with 2020 revenues holding up well despite COVID-19 lockdowns. | MyTutor | Digital marketplace connecting school pupils seeking one-to-one online tutoring | May 2020 | 0.84 | MyTutorweb (trading as MyTutor) 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. This further investment, alongside other existing shareholders, seeks to build and reinforce its position as a UK category leader in the online education market as well as to begin to develop a broader, personalised learning product offering. MyTutor has performed strongly over the last 18 months with 70% growth in 2019 and over 190% over the last 12 months. The company has been chosen as Tutoring Partner for the National Tuition Programme where they will directly support 30,000 students in catching up on lost learning because of the COVID-19 pandemic. | Buster & Punch | Lighting and interiors brand | September 2020 | 1.41 | Buster & Punch is a premium branded, fast growing business which designs and manufactures a complete range of high-quality functional fittings (lighting, electrical and hardware and other accessories) for the home. The Company first invested in 2017 and since then, the business has delivered consistent high growth, with revenues growing more than 65% and reaching nearly £10 million in 2020. Buster & Punch's products are now sold in 99 countries via both its highly developed ecommerce platform and direct services to consumers, trade and retailers across the world. Buster & Punch also operates flagship showrooms in London, Stockholm and Los Angeles. The new funding will be used for further international expansion into the US and Asia Pacific markets. | Preservica | Seller of proprietary digital archiving software | September 2020 | 0.75 | Preservica is a SaaS software business with blue chip customers and strong recurring revenues. It 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. This latest investment is to provide additional growth capital to finance the further development of the business. The year to 31 March 2020 saw record growth in contract bookings of 68% and many key customer wins. | | | | | | | |
Portfolio valuation movements The portfolio generated net unrealised gains of £10.47 million during the year. The scale of the valuation increases in the last nine months of the year was primarily driven by the Company's growth portfolio, many of which have direct to consumer business models that have been ideally suited to the more physically remote business environment under COVID-19. Mobeus believes that this has accelerated an existing trend and in many cases the shift in behaviour will prove permanent. Over this period, some older style MBO portfolio companies with similar business practices have also benefited. A few companies have struggled in this environment, and while there remains a possibility such businesses will fail, their value has already been reduced to modest levels, reducing their risk to future shareholder value. Details of the principal valuation increases and reductions are explained below. Total valuation increases were £15.54 million. The main valuation increases were: Virgin Wines | £4.85 million | MPB Group | £1.83 million | Parsley Box | £1.58 million | Wetsuit Outlet | £1.55 million |
Virgin Wines, MPB and Parsley Box have generated record earnings and revenues over the lockdown periods and beyond. All have significantly increased their customer base and there is evidence that these new customers are continuing to be at least as active and profitable as their pre-COVID-19 counterparts. Wetsuit Outlet has seen a marked turnaround in the last year and its performance is likely to further benefit from stronger brand relationships and increased usage by customers of its online channel. Within total valuation decreases of £(5.07) million. The main reductions were: Tapas Revolution | £(1.35) million | CGI Creative Graphics International | £(1.19) million | Media Business Insight | £(1.06) million | RotaGeek | £(0.69) million |
These companies saw the most significant impact of a sudden decline in demand for their products or services because of COVID-19. However, as restrictions are eventually eased, a recovery is anticipated in due course. Most of the increase in portfolio value lies in the top 10 companies which represent over 70% of the portfolio by value. Year-on-year growth by either revenues or earnings has been seen in all of the top ten companies and it is pleasing to note that eight of these are from the younger growth portfolio made since the rule change in 2015. The year also saw portfolio companies Jablite, Oakheath (formerly Super Carers) and CB (Country Baskets) entering voluntary liquidation and recognised as a realised loss. These companies were struggling before the impact of COVID-19 and valuation reductions for these companies had already been made. As a result, there has been little impact on shareholder value from these administration processes. Growth capital investing involves companies which often have not achieved profitability, and as a result, have to be measured on other metrics. The table below shows the proportion of the portfolio that is represented by high growth but yet to be profitable companies (often valued by reference to revenue or gross profit multiple), compared with more mature, established companies with a history of profitability and which can therefore be valued on an earnings multiple: Valuation methodology | 2020 £m | 2019 £m | Revenue multiple | 25.55 | 14.14 | Earnings multiple | 23.50 | 30.94 | Recent investment price | 1.59 | 2.98 | Other | 0.50 | - | Gross profit multiple | - | 3.51 | Recent investment price (reviewed for impairment) | - | 0.13 | Total | 51.14 | 51.70 | Note - See Glossary of terms at the end of the Annual Report & Financial Statements for definitions of the financial performance terms in the table above. |
Portfolio Realisations The Company realised its investments in Biosite, Auction Technology Group, Access IS, Blaze Signs and Vectair Holdings during the year, receiving a total of £20.15 million in sale proceeds, contributing to total proceeds of £20.80 million received during the year, as detailed below. In summary, aggregate proceeds and income generated over the life of these investments were £35.64 million representing gains over original cost of £25.02 million. Company | Business | Period of investment | Total cash proceeds over the life of the investment / Multiple over cost | Biosite | Workforce management and security services | November 2016 to February 2020 | £2.45 million 1.5 x cost | The Company sold its investment in Pattern Analytics Limited (trading as Biosite) to ASSA ABLOY AB for £2.34 million. Since investment in 2016, the investment has generated proceeds of £2.45 million compared to an original investment cost of £1.58 million, which is a multiple on cost of 1.5x and an IRR of 21.0%. | Auction Technology Group | SaaS based online auction marketplace platform | October 2008 to February 2020 | £14.79 million 4.5 x cost | The Company sold its investment in Turner Topco Limited (trading as Auction Technology Group) to TA Associates for £8.64 million (including £1.78 million loan interest due on completion) (total realised gain in the year: £1.90 million). This investment generated proceeds of £14.79 million over the life of the investment (including proceeds received following a partial realisation from a sale to ECI Partners in June 2014), compared to an original cost of £3.27 million. Over the 11 ½ years this investment was held, these returns generated a multiple on cost of 4.5x and an IRR of 28.9%. | Access IS | Data capture and scanning hardware | October 2015 to August 2020 | £8.25 million 2.5 x cost | The Company sold its investment in Tovey Management Limited (trading as Access IS) to ASSA ABLOY AB for proceeds of £7.04 million (realised gain in the year: £2.32 million). Since investment in 2015, the investment has generated cash proceeds of £8.25 million compared to an original investment cost of £3.26 million, which is a multiple on cost of 2.5x and an IRR of 23.4%. | Blaze Signs | Manufacturer and installer of signs | April 2006 to September 2020 | £5.50 million 2.8 x cost | The Company sold its investment in Blaze Signs Holdings Limited via a secondary buy out backed by Elaghmore Advisor LLP and has received cash proceeds of £2.21 million (including £0.77 million of dividends and £0.23 million proceeds received after the year-end) (realised gain in the year: £0.16 million). Over the 14 years this investment was held, cash proceeds of £5.50 million have been received compared to original cost of £1.95 million, which is a multiple of cost of 2.8x and an IRR of 13.9%. | Vectair Systems | Designer and distributor of washroom products | January 2006 to November 2020 | £4.65 million 8.3 x cost | The Company sold its investment in Vectair Holdings Limited to a consortium of US investment funds, including Oxbow Industries and Arcspring, and has received proceeds of £2.70 million (realised loss in the year: £(0.23) million). This investment generated proceeds over the life of the investment of £4.65 million compared to original cost of £0.56 million, which is a multiple of cost is 8.3x and an IRR of 22.2%. | | | | | | |
Loan stock repayments and other gains/(losses) During the year, proceeds of £0.47 million were received via loan repayments from BookingTek, Vian Marketing (trading as Red Paddle) and Buster & Punch, generating realised gains of £0.07 million. Finally, consideration and a realised gain of £0.18 million was received in respect of Redline Worldwide, an investment realised in a previous year and a realised loss of £(0.06) million from Jablite Holdings was recognised as this company entered liquidation, with some further recovery of monies still anticipated. Investment Portfolio Yield | 2020 £m | 2019 £m | Interest received in the year | 3.03 | 2.17 | Dividends received in the year | 1.63 | 0.51 | Total portfolio income in the year1 | 4.66 | 2.68 | Portfolio value at 31 December | 51.14 | 51.70 | Portfolio Income Yield (Income as a % of Portfolio value at 31 December) | 9.1% | 5.2% | | | |
1 Total portfolio income in the year is generated solely from investee companies within the portfolio. See Note 3 of the Financial Statements for all income receivable by the Company. The increase in income was mainly due to interest of £1.78 million received on the loan instruments in Auction Technology Group being paid, as part of the sale transaction, which had not previously been recognised. Portfolio yield is expected to fall for the foreseeable future, as the growth portfolio's returns are likely to be more capital in nature. Portfolio review The portfolio's movements and valuation changes in the year are summarised below: | 2020 £m | 2019 £m | Opening portfolio value | 51.70 | 48.48 | New and further investments | 5.43 | 5.85 | Disposal proceeds | (20.80) | (11.77) | Net realised gains | 4.34 | 3.35 | Valuation movements | 10.47 | 5.79 | Portfolio value at 31 December | 51.14 | 51.70 |
Investment Portfolio Capital Movement | 2020 £m | 2019 £m | Increase in the value of | 15.54 | 8.07 | unrealised investments | | | Decrease in the | (5.07) | (2.28) | value of unrealised | | | investments | | | Net increase in the value of unrealised investments | 10.47 | 5.79 | Realised gains | 4.63 | 3.35 | Realised losses | (0.29) | - | Net realised gains in the year | 4.34 | 3.35 | Net investment portfolio capital movement in the year | 14.81 | 9.14 |
New investments after the year-end £1.34 million was invested into two new investments after the year-end, as detailed below: Company | Business | Date of investment | Amount of new investment (£m) | Vivacity | Artificial intelligence & urban traffic control system | February 2021 | 1.16 | Vivacity (www.vivacitylabs.com) develops camera sensors with on-board video analytics software that enables real-time anonymised data gathering of road transport system usage. It offers city transport authorities the ability to manage their road infrastructure more effectively, enabling more efficient monitoring of congestion and pollution levels as well as planning for other issues, such as the changing nature of road usage (e.g. the increasing number of cyclists). The technology and software represent a significant leap forward for local planning authorities which have traditionally relied upon manual data collection methods. The growth capital funding will allow the management team to achieve deeper penetration of the UK transport management sector, explore opportunities internationally and commercialise its new Smart Junction offering. Revenues have grown 350% over the last three years and it has exceeded its most recent year's budget despite the onset of the COVID-19 pandemic. | Caledonian Leisure | UK Leisure and experience breaks | March 2021 | 0.18 | Caledonian Leisure works with accommodation providers, coach businesses and other experienced break providers (such as entertainment destinations and theme parks) to deliver to its customers UK-based leisure and experience breaks. It comprises two brands, Caledonian Travel (www.caledoniantravel.com) and UK Breakaways (www.ukbreakaways.com). The domestic leisure and experience travel market has been devastated by the COVID-19 pandemic, but the company is well-placed to expand as lockdown and travel restrictions are eased. This investment, as part of a series of planned investment tranches, will help the company prepare for and capitalise on what is expected to be strong demand for UK staycation holidays. |
Further investments after the year-end A total of £1.23 million was invested into four existing portfolio companies after the year-end, as detailed below: Company | Business | Date of investment | Amount of further investment (£m) | Parsley Box | Ambient ready meals targeting the over 60s | January 2021 | 0.33 | Parsley Box is a UK direct to consumer supplier of home delivered, ambient ready meals targeting the over 60s. 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 company has seen a strong benefit from the COVID-19 pandemic with revenues nearly eight times greater than at the time of the original investment. This further investment will scale the company's marketing strategy, enable it to process larger order volumes and continue to build out its team. This company has announced an intention to admit its shares to trading on AIM on 31 March 2021. | Arkk Consulting | Regulatory and reporting requirement service provider | February 2021 | 0.62 | 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. This further investment is to enable continued development of its software to capitalise on HMRC's 'Making Tax Digital' campaign. Recurring revenues are now over 50% higher than at the point of the original investment in May 2019. | Bleach | Hair colourants brand | February 2021 | 0.14 | Bleach London Holdings ("Bleach") is an established, branded, fast growing business which manufactures a range of haircare and colouring products. Bleach has made sound commercial progress since the VCTs invested in 2019 with its direct-to- consumer channels benefiting greatly from the COVID-19 pandemic. Revenues have grown over 90% ahead of the previous year. This further investment, along with strong support from existing investors, will be used to invest in marketing and infrastructure to enable the business to accelerate its direct-to-consumer channel. | Tapas Revolution | Spanish restaurant chain | March 2021 | 0.14 | Tapas Revolution is a leading Spanish restaurant chain in the casual dining sector. At initial investment in January 2017 it was operating five sites and, after a further investment round in March 2018, had grown to 12 sites. Tapas was trading well and had a strong outlook up until the onset of COVID-19 which mandated the closure of much of its estate during 2020 in response to the varying patterns of government restrictions. Costs have been controlled well under the circumstances and this further investment is to provide financial headroom through the remaining lockdown period and so as to capitalise on new site acquisition opportunities once the lockdown period has ended. |
Admission to AIM of Virgin Wines Mobeus is also pleased to report that on 2 March 2021, Virgin Wines UK plc ("Virgin Wines"), an existing portfolio company, was admitted to trading on the Alternative Investment Market ("AIM") of the London Stock Exchange, alongside a placing of new and existing shares. The Placing Price of these shares was £1.97 per share, valuing Virgin Wines at a market capitalisation of £110m. Mobeus Equity Partners LLP has been proud to partner the management of Virgin Wines in growing this business. We continue to support Virgin Wines and its future development and are pleased to be retaining the Company's entire equity holding. At the date of the admission, and based upon the Placing Price of £1.97 per share, the Company's beneficial equity investment in Virgin Wines was valued at £11.52 million. This represented a significant uplift in valuation of £5.86 million, compared to that included in the Company's audited Net Asset Value ("NAV") per share at 31 December 2020 as shown as part of this Annual Report. This increase reflects a premium generated by the strong support received from investors in the public offer. As part of this transaction, the Company received net proceeds of £2.35 million (net of transaction costs) to repay its loan stock and interest, leaving Virgin Wines ungeared at that point. At the date of this Report, Virgin's share price has remained above its placing price. Environmental, Social, Governance considerations The Investment Adviser and the Board are considering an appropriate framework within which to assess progress on these matters within the existing portfolio. The Investment Adviser is encouraging this matter to be a standing agenda item at investee company board meetings. It will continue to be an important consideration in the Investment Adviser's and the Board's assessment of new investment opportunities. The statutory environmental disclosures are included in the Directors' Report within the Annual Report. Outlook The portfolio is in a healthy position with many companies trading well throughout the lockdowns and several at record levels. It continues to evolve, offering a balance of fast-growing and more stable investments at various stages of maturity and scale across a range of diverse market sectors. There is a significant exposure to the direct to consumer business model which has underpinned performance during the year. This also gives confidence about the future performance of the portfolio and its ability to cope with other uncertainties, challenges and opportunities associated with Brexit, the macro-economic outlook and the most recent imposition and subsequent lifting of national lockdowns. The new investment pipeline is recovering to levels seen pre-COVID-19 and capital deployment should continue at an encouraging rate in line with forecast. The Investment Adviser, although cautious in its approach, is confident that the portfolio is in a robust shape to be able to cope with whatever the short to medium-term holds. Mobeus Equity Partners LLP Investment Adviser 30 March 2021 Investment Portfolio Summary as at 31 December 2020 | Market sector | Date of investment | Total book cost £'000 | Valuation £'000 | Like for like valuation increase/ (decrease) over year1 | % value of net assets | % of equity held by funds advised by Mobeus2 | Virgin Wines Holding Company Limited3 Online wine retailer | General retailers | Nov-13 | 2,439 | 7,976 | 155.0% | 9.4% | 42.0% | MPB Group Limited Online marketplace for used photographic and video equipment | General retailers | Jun-16 | 1,900 | 5,294 | 52.8% | 6.2% | 23.6% | Preservica Limited Seller of proprietary digital archiving software | Software and computer services | Dec-15 | 2,849 | 4,780 | 49.0% | 5.6% | 47.9% | End Ordinary Group Limited (trading as Buster and Punch) Industrial inspired lighting and interiors retailer | General retailers | Mar-17 | 1,885 | 3,333 | 81.5% | 3.9% | 34.6% | EOTH Limited (trading as Equip Outdoor Technologies) Branded outdoor equipment and clothing | General retailers | Oct-11 | 1,000 | 2,951 | 13.2% | 3.5% | 8.0% | My TutorWeb Limited Digital marketplace connecting school pupils seeking one-to-one online tutoring | Support services | May-17 | 2,374 | 2,906 | 34.7% | 3.4% | 35.1% | Data Discovery Solutions Limited (trading as Active Navigation) Provider of global market leading file analysis software for information governance, security and compliance | Software and computer services | Nov-19 | 1,413 | 2,826 | 100.0% | 3.3% | 28.5% | Parsley Box Limited Supplier of home delivered, ambient ready meals targeting the over 60s | General retailers | May-19 | 854 | 2,477 | 175.1% | 2.9% | 22.0% | Proactive Group Holdings Inc Provider of media services and investor conferences for companies primarily listed on secondary public markets | General financial | Jan-18 | 927 | 2,331 | 0% | 2.8% | 11.4% | Manufacturing Services Investment Limited (trading as Wetsuit Outlet) Online retailer in the water sports market | General retailers | Jul-17 | 2,174 | 2,171 | 247.9% | 2.6% | 27.5% | Vian Marketing Limited (trading as Red Paddle Co) Design, manufacture and sale of stand-up paddleboards and windsurfing sails | Leisure goods | Jul-15 | 1,043 | 1,938 | 21.3% | 2.3% | 48.5% | Arkk Consulting Limited (trading as Arkk Solutions) Provider of services and software to enable organisations to remain compliant with regulatory reporting requirements | Software and computer services | May-19 | 1,446 | 1,524 | 3.1% | 1.8% | 33.6% | Tharstern Group Limited Software based management information systems | Software and computer services | Jul-14 | 1,377 | 1,308 | (6.2)% | 1.5% | 52.5% | Master Removers Group 2019 Limited (trading as Anthony Ward Thomas, Bishopsgate and Aussie Man & Van) A specialist logistics, storage and removals business | Support services | Dec-14 | 418 | 1,254 | 33.1% | 1.5% | 28.1% | Connect Childcare Group Limited Provider of childcare services | Support services | Dec-20 | 1,168 | 1,168 | New investment | 1.4% | 14.4% | Bleach London Holdings Limited Hair colourants brand | General retailers | Dec-19 | 674 | 1,080 | 60.3% | 1.3% | 14.1% | Rota Geek Limited Workforce management software | Support services | Aug-18 | 1,142 | 949 | (64.5)% | 1.1% | 20.3% | IPV Limited Provider of media asset software | Software and computer services | Nov-19 | 890 | 890 | 0% | 1.1% | 26.6% | Media Business Insight Holdings Limited A publishing and events business focused on the creative production industries | Media | Jan-15 | 2,518 | 747 | (46.9)% | 0.9% | 67.5% | CGI Creative Graphics International Limited Vinyl graphics to global automotive, recreational vehicle and aerospace markets | General industrials | Jun-14 | 1,808 | 487 | (70.9)% | 0.6% | 26.9% | Northern Bloc Ice Cream Limited Supplier of premium vegan ice cream | Food and drink | Dec-20 | 420 | 420 | New investment | 0.5% | 3.6% | Muller EV Limited (trading as Andersen EV) Provider of premium electric vehicle (EV) chargers | Electronic & electrical equipment | Jun-20 | 270 | 301 | New investment | 0.4% | 2.4% | RDL Corporation Limited Recruitment consultant for the pharmaceutical and IT industries | Support services | Oct-10 | 1,558 | 236 | (48.5)% | 0.3% | 45.2% | Kudos Innovations Limited Online platform that provides and promotes academic research dissemination | Support services | Nov-18 | 421 | 195 | (70.4)% | 0.2% | 14.6% | Spanish Restaurant Group Limited (formerly Ibericos Etc. Limited) (trading as Tapas Revolution) Spanish restaurant chain | Travel & leisure | Jan-17 | 1,245 | 166 | (89.1)% | 0.2% | 25.0% | Jablite Holdings Limited (in members' voluntary liquidation) Manufacturer of expanded polystyrene products | Construction and materials | Apr-15 | 502 | 66 | (47.2)% | 0.1% | 40.1% | Veritek Global Holdings Limited Maintenance of imaging equipment | Support services | Jul-13 | 2,045 | - | 0% | 0.0% | 65.6% | Racoon International Group Limited Supplier of hair extensions, hair care products and training | Personal goods | Dec-06 | 1,213 | - | 0% | 0.0% | 0.0% | BookingTek Limited Direct booking software for hotels | Software and computer services | Oct-16 | 688 | - | 0% | 0.0% | 14.9% | Oakheath Limited (formerly Super Carers Limited)(in members' voluntary liquidation) Online platform that connects people seeking care at home from experienced independent carers | Support services | Mar-18 | 580 | - | 0% | 0.0% | 18.7% | CB Imports Group Limited (trading as Country Baskets) Importer and distributor of artificial flowers and floral sundries | General retailers | Dec-09 | 350 | - | 0% | 0.0% | 23.2% | Total qualifying investments | 39,591 | 49,774 | | 58.8%4 | | Non-qualifying investments | | | | Media Business Insight Limited A publishing and events business focused on the creative production industries | Media | Jan-15 | 764 | 475 | (45.8)% | 0.6% | 67.5% | Manufacturing Services Investment Limited (trading as Wetsuit Outlet) Online retailer in the water sports market | General retailers | Jul-17 | 571 | 571 | 0% | 0.7% | 27.5% | EOTH Limited (trading as Equip Outdoor Technologies) Branded outdoor equipment and clothing (Rab and Lowe Alpine) | General retailers | Oct-11 | 298 | 324 | 0% | 0.4% | 8.0% | Total non-qualifying investments | | | 1,633 | 1,370 | | 1.7% | | | | | | | | | | Total investment portfolio | | | 41,224 | 51,144 | | 60.5% | | Current asset investments and cash at bank5 | | | 33,492 | 33,492 | | 39.4% | | Total investments | | | 74,716 | 84,636 | | 99.9% | | Other assets | | | | 517 | | 0.6% | | Current liabilities | | | | (465) | | (0.5)% | | Net assets | | | | 84,688 | | 100.0% | | | | | | | | | | Portfolio Split by type | | | | | | | | Investments made prior to 2015 rule change | | 17,333 | 17,762 | | 34.7% | | Investments made after 2015 rule change | | 23,891 | 33,382 | | 65.3% | | | | | 41,224 | 51,144 | | 100.0% | | | | | | | | | | 1 This percentage change in 'like for like' valuations is a comparison of the 31 December 2020 valuations with the 31 December 2019 valuations (or where a new investment has been made in the year, the investment amount), having adjusted for any partial disposals, loan stock repayments or new investments in the year. 2 The other funds advised by Mobeus include Mobeus Income & Growth 2 VCT plc, Mobeus Income & Growth 4 VCT plc and The Income & Growth VCT plc. Details are contained in Note 9 to the accounts of the Annual Report. 3 After the year-end, this company was admitted to AIM. For further details see Post Balance Sheet Events. 4 At 31 December 2020, the Company held more than 80% of its total investments in qualifying holdings, and therefore complied with the VCT qualifying investment test. For the purposes of the VCT qualifying investment test, the Company is permitted to disregard disposals of investments for twelve months from the date of disposal. It also has up to three years to bring in new funds raised, before these need to be included in the qualifying investment test. 5 Disclosed as Current asset investments and Cash at bank within Current assets in the Balance sheet. | | | | | | | | | | | | | | | | |
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 and emerging risks faced by the Company. The Board's risk appetite is cognitive of the risks and rewards of investing in small unquoted companies. A key risk management review and robust assessment of the risks takes place at each quarterly Board meeting and the Board discusses emerging risks as and when they arise, such as the COVID-19 pandemic, and puts in place mitigating actions to manage the risk. The principal and emerging risks identified by the Board, a description of the possible consequences of each risk and how the Board manages each risk are set out below: Risk | Possible consequence | How the Board manages risk | Economic | Events such as the impact of leaving the EU during 2020, an economic recession, a movement in sterling or in interest rates and the impact of COVID-19, could affect trading conditions for smaller companies and consequently the value of the Company's qualifying investments. | · 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 movements in interest rates and availability of labour under new immigration plans; and (3) the Company's cash position ensuring it can be flexible in light of economic impacts. | Loss of approval as a Venture Capital Trust | A breach of the VCT Rules, which change on a frequent basis, may lead to the Company losing its approval as a VCT, which would inter alia result in: (1) qualifying shareholders who have not held their shares for the designated period having to repay the income tax relief they obtained; (2) future dividends paid by the Company being subject to tax; and (3) the Company losing its exemption from corporation tax on capital gains. | · The Company's VCT qualifying status is continually reviewed by the Board and the Investment Adviser. · The Board receives regular reports from its VCT Status Adviser who has been retained by the Board to monitor the VCT's compliance with the VCT Rules. | Investment and strategic | Investment in unquoted small companies involves a higher degree of risk than investment in fully listed companies. 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 Objective and Investment Policy. · Investments are made across a number of diverse sectors to mitigate risk. 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. · A member of the Investment Adviser normally sits on the investee company board. | Regulatory | The Company is required to meet its legal and regulatory obligations as a VCT, a listed company and its own AIFM. Failure to comply might result in suspension of the Company's Stock Exchange listing, financial penalties, a qualified audit report or loss of its VCT status. | · Regulatory and legislative developments are kept under review by the Company's solicitors, its VCT Status Adviser 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 and receives control reports by exception. · It reviews the performance of the service providers annually and has obtained assurance that such providers have controls in place to reduce the risk of breaches of their cyber security. | Valuations and stock market | The majority of the Company's assets are minority holdings in unquoted companies, which are inherently difficult to value. Changes in valuations are taken to Profit and Loss account, so any inaccuracy in valuations will affect both the Income Statement and the Balance Sheet. | · The Board receives quarterly valuation reports from the Investment Adviser. · The Investment Adviser alerts the Board about any adverse movements. | Asset liquidity | The Company's unquoted investments cannot be realised in a short timescale. Under-performing unquoted investments may be difficult to realise on any timescale. | · 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 | As a result of the limited secondary market in VCT shares, shareholders may find it difficult to sell their shares at a price which is close to the net asset value. Whilst demand has always been met to date, it may not be possible for the Company to buy back large percentages of the share capital, other than over several years. | · The Board has a share buyback policy which seeks to mitigate market liquidity risk. This policy is reviewed at each quarterly Board meeting. | Counterparty | A counterparty may fail to discharge an obligation or commitment that it has entered into with the Company. | · The Board regularly reviews and agrees policies for managing these risks. Further details can be found under 'credit risk' in Note 15 to the Financial Statements in the Annual Report. | Key staff | A partner or key member of staff at the Investment Adviser may leave the organisation or the Investment Adviser may fail to maintain adequate levels of experience and expertise in its team. This may have an adverse effect on the standard of service that the Company receives from the Investment Adviser and therefore the performance of the Company. | · The Board maintains regular dialogue with the Investment Adviser to ensure that the team is adequately resourced. | Environmental, Social and Governance Emerging Risk | Non-compliance with current and future reporting requirements could lead to a fall in demand from investors. That may affect the level of capital the Company has available to meet its investment objectives. | · ESG is also taken into account when considering new investment proposals. The Investment Adviser monitors the potential impact on investee companies of any proposed new legislation regarding environmental, social and governance matters and advises and adapts accordingly. · The Board recognises that climate change is an important emerging risk that the Company is taking into account in their strategic planning although the Company itself has little direct impact on environmental issues. Measures have been introduced to reduce the cost and environmental impact of providing paper copies of Shareholder correspondence. |
STATEMENT OF DIRECTORS' RESPONSIBILITIES The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Financial Statements for each financial year and the Directors have elected to prepare the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these Financial Statements, the Directors are required to: ● 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 Director's Report and Directors' 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; and 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 the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Company's performance, business model and strategy. Neither the Company nor the Directors accept any liability to any person in relation to the Annual Report except to the extent that such liability could arise under English law. For and on behalf of the Board Clive Boothman Chairman 30 March 2021 FINANCIAL STATEMENTS Income Statement for the year ended 31 December 2020 | | Notes | Year ended 31 December 2020 Revenue Capital Total £ £ £ | Year ended 31 December 2019 Revenue Capital Total £ £ £ | Net investment portfolio gains | 8 | - | 14,811,634 | 14,811,634 | - | 9,144,246 | 9,144,246 | Income | 3 | 4,754,700 | - | 4,754,700 | 2,854,837 | - | 2,854,837 | Investment Adviser's fees | 4a | (423,839) | (1,271,516) | (1,695,355) | (406,306) | (1,218,918) | (1,625,224) | Other expenses | 4c | (424,396) | - | (424,396) | (411,005) | - | (411,005) | Profit on ordinary activities before taxation | | 3,906,465 | 13,540,118 | 17,446,583 | 2,037,526 | 7,925,328 | 9,962,854 | Taxation on profit on ordinary activities | 5 | (432,618) | 241,588 | (191,030) | (293,485) | 231,594 | (61,891) | Profit for the year and total comprehensive income | 3,473,847 | 13,781,706 | 17,255,553 | 1,744,041 | 8,156,922 | 9,900,963 | Basic and diluted earnings per ordinary share | 7 | 2.76p | 10.97p | 13.73p | 1.65p | 7.71p | 9.36p | The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the net investment portfolio gains (unrealised gains and realised gains on investments) and the proportion of the Investment Adviser's fee 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 better to reflect the activities of a VCT and in accordance with the 2014 Statement of Recommended Practice ("SORP") (updated in October 2019) by the Association of Investment Companies, 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 December 2020 Company No. 5153931 | Notes | 31 December 2020 £ | 31 December 2019 £ | Fixed assets | | 51,144,184 | 51,703,161 | Investments at fair value | 8 | Current assets | | | | Debtors and prepayments | | 517,277 | 225,562 | Current asset investments | 9 | 30,371,198 | 12,914,124 | Cash at bank and in hand | 9 | 3,120,539 | 7,261,618 | | 34,009,014 | 20,401,304 | Creditors: amounts falling due within one year | | (464,682) | (216,090) | Net current assets | 33,544,332 | 20,185,214 | Net assets | 84,688,516 | 71,888,375 | | | | Capital and reserves | | 1,263,366 | 1,045,265 | Called up share capital | 10 | Capital redemption reserve | | 25,536 | 11,304 | Share premium reserve | | 14,397,509 | - | Revaluation reserve | | 12,498,006 | 8,719,606 | Special distributable reserve | | 27,415,880 | 45,731,919 | Realised capital reserve | | 26,927,746 | 14,528,747 | Revenue reserve | | 2,160,473 | 1,851,534 | Equity Shareholders' funds | 84,688,516 | 71,888,375 | Basic and diluted net asset value per ordinary share | 11 | 67.03p | 68.78p | | | | | | |
The Notes below form part of these Financial Statements. The Financial Statements were approved and authorised for issue by the Board of Directors on 30 March 2021 and were signed on its behalf by Clive Boothman, Chairman. Statement of Changes in Equity for the year ended 31 December 2020 | | | Non-distributable reserves | Distributable reserves | | | | Called up | Capital | Share | | Special | Realised | | | | | share | redemption | premium | Revaluation | distributable | capital | Revenue | | | | capital | reserve | reserve | reserve | reserve | reserve | reserve | Total | For the year ended 31 December 2020 | | | | | (Note a) | (Note b) | (Note b) | | Notes | £ | £ | £ | £ | £ | £ | £ | £ | | | | | | | | | | | At 1 January 2020 | | 1,045,265 | 11,304 | - | 8,719,606 | 45,731,919 | 14,528,747 | 1,851,534 | 71,888,375 | Comprehensive income for the year | | | | | | | | | | Profit for the year | | - | - | - | 10,471,413 | - | 3,310,293 | 3,473,847 | 17,255,553 | Total comprehensive income for the year | | - | - | - | 10,471,413 | - | 3,310,293 | 3,473,847 | 17,255,553 | | | | | | | | | | | Contributions by and distributions to owners | | | | | | | | | | Shares issued via Offer for Subscription (Note c) | 10 | 232,333 | - | 14,767,667 | - | | - | - | 15,000,000 | Issue costs and facilitation fees on Offer for Subscription (Note c) | 10 | - | - | (370,158) | - | (152,153) | - | | (522,311) | Shares bought back (Note d) | 10 | (14,232) | 14,232 | - | - | (756,637) | - | | (756,637) | Dividends paid | 6 | - | - | - | - | (15,011,556) | - | (3,164,908) | (18,176,464) | Total contributions by and distributions to owners | | 218,101 | 14,232 | 14,397,509 | - | (15,920,346) | - | (3,164,908) | (4,455,412) | | | | | | | | | | | Other movements | | | | | | | | | | Realised losses transferred to special reserve (Note a) | | - | - | - | - | (2,395,693) | 2,395,693 | | - | Realisation of previously unrealised gains | | - | - | - | (6,693,013) | - | 6,693,013 | | - | Total other movements | | - | - | - | (6,693,013) | (2,395,693) | 9,088,706 | - | - | | | | | | | | | | | At 31 December 2020 | | 1,263,366 | 25,536 | 14,397,509 | 12,498,006 | 27,415,880 | 26,927,746 | 2,160,473 | 84,688,516 | | | | | | | | | | | Notes | | | | | | | | | | a) The purpose of this reserve is to fund market purchases of the Company's own shares, to write off existing and future losses and for any other corporate purpose. The transfer of £2,395,693 to the special reserve from the realised capital reserve above is the total of realised losses incurred by the Company in the year. As at 31 December 2020, the Company has a special reserve of £27,415,880, £3,210,394 of which arises from shares issued more than three years ago. Reserves originating from share issues are not distributable under VCT rules if they arise from share issues that are within three years of the end of an accounting period in which shares were issued. | | | | | | | | | | | b) The realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the Company shown on the Balance Sheet. | | | | | | | | | | | c) Under the Company's Offer for Subscription launched on 25 October 2019, 23,233,293 Ordinary Shares were allotted between 8 January 2020 and 2 April 2020, raising net funds of £14,477,689 for the Company. This figure is net of issue costs of £370,158 and facilitation fees of £152,153. | | | | | | | | | | | d) During the year, the Company purchased 1,423,180 of its own shares at the prevailing market price for a total cost of £756,637, which were subsequently cancelled. This differs to the figure shown in the cash flow statement by £44,114 which was a creditor at the year-end. | | | | | | | | | | | Statement of Changes in Equity for the year ended 31 December 2019 | | | Non-distributable reserves | Distributable reserves | | | | Called up | Capital | Share | | Special | Realised | | | | | share | redemption | premium | Revaluation | distributable | capital | Revenue | | | | capital | reserve | account | reserve | reserve | reserve | reserve | Total | | £ | £ | £ | £ | £ | £ | £ | £ | | | | | | | | | | | At 1 January 2019 | | 1,068,659 | 32,191 | 43,644,698 | 5,285,632 | 12,681,614 | 8,818,475 | 3,546,713 | 75,077,982 | Comprehensive income for the year | | | | | | | | | | Profit for the year | | - | - | - | 5,793,216 | - | 2,363,706 | 1,744,041 | 9,900,963 | Total comprehensive income for the year | | - | - | - | 5,793,216 | - | 2,363,706 | 1,744,041 | 9,900,963 | | | | | | | | | | | Contributions by and distributions to owners | | | | | | | | | | Shares issued under Offer for Subscription | | 363 | - | 24,637 | - | - | - | - | 25,000 | Shares bought back | | (23,757) | 23,757 | - | - | (1,492,825) | - | - | (1,492,825) | Dividends paid | | - | - | - | - | (8,183,525) | - | (3,439,220) | (11,622,745) | Total contributions by and distributions to owners | | (23,394) | 23,757 | 24,637 | - | (9,676,350) | - | (3,439,220) | (13,090,570) | | | | | | | | | | | Other movements | | | | | | | | | | Cancellation of Share Premium account | | - | (44,644) | (43,669,335) | - | 43,713,979 | - | - | - | Realised losses transferred to special reserve | | - | - | - | - | (987,324) | 987,324 | - | - | Realisation of previously unrealised appreciation | | - | - | - | (2,359,242) | - | 2,359,242 | - | - | Total other movements | | - | (44,644) | (43,669,335) | (2,359,242) | 42,726,655 | 3,346,566 | - | - | At 31 December 2019 | | 1,045,265 | 11,304 | - | 8,719,606 | 45,731,919 | 14,528,747 | 1,851,534 | 71,888,375 | | | | | | | | | | | 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 recent 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 | This reserve is created from cancellations of the balances upon the Share premium reserve, which are transferred to this reserve from time to time. The cost of share buybacks and any realised losses on the sale or impairment of investments (excluding transaction costs), and 75% of the Investment Adviser fee expense, and the related tax effect, are transferred from the realised capital reserve to this reserve. This reserve will also be charged any facilitation payments to financial advisers, which arose as part of the Offer for Subscription. | 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 fee expense and 100% of any performance fee payable, together with the related tax effect to this reserve in accordance with the policies, and • Capital dividends paid. | Revenue reserve | Income and expenses that are revenue in nature are accounted for in this reserve, as well as 25% of the Investment Adviser fee together with the related tax effect, as well as income dividends paid that are classified as revenue in nature. | The Notes below form part of these Financial Statements. |
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Notes to the Financial Statements for the year ended 31 December 2020 | 1 | Company information | | Mobeus Income and Growth VCT plc is a public limited company incorporated in England, registration number 5153931. The registered office is 30 Haymarket, London, SW1Y 4EX. | 2 | Basis of preparation | | A summary of the principal accounting policies, all of which have been applied consistently throughout the year are set out at the start of the related disclosure throughout the Notes to the Financial Statements. All accounting policies are included within an outlined box at the top of each relevant Note. These Financial Statements have been prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 ("FRS102"), with the Companies Act 2006 and the 2014 Statement of Recommended practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('the SORP') (updated in October 2019) 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. After performing the necessary enquiries, the Directors have undertaken an assessment of the Company's ability to meet its liabilities as they fall due. The Company has significant cash and liquid resources and no external debt or capital commitments. The Company's cash flow forecasts, which consider levels of anticipated new and follow on investment, as well as investment income and annual running cost projections, are discussed at each quarterly Board meeting and, in particular, have been considered in light of the ongoing impact of the COVID-19 pandemic. The Directors have also received assurances that the Company's key suppliers' ability to continue to service the Company has not been materially impacted by the COVID-19 pandemic. Following this assessment, the Directors have a reasonable expectation that the Company will have adequate resources to continue to meet its liabilities for at least 12 months from the date of these Financial Statements. The Directors therefore consider the preparation of these financial statements on a going concern basis to be appropriate. | | | 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 December 2020 has been classified as capital and has been included within gains on investments. | 2020 | 2019 | | £ | £ | Income from bank deposits | 14,334 | 29,674 | | | | Income from investments | | | - from equities | 1,628,784 | 505,401 | - from OEIC funds | 70,175 | 151,532 | - from loan stock | 2,967,870 | 2,161,352 | - from interest on preference share dividend arrears | 64,840 | 6,878 | | 4,731,669 | 2,825,163 | | | | Other income | 8,697 | - | Total income | 4,754,700 | 2,854,837 | | | | Total income comprises | | | Dividends | 1,698,959 | 656,933 | Interest | 3,047,044 | 2,197,904 | Other income | 8,697 | - | | 4,754,700 | 2,854,837 | | | |
Total loan stock interest due but not recognised in the year was £979,270 (2019: £580,811), due to uncertainty over its recoverability. This increase is due to a number of investee company provisions in light of COVID-19 partially offset by the realisation of one investee company whose interest was only recognised upon exit. | 4 | Investment Adviser's fees and performance fees | | All expenses are accounted for on an accruals basis. 25% of the Investment Adviser's fees are charged to the revenue column of the Income Statement, while 75% is charged against the capital column of the Income Statement. This is in line with the Board's expected long-term split of returns from the investment portfolio of the Company. 100% of any performance incentive fee payable for the year is charged against the capital column of the Income Statement, as it is based upon the achievement of capital growth. a) Investment Adviser's fees and performance fees | Revenue | Capital | Total | Revenue | Capital | Total | | 2020 | 2020 | 2020 | 2019 | 2019 | 2019 | | £ | £ | £ | £ | £ | £ | Mobeus Equity Partners LLP | | | | | | | Investment Adviser's fees | 423,839 | 1,271,516 | 1,695,355 | 406,306 | 1,218,918 | 1,625,224 |
Under the terms of a revised investment management agreement dated 20 May 2010 (amended and restated on 9 November 2016), Mobeus Equity Partners LLP ("Mobeus") provides investment advisory, administrative and company secretarial services to the Company, for a fee of 2% per annum of closing net assets, paid in advance, calculated on a quarterly basis by reference to the net assets at the end of the preceding quarter, plus a fixed fee of £134,168 per annum, the latter inclusive of VAT and subject to annual increases in RPI. In 2013, Mobeus agreed to waive such further increases due to indexation, until otherwise agreed with the Board. The Investment Adviser's fee includes provision for a cap on expenses excluding irrecoverable VAT and exceptional items set at 3.6% of closing net assets at the year-end. In accordance with the Investment Management Agreement, any excess expenses are borne by the Investment Adviser. The excess expenses during the year amounted to £nil (2019: £nil). With effect from 1 July 2020, the Investment Adviser's fee upon the net funds raised from the use of the overallotment facility of £5 million under the 2019/20 Offer is reduced to 1% from 2% per annum, for one year. Between 1 April 2018 and 31 March 2019, the Investment Adviser's fee upon the net funds raised from the use of the overallotment facility of £10 million under the 2017/18 Offer was reduced to 1% from 2% per annum, for one year. 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. No such costs have been incurred in the current or previous year. In line with common practice, Mobeus retains the right to charge arrangement and syndication fees and directors' or monitoring fees to companies in which the Company invests. The Investment Adviser received fees totalling £415,064 during the year ended 31 December 2020 (2019: £425,708), being £270,534 (2019: £146,336) for arrangement fees and £144,530 (2019: £279,372) for acting as non-executive directors on a number of investee company boards. These fees attributable to the Company are based upon the investment allocation applicable to the Company which applied at the time of each investment. These figures are not part of these Financial Statements. Incentive agreement Under the Incentive Agreement dated 9 July 2004, and a variation of this agreement dated 20 May 2010, the Investment Adviser is entitled to receive an annual performance-related incentive fee of 20% of the dividends paid in a year in excess of a "Target Rate" comprising firstly, an annual dividend paid in a year target which started at 6.00 pence per share on launch (indexed each year for RPI) and secondly a requirement that any shortfall of cumulative dividends paid in each year beneath the cumulative annual dividend target is carried forward and added to the Target Rate for the next accounting period. Any excess of cumulative dividends paid above the cumulative annual dividend target is not carried forward, whether an incentive fee is payable for that year or not. Payment of a fee is also conditional upon the daily weighted average Net Asset Value ("NAV") per share throughout such year equalling or exceeding the daily weighted average Base NAV per share throughout the same year. The performance fee will be payable annually. At 31 December 2020, the annual dividend target is 8.11 pence per share and as cumulative dividends paid were 15.00 pence, this target was met. However, the average NAV per share was 61.04 pence for the year, which was less than the average base NAV per share for the year of 87.85 pence. Accordingly, no performance incentive fee is payable for the year (2019: nil). b) Offer for Subscription fees | 2020 | 2019 | | £m | £m | Funds raised by MIG VCT | 14.48 | - | Offer costs payable to Mobeus at 3.00% of funds raised by the Company | 0.45 | - |
Under the terms of an Offer for Subscription, with the other Mobeus advised VCTs, launched on 25 October 2019, Mobeus was entitled to fees of 3.00% of the investment amount received from investors. This amount totalled £1.74 million across all four VCTs, out of which all the costs associated with the allotment were met, excluding any payments to advisers facilitated under the terms of the Offer. | | 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. | 2020 | 2019 | | £ | £ | Directors' remuneration (including NIC of £6,852 (2019: £7,916)) - note a) | 111,852 | 112,916 | IFA trail commission | 98,888 | 75,439 | Broker's fees | 3,600 | 14,400 | Auditor's fees - Audit of Company (excluding VAT) | 30,084 | 29,213 | - audit related assurance services - note b) (excluding VAT) | 6,868 | 6,663 | - tax compliance services - note b) (excluding VAT) | - | 1,845 | Registrar's fees | 44,356 | 55,221 | Printing | 61,709 | 33,095 | Legal & professional fees | 6,654 | 24,501 | VCT monitoring fees | 9,000 | 9,000 | Directors' insurance | 6,225 | 6,644 | Listing and regulatory fees | 32,628 | 31,571 | Sundry | 9,200 | 10,497 | Running costs | 421,064 | 411,005 | Provision against loan interest receivable (note c) | 3,332 | - | Other expenses | 424,396 | 411,005 |
| | | | Notes: | | | | a) Directors' remuneration is a related party transaction, see analysis of Directors' fees payable and their interests in the shares of the Company in the Directors' Remuneration Report within the Annual Report, which excludes NIC above. The key management personnel are the three non-executive Directors. The Company has no employees. There were no amounts outstanding and due to the Directors at 31 December 2020 (2019: £nil). b) The audit-related assurance services are in relation to certain agreed procedures in respect of the Financial Statements within 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 2019 only, BDO carried out iXBRL services on behalf of the Company, and was therefore shown as part of tax compliance services above. The preparation of the Company's Corporation tax return (for both years) and iXBRL services (for the current year) were carried out elsewhere, and by two separate firms. c) Provision against loan interest receivable above relates to an amount of £3,332 (2019: £nil), being a provision made against loan stock interest regarded as collectable in previous years. | | | | | 5 | Taxation on ordinary activities | | The tax expense for the year comprises current tax and is recognised in profit or loss. The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date. Any tax relief obtained in respect of adviser fees allocated to capital is reflected in the 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. Tax relief relating to Investment Adviser fees is allocated between revenue and capital where such relief can be utilised. The Company is an Investment Trust and Investment Trust companies are exempt from tax on capital gains if they meet the HMRC criteria set out in section 274 of the ITA. | 2020 | 2020 | 2020 | 2019 | 2019 | 2019 | | Revenue | Capital | Total | Revenue | Capital | Total | | £ | £ | £ | £ | £ | £ | a) Analysis of tax charge: | | | | | | | UK Corporation tax on profits/(losses) for the year | 432,618 | (241,588) | 191,030 | 293,485 | (231,594) | 61,891 | Total current tax charge/(credit) | 432,618 | (241,588) | 191,030 | 293,485 | (231,594) | 61,891 | Corporation tax is based on a rate of 19.00% (2019: 19.00%) | | | | | | | | | | | | | | b) Profit on ordinary activities before tax | 3,906,465 | 13,540,118 | 17,446,583 | 2,037,526 | 7,925,328 | 9,962,854 | Profit on ordinary activities multiplied by main company rate of corporation tax in the UK of 19.00% (2019: 19.00%) | 742,228 | 2,572,622 | 3,314,850 | 387,129 | 1,505,813 | 1,892,942 | Effect of: | | | | | | | UK dividends | (309,469) | - | (309,469) | (96,026) | - | (96,026) | Net investment portfolio gains not taxable | - | (2,814,210) | (2,814,210) | - | (1,737,407) | (1,737,407) | Expenditure not allowable for tax purposes | - | - | - | 2,382 | - | 2,382 | Overprovision in prior period | (141) | - | (141) | - | - | - | Actual current tax charge | 432,618 | (241,588) | 191,030 | 293,485 | (231,594) | 61,891 |
Deferred taxation No provision for deferred taxation has been made on potential capital gains due to the Company's current status as a VCT under section 274 of the ITA and the Directors' intention to maintain that status. | 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 in applying the above accounting policy is in determining the amount of minimum 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 ITA, 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 December | Pence per share | Date Paid | 2020 £ | 2019 £ | Final | Income | 2018 | 1.75p | 17 May 2019 | - | 1,854,366 | Final | Capital | 2018 | 3.25p* | 17 May 2019 | - | 3,443,822 | Interim | Income | 2019 | 1.50p | 20 September 2019 | - | 1,584,854 | Interim | Capital | 2019 | 2.50p* | 20 September 2019 | - | 2,641,423 | Interim | Capital | 2019 | 2.00p* | 06 December 2019 | - | 2,098,280 | Interim | Capital | 2019 | 4.00p* | 08 January 2020 | 4,183,502 | - | Interim | Capital | 2020 | 6.00p* | 07 May 2020 | 7,665,588 | - | Interim | Income | 2020 | 2.50p | 17 December 2020 | 3,164,908 | - | Interim | Capital | 2020 | 2.50p* | 17 December 2020 | 3,164,908 | - | Dividends refunded in the year* | | | (2,442) | - | | | | | | 18,176,464 | 11,622,745 | Proposed distributions to equity holders at the year-end: | Date payable | | | Interim | Capital | 2019 | 4.00p* | 08 January 2020 | - | 4,183,502 | | | | | | - | 4,183,502 |
* - This dividend was paid out of the Company's Special distributable reserve. 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 259 of the ITA concerning the Company not retaining more than 15% of its income from shares and securities, is considered. Recognised income distributions in the financial statements for the year | | | Dividend | Type | For year ended 31 December | Pence per share | Date paid/payable | 2020 £ | 2019 £ | Revenue available for distribution by way of dividends for the year | | 3,473,847 | 1,744,041 | Interim | Income | 2019 | 1.50p | 20 September 2019 | - | 1,584,854 | Interim | Income | 2020 | 2.50p | 17 December 2020 | 3,164,908 | - | Total income dividends for the year | | | | 3,164,908 | 1,584,854 | | | | | | | | | | | | |
| 7 | Basic and diluted earnings per share | | | 2020 | 2019 | | £ | £ | Total earnings after taxation: | 17,255,553 | 9,900,963 | Basic and diluted earnings per share (Note a) | 13.73p | 9.36p | Revenue earnings from ordinary activities after taxation | 3,473,847 | 1,744,041 | Basic and diluted revenue earnings per share (Note b) | 2.76p | 1.65p | | | | Net investment portfolio gains | 14,811,634 | 9,144,246 | Capital Investment Adviser fees less taxation | ( 1,029,928) | ( 987,324) | Total capital earnings | 13,781,706 | 8,156,922 | Basic and diluted capital earnings per share (Note c) | 10.97p | 7.71p | | | | Weighted average number of shares in issue in the year | 125,685,147 | 105,785,777 |
Notes: a) Basic earnings per share is total earnings after taxation divided by the weighted average number of shares in issue. b) Basic revenue earnings per share is the revenue return after taxation divided by the weighted average number of shares in issue. c) Basic 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 per share. | 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 (as updated by Special Valuation guidance issued in March 2020). 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 or follow on 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 every subsequent quarterly measurement date, 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 enterprise value of the investment may be determined 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, scale and liquidity). 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, realisation proceeds, or a weighted average of these bases 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 figures are shown net of any applicable transaction costs incurred by the Company. 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. Accounting standards classify methods of fair value measurement as Levels 1, 2 and 3. This hierarchy is based upon the reliability of information used to determine the valuation. All of the unquoted investments are Level 3, i.e. fair value is measured using techniques using inputs that are not based on observable market data. Movements in investments during the year are summarised as follows: | Unquoted ordinary shares | Unquoted preference shares | Unquoted Loan stock | Total | | £ | £ | £ | £ | Cost at 31 December 2019 | 23,351,076 | 27,108 | 20,845,314 | 44,223,498 | Net unrealised gains/(losses) at 31 December 2019 | 8,829,094 | 312 | (109,800) | 8,719,606 | Permanent impairment in value of investments as at 31 December 2019 | (1,213,033) | - | (26,910) | (1,239,943) | Valuation at 31 December 2019 | 30,967,137 | 27,420 | 20,708,604 | 51,703,161 | | | | | | Purchases at cost | 3,478,736 | 599,800 | 1,354,821 | 5,433,357 | Sale proceeds (note a) | (13,738,711) | (25,511) | (7,039,746) | (20,803,968) | Reclassification at value | (609,459) | 609,459 | - | - | Net realised gains/(losses) on investments (note a) | 4,255,538 | (302) | 84,985 | 4,340,221 | Net unrealised gains/(losses) on investments (note b) | 13,471,270 | 57,016 | (3,056,873) | 10,471,413 | Valuation at 31 December 2020 | 37,824,511 | 1,267,882 | 12,051,791 | 51,144,184 | | | | | | Cost at 31 December 2020 | 23,685,698 | 1,185,039 | 16,354,239 | 41,224,976 | Net unrealised gains/(losses) at 31 December 2020 | 16,717,309 | 83,145 | (4,302,448) | 12,498,006 | Permanent impairment in cost of investments as at 31 December 2020 (note c) | (2,578,496) | (302) | - | (2,578,798) | Valuation at 31 December 2020 | 37,824,511 | 1,267,882 | 12,051,791 | 51,144,184 |
Net realised gains/(losses) on investments of £4,340,221 together with net unrealised gains/(losses) on investments of £10,471,413 equal net investment portfolio gains of £14,811,634 as shown on the Income Statement. Note a) Disposals of investment portfolio companies during the year were: | Type | Investment cost | Disposal proceeds | Valuation at 31 December 2019 | Realised gain/(loss) in year | | | £ | £ | £ | £ | Tovey Management Limited (trading as Access IS) | Realisation | 3,263,682 | 7,037,568 | 4,720,481 | 2,317,087 | Turner Topco Limited (trading as Auction Technology Group) | Realisation | 2,501,087 | 6,856,083 | 4,957,044 | 1,899,039 | Redline Worldwide Limited | Contingent consideration | - | 183,343 | - | 183,343 | Blaze Signs Holdings Limited | Realisation | 491,797 | 1,212,192 | 1,054,473 | 157,719 | BookingTek Limited | Loan repayment | 82,619 | 65,169 | - | 65,169 | H Realisations (2018) Limited (formerly Hemmels Limited) | Realisation | 26,910 | 2,366 | - | 2,366 | Vectair Holdings Limited | Realisation | 138,574 | 2,700,319 | 2,925,531 | (225,212) | Pattern Analytics Limited (trading as Biosite) | Realisation | 1,583,521 | 2,340,857 | 2,340,857 | - | End Ordinary Group Limited (trading as Buster & Punch) | Loan repayment | 198,133 | 198,133 | 198,133 | - | Vian Marketing Limited (trading as Red Paddle Co) | Loan repayment | 145,557 | 207,938 | 207,938 | - | Jablite Holdings Limited | Permanent impairment | - | - | 59,290 | (59,290) | Vectair Holdings Limited | Realisation | 138,574 | 2,700,319 | 2,925,531 | (225,212) | | | 8,431,880 | 20,803,968 | 16,463,747 | 4,340,221 |
Note b: The major components of the net increase in unrealised valuations of £10,471,413 in the year were increases of £4,847,782 in Virgin Wines Holding Company Limited, £1,828,742 in MPB Group Limited, £1,576,387 in Parsley Box Limited, £1,547,274 in Manufacturing Services Investment Limited (trading as Wetsuit Outlet), and £1,413,000 in Data Discovery Solutions Limited (trading as Active Navigation). These increases were partly offset by falls of £1,352,880 in Spanish Restaurant Group Limited (trading as Tapas Revolution), £1,189,515 in CGI Creative Graphics International Limited, £1,061,023 in Media Business Insight Holdings Limited, £688,531 in Rota Geek Limited and £463,989 in Kudos Innovations Limited. Note c: During the year, permanent impairments of the cost of investments have increased from £1,239,943 to £2,578,798 due to the permanent impairment of three investee companies, partially offset by the disposal of one investee company which had been permanently impaired previously. | | | 9 | Current asset investments and Cash at bank | | Cash equivalents, for the purposes of the Statement of Cash flows, comprises bank deposits repayable on up to three months' notice and funds held in OEIC money-market funds. Current asset investments are the same but also include bank deposits that mature after three months. Current asset investments are disposable without curtailing or disrupting the business and are readily convertible into known amounts of cash at their carrying values at immediate or up to three months' notice. Cash, for the purposes of the Statement of Cash Flows is cash held with banks in accounts subject to immediate access. Cash at bank in the Balance Sheet is the same. | | | 2020 | 2019 | | | | £ | £ | OEIC Money market funds | 29,365,900 | 11,908,442 | Cash equivalents per Statement of Cash Flows | 29,365,900 | 11,908,442 | Bank deposits that mature after three months but are not immediately repayable | 1,005,298 | 1,005,682 | Current asset investments | 30,371,198 | 12,914,124 | Cash at bank | 3,120,539 | 7,261,618 |
| 10 | Called up share capital | | | 2020 | 2019 | | £ | £ | | | | Allotted, called-up and fully paid: | | | Ordinary Shares of 1p each: 126,336,620 (2019: 104,526,507) | 1,263,366 | 1,045,265 |
Under the Offer for Subscription launched on 25 October 2019 a total of 23,233,293 (2019: 36,295) ordinary shares were allotted at an average effective offer price of 64.56 pence per share, raising net funds of £14,477,689 (2019: £25,000). During the year the Company purchased 1,423,180 (2019: 2,375,656) of its own Ordinary shares for cash (representing 1.4% (2019: 2.2%) of the Ordinary shares in issue at the start of the year) at the prevailing market price for a total cost of £756,637 (2019: £1,492,825). These shares were subsequently cancelled by the Company. This differs to the figure shown in the Statement of Cash Flows of £712,523 by £44,114 which is included in creditors at the year-end. | 11 | Basic and diluted net asset value per share | | Net asset value per ordinary share is based on net assets at the end of the year and on 126,336,620 (2019: 104,526,507) Ordinary shares, being the number of Ordinary shares in issue on that date. There are no instruments that will increase the number of shares in issue in future. Accordingly, the figures currently represent both basic and diluted net asset value per share. | 12 | Post balance sheet events | | On 7 January 2021, a follow-on investment of £0.33 million was made into Parsley Box Limited, a supplier of home delivered ambient ready meals targeting the over 60s. On 27 January 2021, further proceeds of £0.23 million were received by the Company in relation to the sale of Blaze Signs Holdings Limited which occurred in September 2020. On 5 February 2021, a follow-on investment of £0.14 million was made into Bleach London Holdings Limited, a hair colourants brand. On 12 February 2021, a follow-on investment of £0.62 million was made into Arkk Consulting Limited, a regulatory and reporting requirement service provider. On 18 February 2021, a new investment of £1.16 million was made into Vivacity Labs Limited, an artificial intelligence & urban traffic control system. Virgin Wines admission to AIM Ahead of the Admission to AIM of Virgin Wines on 2 March 2021, the Company's equity investment in Virgin Wines Holding Company Ltd ("VWHCL") had been exchanged for an equity investment in Rapunzel Newco Limited ("RNL"), a company owned by the four Mobeus advised VCTs pro rata to each VCT's share of its investment in Virgin Wines. Immediately prior to Admission, RNL exchanged its equity investment in VWHCL for an equity investment in Virgin Wines UK plc ("VWUK"). The Company is beneficially interested in 5,846,197 shares in VWUK, through its holding in RNL. RNL is the legal owner of the shares in VWUK, but each VCT is the beneficial holder. At the Placing Price of £1.97 per share upon Admission, the Company's beneficial holding in VWUK had a value of £11.52 million, an increase of £5.86 million over the value of the equity at the year-end, and represented 10.47% of the enlarged equity of VWUK. Alongside the Admission, VWUK also raised new funds from other investors in a Placing of new shares. These funds have been applied partly to repay the Company's loan stock investment and accrued interest in Virgin Wines via RNL. The Company has received net proceeds to date of £2.35 million, after the deduction of transaction costs of £0.07 million. On 12 March 2021, the Company made a £0.14 million follow-on investment into Spanish Restaurant Group Limited (trading as Tapas Revolution), a leading Spanish restaurant chain. On 25 March 2021, a new investment of £0.18 million was made into Caledonian Leisure Limited, a travel & leisure company specialising in providing UK based, value short breaks and holidays. On 26 March 2021, the portfolio company, Parsley Box, announced an intention to float on the AIM market on 31 March 2021. Subject to Admission to trading on that date, the Placement Price of £2.00 per share will increase the year-end value of the Company's investment by £2.11 million. | | | 13 | Statutory information | | The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 31 December 2020 but is derived from those accounts. Statutory accounts will be delivered to the Registrar of Companies after the Annual General Meeting. The auditors have reported on these accounts and their report was unqualified and did not contain a statement under section 498(2) of the Companies Act 2006. | 14 | Annual Report & Financial Statements | | The Annual Report & Financial Statements will be published on the Company's website at www.migvct.co.uk shortly and, following the adoption of electronic communications by the Company, Shareholders will shortly receive notification from the Company on how to download a pdf of the Report from the website. Shareholders and members of the public who wish to receive a hard copy of the Annual Report, may request a copy by writing to the Company Secretary, Mobeus Equity Partners LLP by email at vcts@mobeus.co.uk. | 15 | Annual General Meeting | | The Company's next Annual General Meeting will be held on Monday, 10 May 2021 as a virtual meeting at the following address: mobeusvctAGM.co.uk, the link if also available on the Company's website at: www.migvct.co.uk. | | Contact details for further enquiries | | Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by email 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. |
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