REG - The Inc & Grwth VCT - Annual Financial Report
14/01/2025 07:00
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RNS Number : 1682T Income & Growth VCT (The) PLC 14 January 2025
THE INCOME & GROWTH VCT PLC
LEI: 213800FPC15FNM74YD92
ANNUAL FINANCIAL RESULTS OF THE COMPANY FOR THE YEAR ENDED 30 SEPTEMBER 2024
The Income & Growth VCT plc (the "Company") announces the final results
for the year ended 30 September 2024. These results were approved by the
Board of Directors on 13 January 2025.
You may, in due course, view the Annual Report & Financial Statements,
comprising the statutory accounts of the Company by visiting
www.incomeandgrowthvct.co.uk (http://www.incomeandgrowthvct.co.uk)
Merger with Mobeus Income & Growth 4 VCT plc
The Company merged with Mobeus Income & Growth 4 VCT plc ("MIG 4 VCT") on
26 July 2024 ("Merger") and following the transfer of its assets and
liabilities amounting to £80,712,057 to the Company, MIG 4 VCT was placed in
members' voluntary liquidation. As consideration on 26 July 2024 the Company
issued 111,563,043 new ordinary 1 pence shares at a price of 72.35 pence per
share to each MIG 4 VCT Shareholder. Accordingly, each MIG 4 VCT Shareholder
received 1.012 shares in the Company for each MIG 4 VCT share that they held
at the date of the merger (rounded down to the nearest whole number).
FINANCIAL HIGHLIGHTS
As at 30 September 2024:
Net assets: £188.70 million
Net asset value per share: 70.90 pence
- There was a positive Net asset value ("NAV") total return (including
dividends)(1) per share of 2.0%.
- Dividends paid/payable in respect of the year total 6.00 pence per share.
This brings cumulative dividends paid(1) to Shareholders in respect of the
past five years to 48.00 pence per share.
- The Company realised investments totalling £3.88 million of cash
proceeds.
- £8.96 million was invested into five new companies and seven
follow-on investments.
(1) - Definitions of key terms and alternative performance measures shown
above and throughout this report are provided in the Glossary
of terms in the Annual Report & Financial Statements.
(2) - Further details on the share price total return are shown in the
Performance section of the Strategic Report within the Annual Report &
Financial Statements.
OUR INVESTMENT OBJECTIVE
The objective of the Company is to provide investors with an attractive return
by maximising the stream of
tax-free dividend distributions from the income and capital gains generated by
a diverse and carefully selected portfolio of investments, while continuing at
all times to qualify as a VCT.
INVESTMENT POLICY
The Company's Investment Policy is to invest primarily in a diverse portfolio
of UK unquoted companies. Investments are generally structured as part loan
and part equity in order to receive regular income, to generate capital gain
upon sale and to reduce the risk of high exposure to equities. To further
spread
risk, investments are made in a number of different businesses across
different industry sectors.
The Company's cash and liquid resources are held in a range of instruments
which can be of varying
maturities, subject to the overriding criterion that the risk of loss of
capital be minimised.
The Company seeks to make investments in accordance with the requirements of
VCT regulation.
The full text of the Company's Investment Policy is set out in the Annual
Report & Financial Statements.
CHAIRMAN'S STATEMENT
Overview
The Company's financial year has been set against a backdrop of challenging
geopolitical and UK economic conditions although markets as a whole have
delivered modest growth. Inflation and interest rates have started to reduce
but continue to impact on consumer and business confidence and to affect
trading performance in the portfolio companies. We have not yet seen the full
effect of the recent Bank of England ("BoE") interest rate cuts from a peak of
5.25% and there may be further interest rate cuts in the event that inflation
continues to meet the BoE's 2% target. The political uncertainty and
distraction associated with the general election and subsequent budget looks
now to have subsided bringing expectations of a welcomed period of relative
stability in the UK, albeit with continued pressures on companies from tax
increases and ongoing global economic and geopolitical risk including the
potential impacts of the change in US Administration.
The positive NAV performance reported for the first six months of the year for
a number of portfolio companies was undermined somewhat by a challenging final
quarter of the year for some assets. Overall, however due to continued
strong performance of the portfolio's larger assets, the Company's NAV total
return remained positive, increasing by 2.0% (2023: 4.3%).
The Company has continued to be an active investor and provided investment
finance to five new companies during the year: Ozone API, Azarc, CitySwift,
SciLeads and OnSecurity, whilst in February 2024 delivered a highly successful
partial exit of Master Removers Group ("MRG"). Follow-on investments were also
made into seven existing portfolio companies: RotaGeek, FocalPoint, Orri and
MyTutor, ActiveNAV, VivaCity and Dayrize. After the year-end, two new
investments were made into Mobility Mojo and Gentianes Solutions (trading as
Much Better Adventures), and three further follow-on investments were made
into Branchspace, Preservica and FocalPoint.
Through the support and guidance of Gresham House's portfolio directors the
portfolio continues to take steps to reposition their cost bases in
anticipation of any medium-term challenges. Overall, the investee companies
are adequately funded although it is expected that the portfolio's newer
additions are likely to accelerate further funding plans. The Company's
successful fundraising after the period end ensures strong liquidity is
available to seek opportunities within the existing portfolio together with
new
investments.
Overall, the portfolio remains diversified and resilient considering the
recent uncertainty, however there is a degree of concentration in that the top
five assets now represent 54.4% of portfolio value. As is the nature of growth
assets, the risk of company failures is ever present. However, the upside for
successful investments can be significant which is resulting in value
concentration amongst these larger and more stable assets.
Company Objective and Strategy
A Venture Capital Trust ("VCT") is a company listed on the London Stock
Exchange that raises money from private investors and uses it to invest in
small, young, innovative companies with high potential for growth.
These companies are usually unquoted and often less established. As a
consequence they may be considered higher risk and some will not be
successful. However, because small company formation is an important source of
growth for the UK economy, the government has policies to help those companies
grow. The VCT scheme provides investors with generous tax reliefs to help
encourage investors for the risk they take with their investment and there are
strict guidelines on the type of company that can receive VCT investment.
Since incorporation, your Company has helped to create jobs, reward innovation
and bolster the UK economy in line with the UK Government's VCT scheme policy.
The Company's objective is to provide investors with an attractive return by
maximising the stream of tax-free dividend distributions from the income and
capital gains generated by a diverse and carefully selected portfolio of
investments, while continuing at all times to qualify as a VCT. The investment
strategy and policy of the Company as set out in the Annual Report &
Financial Statements is to invest primarily in a diverse portfolio of UK
unquoted companies to support this objective.
Merger Update
The merger of the Company with Mobeus Income & Growth 4 VCT plc as set out
in the announcement on 18 June 2024, was approved by Shareholders on 18 July
2024 and completed on 26 July 2024. The assets and liabilities of MIG 4 VCT
were transferred to the Company in consideration for shares being issued to
the MIG 4 VCT Shareholders on a relative net asset basis. The new share
certificates were issued to the MIG 4 VCT Shareholders on MIG 4 VCT entering
voluntary liquidation following shareholder approval at the MIG 4 VCT second
General Meeting on 26 July 2024. We welcome those new Shareholders to the
Company.
On completion of the Merger, Graham Paterson, former Chair of MIG 4 VCT, was
appointed and welcomed to the Board. Graham has assumed the role of Senior
Independent Director of the Company and Chair of the newly formed Management
Engagement Committee and the Nomination and Remuneration Committee. We look
forward to working together on behalf of the Company's Shareholders. We would
also like to thank the other directors of MIG 4 VCT, Christopher Burke and
Lindsay Dodsworth, for their service and contribution.
The Merger payback period of under 18 months, as outlined in the Prospectus,
is on track to being achieved. This is based upon Merger costs incurred to
date compared with annual cost savings incurred and forecast.
Performance
The Company's NAV total return per share increased by 2.0% (2023: 4.3%) after
adding back a total of 10.00 pence per share in dividends paid during the
year. The increase was principally the result of valuation uplifts and income
returns from cash balances held. Strong valuation contributions were from
Veritek Global, Preservica, Active Navigation as well as the legacy
investment, Aquasium. The proceeds received on the successful portfolio
partial exit of MRG were already fully reflected in the Company's NAV at 30
September 2023 including further proceeds received after the year-end.
Income generated from cash held awaiting investment and loan stocks resulted
in a positive revenue return.
At the year-end, the Company was ranked 3rd out of 26 Generalist VCTs over ten
years, 1st out of 32 Generalist VCTs over five years and 20th out of 32
Generalist VCTs over three years in the Association of Investment Companies'
("AIC") analysis of NAV Total Return (assuming dividends are reinvested).
Shareholders should note that, due to the lag in the disclosed performance
figures available each quarter, the AIC ranking figures do not fully reflect
the final NAV uplift to 30 September 2024, or those of our peers.
Dividends
The Board was pleased to be able to declare two interim dividends of 3.00
pence per share, totalling 6.00 pence per share in respect of the year ended
30 September 2024 to reflect gains and income generated and ensure compliance
with the VCT regulations. This was in line with the Company's annual target
of 6.00 pence per share which has been achieved, and often exceeded, in each
of the last thirteen financial years. Shareholders should note that
following the Merger and, as detailed in the Prospectus, the target annual
dividend target was amended to an annual dividend target of 7% of the NAV per
Share at the start of the relevant financial year.
The first interim dividend was paid on 7 June 2024, to Shareholders on the
Register on 17 May 2024 and the second interim dividend was paid after the
year-end on 18 October 2024 to those Shareholders on the Register on 20
September 2024. These dividend payments have brought cumulative dividends paid
per share since inception to 165.50 pence, including the second interim
dividend paid after the year-end. No further dividends will be paid in
respect of the year to 30 September 2024.
It should continue to be noted that the majority of the portfolio now consists
of younger growth capital investments. By their nature this results in greater
risk than the historic Management Buy-Out portfolio and are very likely to
result in increased volatility in the returns Shareholders receive in any
given year. Shareholders should also note that there may continue to be
circumstances where the Company is required to pay dividends in order to
maintain its regulatory status as a VCT, for example, to stay above the
minimum percentage of assets required to be held in qualifying investments.
Such dividends paid in excess of net income and capital gains achieved will
cause the Company's NAV per share to reduce by a corresponding amount.
Dividend Investment Scheme
The Company's Dividend Investment Scheme ("DIS") provides Shareholders with
the opportunity to reinvest their cash dividends into new shares in the
Company at the latest published NAV per share. New VCT shares attract the same
tax reliefs as shares purchased through an Offer for Subscription. A total of
3,970,532 (2023: 2,674,764) Ordinary shares were allotted as a result of
dividends paid during the year resulting in £2.80 million (2023: £2.07
million) of cash being retained by the Company. Shareholders wishing to take
advantage of the scheme for any future dividends can join the DIS by
completing a mandate form available on the Company's website, under the
'Dividends' heading, at: www.incomeandgrowthvct.co.uk
(http://www.incomeandgrowthvct.co.uk) , or alternatively, Shareholders can
opt-out by contacting City Partnership, using their details provided under
Corporate Information in the Annual Report. Shareholders who hold their shares
in a Nominee company can still join the DIS scheme by instructing the Nominee
provider to elect for the DIS Shares on their behalf. Please note that on
the merger, if you were a member of the DIS in MIG 4 VCT but not in the
Company's DIS, City Partnership may have created a new account with the
different mandate instructions in accordance with the provisions set out in
the Prospectus. You can instruct City Partnership to amalgamate the two
accounts and have one common DIS membership. The new shares are also eligible
for Income Tax Relief.
Investment Portfolio
The portfolio movements across the year were as follows:
2024 2023
Opening portfolio value 72.72 73.08
MIG 4 VCT acquisition 56.43 -
New and follow-on investments 8.96 3.34
Disposal proceeds (3.87) (9.13)
Net unrealised (losses)/gains (0.23) 0.41
Valuation movements: unrealised 1.94 5.02
Net investment portfolio gains 1.71 5.43
Portfolio value at 30 September 2024 135.95 72.72
The closing portfolio now reflects the acquisition of MIG 4 VCT's assets and
liabilities on 26 July 2024 with portfolio performance of the enlarged entity
being reflected from that date. On the portfolio investee companies
themselves, despite the continuing uncertain macroeconomic conditions, various
investee companies demonstrated some positive revenue and profits growth, in
particular Veritek Global, Preservica, and Active Navigation although the
consumer facing businesses have found delivery of growth to be harder, such as
MyTutor and Bella & Duke. The net result has been positive, and the
overall value in the year increased by a modest £1.71 million (2023: £5.43
million), or 1.4% (2023: 7.4%) on a like-for-like basis, compared to the
opening portfolio value at 1 October 2023 of £72.72 million and the assets
acquired from MIG 4 VCT of £56.43 million. This net increase was comprised of
an unrealised increase in portfolio valuations of £1.94 million and net
realised losses of £0.23 million.
At the year-end, the portfolio was valued at £135.95 million (2023: £72.72
million) which includes the assets acquired from MIG 4 VCT as part of the
Merger. The portfolio is substantially comprised of growth capital
investments, particularly of investments made since the VCT rule change in
2015 and, as Shareholders will be aware, these younger, less proven
investments have a more variable return profile. Shareholders should continue
to note therefore that whilst the potential upside for the Company's
Shareholders of these type of investments may be higher, conversely the
likelihood of investee company failures also increases. The Company's largest
five assets by value represent over 50% of the portfolio's value with
Preservica accounting for 26.7%. The overall portfolio value is greatly
affected by the performance of these investments and these higher value assets
continue to be monitored closely by the Investment Adviser as part of its risk
mitigation measures.
During the year under review, the Company invested £4.62 million (2023:
£2.72 million) into five new investments:
Ozone £1.50 million Open banking software developer
Azarc £0.53 million Cross-border customs automation software provider
CitySwift £0.77 million Passenger transport data and scheduling software provider
SciLeads £0.83 million Digital platform within life science vertical
OnSecurity £0.99 million B2B cybersecurity business providing independent third-party penetration
testing services
The Company also invested a total of £4.34 million (2023: £0.62 million)
into seven existing portfolio companies during the year:
RotaGeek £0.23 million Provider of cloud-based enterprise software
FocalPoint £0.17 million GPS enhancement software provider
MyTutor £0.64 million Digital marketplace connecting school pupils seeking one to one online
tutoring
Orri £0.25 million An intensive day care provider for adults with eating disorders
ActiveNAV £1.95 million A global provider of file analysis software for information governance,
security and compliance
VivaCity Labs £0.94 million An AI and Urban Traffic Control business
Dayrize £0.16 million A provider of a rapid sustainability impact assessment tool
The VCT's portfolio valuation methodology has continued to be applied
consistently and in line with IPEV guidelines with four of the top ten largest
valuations triangulated by an independent external valuation in the year.
Following the year-end, two new investments were made, £0.55 million of which
was made into Mobility Mojo, a software platform supporting accessibility
audits and £1.25 million was made into Gentianes Solutions (trading as Much
Better Adventures), a Adventure Travel Marketplace, and three further
follow-on investments comprising £0.31 million into Branchspace Limited,
£0.54 million into Preservica, and £0.12 million info FocalPoint.
The Company received £3.88 million in proceeds from the partial exit of MRG,
whose value was fully reflected at the previous year-end. Over the life of
this investment, the Company has received total proceeds of £7.35 million
(including £0.47 million received after the year-end) which equates to a
multiple on cost of 3.3x, an IRR of 26.0%. Conversely, the Company was unable
to support further investment into Bleach Holdings Limited and was required to
exit its holding for only minimal proceeds. The Company had reduced its
valuation of Bleach in previous years such that a modest £0.16 million
realised loss was incurred on disposal in the year. Further, the Company's
holding in Northern Bloc was fully impaired recognising a loss of £0.07
million in the year.
Further details of this investment activity and the performance of the
portfolio are contained in the Investment Adviser's Review and the Investment
Portfolio Summary in the Annual Report.
Revenue Account
The results for the year are set out in the Income Statement in the Annual
Report and show a revenue return (after tax) of 0.57 pence per share (2023:
1.11 pence per share).
The revenue return for the year of £1.00 million has decreased from last
year's figure of £1.66 million due to lower dividends received however loan
stock interest receivable has increased over the year. Investment adviser fees
have increased due to higher net assets, but other expenses have reduced due
to a reduction in trail commission payable. The revenue return also includes
the impact of one off costs relating to the Merger.
Liquidity and Fundraising
Cash and liquidity fund balances as at 30 September 2024 amounted to £52.79
million representing 28.0% of net assets. After the year-end, following a
3.00 pence dividend payment, cash and liquid balances reduced to £46.17
million, 25.5% of net assets. The majority of cash resources are held in
liquidity funds with AAA credit ratings, the returns on which have benefitted
from higher levels of interest rates which will help support future returns to
Shareholders. The Board however continues to monitor credit risk in respect of
all its cash and near cash resources and still prioritises the security and
protection of the Company's capital.
On 2 September 2024, the Company launched a Joint Offer for Subscription
alongside Mobeus Income & Growth VCT plc ("MIG") to each raise an initial
amount of up to £35 million, as well as an over-allotment facility of £10
million for the tax year 2024/25. Following strong demand, the Company
received applications for the full amount sought of £45 million (including
the over-allotment facility). Two allotments took place after the year-end, on
1 October 2024 and 28 October 2024, issuing a total of 62,562,671 new Ordinary
shares at an average effective offer piece of 71.93 pence per share, raising
net funds for the Company of £43.39 million. These additional funds will
allow the Company to take advantage of new investment opportunities, fund
further expansion of existing portfolio businesses, provide attractive returns
for shareholders in the form of dividend payments and buy back its shares from
those Shareholders who may wish to sell.
Share buy-backs
During the year, the Company bought back and cancelled 4,163,732 of its own
shares (2023: 3,975,746), representing 2.7% (2023: 3.1%) of the shares in
issue at the beginning of the year, at a total cost of £2.87 million (2023:
£2.98 million), inclusive of expenses.
It is the Company's policy to cancel all shares bought back in this way. The
Board regularly reviews its buyback policy, where its priority is to act
prudently and in the interest of remaining Shareholders, whilst considering
other factors, such as levels of liquidity and reserves, market conditions and
applicable law and regulations. Under this policy, the Company seeks to
maintain the discount at which the Company's shares trade at approximately 5%
below the latest published NAV.
Change of Auditor
The Board will be recommending the appointment of Johnston Carmichael to
become the Company's auditor for the year ending 30 September 2025. This is to
ensure cost and time efficiencies are maintained through the Company and
Mobeus Income & Growth VCT plc ("MIG") having the same auditor as well as
the same year-end. MIG had reached the 20 year limit for audit tenure with
BDO. Following a comprehensive and robust audit tender process for both the
Company and MIG, the Boards of both companies will be recommending this
appointment to shareholders at their AGM.
Shareholder Communications & Annual General Meeting
May I remind you that the Company has its own website which is available at:
www.incomeandgrowthvct.co.uk (http://www.incomeandgrowthvct.co.uk) .
The Investment Adviser held another virtual shareholder event on 1 March 2024,
showcasing some exciting
portfolio company growth journeys as well as a presentation by the Investment
Adviser and representatives of the four Mobeus VCTs, a recording of which is
available on the Company's website or by registering for access here:
https://mvcts.connectid.cloud/ (https://mvcts.connectid.cloud/) . It is
anticipated that the next Shareholder Event will take
place in September 2025.
The Board is pleased to be able to hold the next Annual General Meeting
("AGM") of the Company in person at 2.30 pm on 5 March 2025 at 1st Floor, 8
Fenchurch Place, London EC3M 4PB. The Board is aware that a number of
Shareholders hold shares in the Company and the other Mobeus VCT, MIG, which
shares a 30 September year-end. A joint presentation by the Investment
Adviser to the Company's and MIG VCT Shareholders will therefore take place at
1.30 pm and a light lunch will be available from 1.00 pm. The MIG VCT AGM will
be held before the presentation at 1.00 pm.
A webcast will also be available at the same time for those Shareholders who
cannot attend in person. However, please note that you will not be able to
vote via this method and you are encouraged to return your proxy form before
the deadline of 2.30 pm on Monday, 3 March 2025. There will however be the
ability to send questions into the meeting via the link.
Information setting out how to join the meeting by virtual means will be shown
on the Company's website a few days before the AGM. Directions to the AGM
venue will also be available on the website. For further details, please see
the Notice of the Meeting which can be found at the end of the Annual Report
&
Financial Statements.
Votes Against AGM Resolutions
At the Annual General Meeting of the Company held on 29 February 2024, over
20% of the votes received were lodged against the resolutions to approve the
Remuneration Report and to approve the disapplication of pre-emption rights.
As required under the AIC Code of Corporate Governance Code, those
Shareholders that voted against the resolutions were contacted in April 2024
to ascertain the background and reasons for their vote. I thank those
Shareholders who responded to the request with their reasons for voting
against the resolutions. From the responses, it was clear that the key factors
were Shareholders' concerns about the level of fees received by the Board and
of new shareholders being added to the Register of Members, thereby diluting
current Shareholders' holding and potential dividend income. The Board
considers its fees to be competitive, in line with the amount of assets under
management and commensurate with the time commitment required to be undertaken
by the Board. The Board considers the level of fees on an annual basis, as
well as bench-marking against peers.
With regard to the issuance of shares to new investors, the Board consider it
in the Company's interest to periodically raise new funds to:
(i) take advantage of new investment opportunities and to
support existing portfolio companies and
(ii) maintain (bearing in mind the annual running costs and
outflows through dividends and buybacks) and further grow the net asset base
of the Company over which to spread the annual running costs.
Further fundraisings are typically raised at an issue price per share of the
NAV plus costs, which avoids economic dilution of the existing NAV per share
for existing Shareholders. The Board acknowledges that there may be a
potential short-term dilutive impact of individual shareholder returns - from
sharing gains on existing investments with new Shareholders. At the same time,
existing Shareholders are partially
"derisked" in cash for part of the very same investments at current market
value.
In any event, the Board believes that both these counterveiling arguments are
outweighed by having sufficient liquidity to meet its investment objectives
and the potential to generate enhanced returns in the future, as well as the
ability to support dividend payments.
VCT Regulations - Retirement Date of the UK Government's Venture Capital
Schemes
The Board and Investment Adviser were pleased to see the European Commission
approve the extension of the VCT scheme until 5 April 2035. This was
formalised by UK legislation on 3 September 2024. The regulations bring into
effect the extension of the Enterprise Investment Scheme ("EIS") and the
Venture Capital Trust ("VCT") Scheme sunset clause to 2035. The Board welcomes
this news and would like to thank the Investment Adviser, The Venture Capital
Trust Association ("VCTA"), the Association of Investment Companies ("AIC")
and other parties involved for their help in getting the new legislation
enacted.
Consumer Duty
The Financial Conduct Authority's (FCA) new Consumer Duty regulation came into
effect on 31 July 2023. Consumer Duty is an advance on the previous concept of
'treating customers fairly', which sets higher and clearer standards of
consumer protection across financial services and requires all firms to put
their customers' needs first.
As previously notified, the Company is not regulated by the FCA and therefore
it does not directly fall into the scope of Consumer Duty. However, Gresham
House as the Investment Adviser, and any IFAs or financial platforms used to
distribute future fundraising offers, are subject to Consumer Duty.
The Board will ensure that the principles behind Consumer Duty are upheld and
will work with the Investment Adviser on the information now available to
assist consumers and their advisers to be able to discharge their obligations
under Consumer Duty.
Environmental, Social and Governance ("ESG")
The Board and the Investment Adviser believe that the consideration of
environmental, social and corporate governance ("ESG") factors throughout the
investment cycle will contribute towards enhanced Shareholder value.
Gresham House has a dedicated sustainable investment team which conducts an
annual survey of our
unquoted portfolio companies to understand how they are responding to relevant
ESG risks and opportunities. The results of the November 2023 survey of
investee companies highlighted that the portfolio companies who participated
were taking action on implementing a range of sustainability initiatives
within their businesses. Each portfolio company in the survey identified areas
for improvement over the next 12 months which are being monitored by the
Investment Adviser and their progress tracked throughout
the year.
The FCA reporting requirements consistent with the Task Force on
Climate-related Financial Disclosures ("TCFD") do not currently apply to the
Company but will be kept under review, the Board being mindful of any
recommended changes. The Board is aware of the FCA's Sustainability Disclosure
Requirements and investment labels (together the "rules"). As the Company is
classified as a Collective Investment Undertaking, the scope of the rules
capture such UK-domiciled unauthorised funds, however given that the shares in
the Company (the "product") do not have a sustainable investment objective,
the rules only apply
on a very limited basis (through the Investment Adviser) in relation to the
Company. The Gresham House TCFD Report can be found on its website at: TCFD
report - Gresham House (https://greshamhouse.com/tcfd/) .
Fraud Warning
Shareholders continue to be contacted in connection with sophisticated but
fraudulent financial scams which purport to come from or to be authorised by
the Company. This is often by a phone call or an email usually originating
from outside of the UK, claiming or appearing to be from a corporate finance
firm offering to buy your shares at an inflated price.
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 in the Annual Report.
Outlook
Despite some recent return to stability on the domestic front following the UK
election and subsequent budget, the wider geopolitical and economic
environment remains uncertain. The Company's portfolio companies have been
operating under challenging economic conditions for some time now and the
Board and Investment Adviser are encouraged with the level of resilience
shown. With a more certain fiscal roadmap now laid out and the prospect for
further interest rate reductions, the Board has cautious
optimism that portfolio performance can be maintained and improved. The
Investment Adviser continues to target new opportunities in exciting new
businesses and is reporting a strong pipeline under current review.
The sole successful partial exit of MRG during the year represents a somewhat
quiet period for the Mobeus VCT portfolio in terms of realisations compared to
past periods. Expectations are that the exit environment will likely remain
subdued for the time being. However, a period of stability should facilitate
more measured growth which will ultimately lead to exits but with no fixed
timescale associated
with the Company's investments, there is no imperative to force an exit and
the Investment Adviser is able to influence the best time to sell to optimise
value.
In summary, the Company continues to add to its large, well-diversified
portfolio which is managed by a professional and experienced investment team.
The Board and Investment Adviser will continue to work together to drive
shareholder returns further.
I would like to take this opportunity once again to thank all Shareholders for
your continued support and to extend a warm welcome to our new Shareholders in
the Company.
Maurice Helfgott
Chairman
13 January 2025
INVESTMENT ADVISER'S REVIEW
Portfolio Review
The year to date has been marked by a continuing period of uncertainty,
against which markets have delivered modest growth. Inflation and interest
rates appear to have peaked, but concerns regarding geo-political tensions in
Europe and the Middle East persist. The UK and US election results will
hopefully
allow more clarity on the future economic and political landscape although the
impact of the UK Government's first budget has caused an element of market
turbulence, potential inflationary pressures and pausing of interest rate
reductions.
Despite this unsettled environment, it is encouraging to see that two thirds
of the portfolio companies recorded continued growth in either revenues or
profits over the year. This steady positive progress
contrasts the observation that the portfolio includes several companies
contemplating top up rounds to enable them to reach a delayed breakeven. The
ability to invest further VCT capital is a useful opportunity to build
meaningful stakes as well as enhancing the Company's influence and protecting
the VCTs' position. Over 70% of the portfolio recorded profit increases versus
the previous year which is very encouraging and demonstrates the
responsiveness and effectiveness of portfolio company boards in maintaining
close cost management.
The nature of the VCT assets are that many portfolio companies are seeking to
prove and develop nascent business models. Most of the recent group of earlier
stage investments are steadily building out their pipelines and capability as
they balance investment with the rate of commercial development. At this stage
of their development Gresham House is still hopeful that the majority will
deliver the relevant commercial proof points, albeit it will take longer and
probably require additional capital earlier than had originally been
envisioned. In some cases, this could be a positive by allowing the Company to
amass more significant stakes on possibly more advantageous terms.
We are pleased to have been able to provide new funding to five significant
investments during the year as well as provide follow on funding for a number
of portfolio companies. The exit environment remains subdued, but the partial
exit of MRG at the start of the period illustrates that investee companies can
still be realised at attractive prices. Unless there is a change in market
dynamics, it is likely that portfolio companies will be held for longer
periods although looking forward, there are a number of assets starting to
plan for exit in 2024/25. Gresham House believes that these are realistic
prospects which could deliver significant realised value to the Company.
The Company's recent successful fundraise after the period end will provide
strong liquidity to take advantage of the improving new investment environment
for the Company as the UK is starting to see
some stability post the election and budget. Gresham House is seeing a number
of interesting investment
propositions which are expected in time to be value accretive to the VCT's
portfolio.
2024 2023
£m £m
Opening portfolio value 72.72 73.08
MIG 4 VCT acquisition 56.43 -
New and follow-on investments 8.96 3.34
Disposal proceeds (3.87) (9.13)
Net unrealised (losses)/gains (0.23) 0.41
Valuation movements: unrealised 1.94 5.02
Net investment portfolio gains 1.71 5.43
Portfolio value at 30 September 135.95 72.72
The value of the Company's portfolio has materially increased in size due to
the acquisition of Mobeus Income & Growth 4 VCT's portfolio of assets, the
vast majority in which the Company had existing holdings.
The Company made new and follow-on investments totalling £8.96 million (2023:
£3.34 million) during the year, of which £4.62 million was to five new
growth capital investments and £4.34 million was to seven follow-on
investments. Further details of these investments are on the following pages.
After the year end, new investments were made into Mobility Mojo and Much
Better Adventures, as well as follow-ons
into Branchspace, Preservica and FocalPoint.
Unless there is a change in market dynamics, it is likely that portfolio
companies will be held for longer periods although looking forward, there are
a number of assets starting to plan for possible exit in 2024/25. Gresham
House believes that these are realistic prospects which could deliver
significant realised value to the Company.
The portfolio's largest investments have experienced some strong revenue
growth which has continued to drive values over the period, in particular
Active Navigation, Preservica and Caledonian Leisure. Pleasingly, Veritek
Global, a historic MBO investment has started to see material traction having
pivoted its business model in recent years and returned to profitability and
finally, legacy investment Aquasium has seen a material uplift in the year. By
contrast, there are also some portfolio companies that are experiencing
tougher trading such as, MyTutor and Dayrize. The portfolio companies continue
to be focused on establishing a path to profitability.
During the year, the MRG partial exit generated proceeds of £3.88 million
resulting in a return of 3.3x and an IRR of 26% over the life of the
investment.
The portfolio's valuation changes in the year are summarised as follows:
2024 2023
£m £m
Increase in the value of unrealised investments 10.63 11.49
Decrease in the value of unrealised investments (8.69) (6.47)
Net increase in the value of unrealised investments 1.94 5.02
Realised gains - 1.28
Realised losses (0.23) (0.87)
Net realised (losses)/gains in the year (0.23) 0.41
Net investment portfolio movement in the year 1.71 5.43
New investments during the year
The Company made five new investments totalling £4.62 million during the
year, as detailed below:
Company Business Date of Investment Amount of new investment (£m)
Ozone API Open banking software provider December 2023 1.50
Ozone API (https://ozoneapi.com) is a software developer providing banks and
financial institutions with a low cost, out-of-the box solution enabling them
to deliver open APIs which comply with open banking and finance standards
globally. The software goes beyond compliance and enables customers to
monetise open banking and finance opportunities which are growing
significantly following regulatory & market development. This funding is
the first equity investment into Ozone and enables the team to invest into
their product and go-to-market teams as they look to capitalise on the large
and fast-growing global market.
Cross-border customs December 2023 0.53
Azarc automation software
provider
Azarc.io (https://azarc.io) specialises in business process automation using
distributed ledger technology. Its Verathread® product has been applied to
automating cross-border customs clearances, albeit it has wider supply chain
applications. Founded in 2021, Azarc successfully secured British Telecom as a
customer and a long-term strategic partner in the UK and aims to improve
efficiencies over traditional paper-based customs clearances for import and
export trade. This investment will support the company's growth trajectory
with BT and expedite its expansion into international import/export hubs
through new partnerships.
Cityswift Passenger transport December 2023
data and scheduling 0.77
software provider
Huddl Mobility Limited (trading as CitySwift) (https://cityswift.com) is a
software business that works with bus operators and local authorities to
aggregate, cleanse and access insight from complex data sources from across
their networks, enabling them to optimise schedules and unlock revenue
generating or cost reduction opportunities. This investment will be used to
accelerate new customer acquisition and unlock significant opportunities
within the existing customer base - CitySwift already works with major bus
operators and local transport authorities including National Express,
Stagecoach and Transport for Wales.
SciLeads Digital Platform within March 2024 0.83
the life science verticals
Based in Belfast, SciLeads (https://scileads.com) is a data and lead
generation platform operating within life science verticals, allowing
customers to identify, track and convert potential leads. SciLeads has grown
ARR significantly and this investment will be used to accelerate new customer
acquisition and professionalise the product and customer success functions to
cross-sell opportunities within the existing customer base.
OnSecurity B2B cybersecurity June 2024 0.99
business providing
independent third-party
penetration testing
Based in Bristol, OnSecurity ((https://www.onsecurity.io) is a B2B
cybersecurity business providing independent third-party penetration testing
services, a type of ethical hacking that simulates a real-world attack on a
computer system, network, or web application to identify and remediate
vulnerabilities that could be exploited by malicious actors. OnSecurity is an
agile and collaborative
platform solution that provides high quality human pentesting with elements of
automation to minimise low value, menial tasks. This investment will be used
to drive growth through developing their platform to target larger potential
clients and develop economies of scale.
Further investments during the year
A total of £4.34 million was invested into seven existing portfolio companies
during the year, as detailed below:
Company Business Date of Investment Amount of new investment (£m)
RotaGeek Provider of cloud-based November 2023 0.23
enterprise software
RotaGeek (https://www.rotageek.com/) is a provider of cloud-based enterprise
software to help larger retail, leisure and healthcare organisations to
schedule staff effectively. RotaGeek has proven its ability to solve the
scheduling issue for large retail clients, competing due to the strength of
its technologically advanced proposition. Since investment it has also
diversified and started to prove its applicability in other verticals such as
healthcare and hospitality. This investment will help the company focus on
operational delivery and continue sales and client contract win momentum.
Focal Point Positioning GPS enhancement December 2023 0.17
software provider
Focal Point Positioning Limited (https://focalpointpositioning.com/) is a deep
tech business with a growing IP and software portfolio. Its proprietary
technology applies advanced physics and machine learning to dramatically
improve the satellite-based location sensitivity, accuracy, and security of
devices such as smartphones, wearables, and vehicles and reduce costs. The
further investment was agreed at the time of the original funding in September
2022.
MyTutor Digital marketplace for January 2024 0.64
online tutoring
MyTutorweb (trading as MyTutor) ((https://mytutor.co.uk) is a digital
marketplace that connects school age pupils who are seeking private online
tutoring with university students. The business is satisfying a growing demand
from both schools and parents to improve pupils' exam results. This further
investment will aim to drive changes in product and margin through operating
business improvements and seek to expand its offering to school and channel
partners.
Orri Specialists in eating disorder support March 2024, 0.25
July 2024
Orri Limited (https://orri-uk.com) is an intensive daycare provider for adults
with eating disorders. Orri provides an alternative to expensive residential
in-patient treatment and lighter-touch outpatient services by providing highly
structured day and half day sessions either online or in-person at its clinic
on Hallam Street, London. This additional funding represents a bridging round
to provide sufficient funding to allow the business to reach break-even.
Potential further funding will allow a targeted geographic roll out once the
core business is proven.
ActiveNav A provider of enterprise-level file analysis May 2024 1.95
software
Data Discovery Solutions, trading as ActiveNav (https://activenav.com), is a
data analysis software solution which makes it easier for companies to clean
up network drives, respond to new data protection laws and dispose of
redundant and out-dated documents. ActiveNav's solution is used by significant
blue-chip customers, particularly those in highly regulated industries such as
energy and professional services, as well as government entities in the USA,
Canada, Australia and the UK. This further funding will assist the development
of ActiveNav's exciting new cyber breach response division 'Actfore', which
was established in late 2022.
Dayrize A provider of a rapid June 2024, September 2024 0.16
sustainability impact
assessment tool
Founded in 2020, Amsterdam-based Dayrize (https://dayrize.io/) has developed a
rapid sustainability impact assessment tool that delivers product-level
insights for consumer goods brands and retailers, enabling them to be leaders
in sustainability. Its proprietary software platform and methodology bring
together an array of data sources to provide a single holistic product level
sustainability score that is comparable across product categories in under two
seconds. This funding round is to help refine its business plan, establish
greater product-market fit and drive conversion of its customer pipeline.
Capital structure terms have also been amended to encourage further funding
from its existing angel network.
Vivacity Provider of artificial August 2024 0.94
intelligence & urban
traffic control systems
Vivacity (https://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.
Valuation changes of portfolio investments still held
The total valuation increases were £10.63 million with the main increases
being:
● Veritek Group: £1.82 million
● Aquasium Technology: £1.23 million
● Active Navigation: £1.20 million
● Preservica: £1.15
million
Veritek Global has undertaken a marked turnaround having pivoted its business
model in recent years. Aquasium Technology, a legacy investment is seeing
growing international interest for its product. Active Navigation continues to
gain momentum for its incident response platform and Preservica has had a
challenging few months, but continues to grow its recurring revenues.
The main reductions within total valuation decreases of £(8.69) million were:
● MyTutor: £(3.26)
million
● Bella & Duke: £(1.05)
million
● Dayrize B.V.: £(0.66) million
● Virgin Wines: £(0.65)
million
MyTutor and Bella & Duke have been impacted by a challenging environment
for consumer facing businesses. IPV has experienced delays in securing new
contracts and partnerships, although through cost-saving initiatives has
improved its profitability. Dayrize has secured several new contracts, however
its cash requirement has been higher than anticipated. Unfortunately,
Dayrize's need for further capital has accelerated over recent months such
that, post the year end, the VCT has agreed to a capital structure plan to
facilitate further funding from its existing angel network without requiring
further funding from the VCT. This will result in a staged recovery of the
Company's loan capital over the next two years, but only a nominal recovery
for the Company's equity instruments. Although disappointing, this is believed
to be the best outcome for Shareholders. Finally, Virgin Wines, despite
releasing positive trading news has been subject to wider AIM market
volatility over the past year.
The Company's investment values have been partially insulated from market
movements and lower revenue growth by the preferred investment structures
utilised in the financing of many of the portfolio companies. This acts to
moderate valuation swings and the net result can be more modest falls when
portfolio company values decline.
Realisation during the year
The Company completed one exit during the year, as detailed below:
Company Business Period of Investment Total cash proceeds over the life of the investment/
Multiple over cost
Master Removers Group A specialist logistics, December 2014 £7.35 million
storage and removals to 3.3x cost
business February 2024
The Company sold its investment in Master Removers Group (2019) Limited to
Elanders AB and alongside this, sold its shares in MRG's domestic removals
business to management. The Company received £3.88 million from the sale plus
£0.82 million after the year end. Total proceeds received by the Company to
date over the life of the investment are £7.35 million compared to an
original investment cost of £2.26 million. On a combined I&G and MIG 4
VCT basis (MIG 4 VCT amounts being received prior to the Merger), including
amounts received after year end, total proceeds are £12.86 million compared
to an original cost of £3.95 million. Overall, this investment generated a
multiple on cost of 3.3x and an IRR of 26%.
Other losses during the year
The Company realised its investment in Bleach Holdings Limited ("Bleach")
during the year. Bleach had significantly underperformed in the face of issues
such as Covid-19 and the subsequent consumer downturn. Despite a restructuring
in 2023, against a challenging backdrop across the retail sector, Bleach
required further funding to support its scaling which the VCTs could not
provide under current VCT rules. A well-known hair-care provider agreed to
acquire the business and safeguard important jobs but disappointingly only at
a level that generated a minimal return for the VCTs. The Company had
reduced its valuation of Bleach materially in previous periods such that upon
realisation a modest loss of just £0.16 million was recognised in the year.
Northern Bloc Ice Cream has had similar trading difficulties such that
this investment was recognised as a permanent impairment resulting in a £0.07
million realised loss.
Portfolio and income yield
In the year under review, the Company received the following amounts of
income:
2024 2023
£m £m
Interest received in the year 0.63 0.58
Dividends received in the year 0.05 0.64
OEIC and bank interest received in the year 2.04 1.97
Total portfolio income in the year 2.79 3.19
Net asset Value at 30 September 188.70 122.78
Income Yield (Income as a % of Net asset Value at 30 September)* 1.4% 2.6%
* Yield appears lower compared to the prior year due to the acquisition of MIG
4 VCT's assets being reflected in the net asset value at the year-end with
interest and dividend income only reflected for the period since the merger.
Investments made after the year-end
The Company made two new and three follow-on investments of £2.77 million
after the year-end, as detailed below:
New:
Company Business Date of Investment Amount of new investment (£m)
Mobility Mojo A software platform October 2024 0.55
supporting accessibility
audits
Based in Dublin, Mobility Mojo (https://mobilitymojo.com) was founded in 2018
and empowers organisations worldwide to create more accessible and inclusive
spaces. Mobility Mojo's innovative software platform enables companies to
capture, track, enhance, promote and benchmark the accessibility of their
buildings in a standardised and cost-effective way across their entire
portfolio. The solution significantly reduces the time and expense typically
associated with traditional paper-based accessibility audits and it is
adaptable to a diverse set of environments, including office spaces, hotels
and retail banks. The funding will support Mobility Mojo in expanding its
marketing and sales teams, enhancing its SaaS platform with new AI-driven
capabilities and recruiting key talent to its leadership team.
Online travel operator
Much Better specialising in creating November 2024 1.25
Adventures unique 'adventure' group trips
Much Better Adventures (https://muchbetteradventures.com)) has developed a
reliable, engaging, user-friendly platform that resonates with customers. This
is reflected in the positive customer reviews and strong repeat rates. It has
built a strong organic search presence in the UK through a combination of a
high-quality website and social content, and curating trips that appeal to its
clear Ideal Customer Profile, a highly marketable segment that fits with the
product offering. With this investment the business will be robustly funded
with the ability to tune expenditure to market conditions.
Existing:
Company Business Period of Investment Amount of further investment (£m)
Branchspace Digital retail software November 2024 0.31
provider to aviation and
travel industry
Branchspace (https://www.branchspace.com/) is a well-established specialist
digital retailing consultancy and software provider to the aviation and travel
industry. Branchspace's offering helps customers to transform their technology
architecture to unlock best-in-class digital retailing capabilities, driving
distribution efficiencies and an improved customer experience. Across two
complementary service offerings Branchspace can effectively cover the entire
airline tech stack and has carved a defensible position as sector experts,
serving clients including IAG, Lufthansa and Etihad. This funding round which
was agreed at the time of the original transaction will seek to support its
growth plans.
Focal Point GPS enhancement December 2024 0.12
Positioning software provider
Azarc.io (https://azarc.io (https://azarc.io) ) specialises in business
process automation using distributed ledger technology. Its Verathread®
product has been applied to automating cross-border customs clearances, albeit
it has wider supply chain applications. Founded in 2021, Azarc successfully
secured British Telecom as a customer and a long-term strategic partner in the
UK and aims to improve inefficiencies over traditional paper-based customs
clearances for import and export trade. This investment will support the
company's growth trajectory with BT and expedite its expansion into
international import/export hubs through new partnerships.
Preservica Seller of proprietary digital archiving software December 2024 0.54
Preservica (https://preservica.com (https://preservica.com) ) 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. The business has seen annual
recurring revenues nearly double over the last two financial years. This
additional funding will give the business extra headroom to deliver 20-25% ARR
growth whilst seeking an exit in 2025.
Environmental, Social, Governance considerations
The Board and the Investment Adviser believe that the consideration of
environmental, social and corporate governance ("ESG") factors throughout the
investment cycle should contribute towards enhanced shareholder value.
The Investment Adviser has a dedicated team which is focused on sustainability
as well as the Investment Adviser's Sustainability Executive Committee who
provide oversight and accountability for the Investment Adviser's approach to
sustainability across its operations and investment practices. This is viewed
as an opportunity to enhance the Company's existing protocols and procedures
through the adoption of the highest industry standards. Each investment
executive is responsible for setting and achieving their own individual ESG
objectives in support of the wider overarching ESG goals of the
Investment Adviser.
The Investment Adviser's Private Equity division has its own Sustainable
Investment Policy, in which it commits to:
● Ensure its team understands the imperative for effective ESG
management and is equipped to support and training.
● Incorporate ESG into the monitoring processes of the unquoted
portfolio companies.
● Engage with the dedicated sustainable investment team and
conduct regular monitoring of ESG
risks, sustainability initiatives and performance in its investments.
Further detail on ESG can be found in the Chair's statement and in the
Director's Report in the Annual Report.
Outlook
Geo-political flux is likely to persist throughout 2025, although domestically
the economic landscape is expected to be on a surer footing. This environment
should also present attractive opportunities for your Company but, as a
selective investor, still has the advantage of being able to take a
longer-term view of both new and portfolio follow-on investments. The early
stage cohort of investments are taking on the challenges presented and are
expected to accelerate their funding plans, however this should also produce
attractive further investment opportunities.
The first Budget under the new Labour Government was held after the
year-end. Of particular note and concern for the portfolio and its
companies, there is an expected impact of increased Employer's National
Insurance contributions on portfolio companies.
Gresham House's seasoned investment managers and advisers are a vital source
of knowledge and experience available to support the Company's portfolio of
management teams. In this respect, Gresham House is well placed by having one
of the largest and most experienced portfolio teams in the industry with an
average of over 18 years' relevant industry experience.
Pleasingly, the portfolio continues to perform in delivering growth against a
challenging backdrop, although the early-stage companies will need careful
monitoring and guidance. The new and
further investment landscape should provide continued opportunities to expand
the portfolio with assets with the potential to generate strong returns for
investors. The Company's strong liquidity provides Gresham House with ample
capacity to fulfil these prospects.
Gresham House Asset Management Limited
Investment Adviser
13 January 2025
Annual General Meeting
The AGM will be held at 2.30 pm on Wednesday, 5 March 2025 at 1st Floor, 8
Fenchurch Place, London EC3M 4PB and will also be available by webcast for
those Shareholders who are unable to attend in person. Details of how to join
the meeting by virtual means will be shown on the Company's website.
Shareholders joining virtually should note you will not be able to vote at the
meeting and therefore you are encouraged to lodge your proxy form either by
returning their proxy form or voting on-line using the Vote Here button on the
Company's website: www.incomeandgrowthvct.co.uk
(http://www.incomeandgrowthvct.co.uk) . Directions to the AGM venue will be
available on the website.
For further details, please see the Notice of the Meeting which can be found
at the end of the Annual Report & Financial Statements.
Further Information
The Annual Report & Financial Statements for the year ended 30 September
2024 will be available shortly on www.incomeandgrowthvct.co.uk
(http://www.incomeandgrowthvct.co.uk) .
It will also be submitted shortly in full unedited text to the Financial
Conduct Authority's National Storage Mechanism and will be available for
inspection at National Storage Mechanism | FCA
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) in accordance with
DTR 6.3.5(1A) of the Financial Conduct Authority's Disclosure Guidance and
Transparency Rules.
Contact:
Gresham House Asset Management Limited
Company Secretary
mobeusvcts@greshamhouse.com (mailto:mobeusvcts@greshamhouse.com)
+44 20 7382 0999
The closing portfolio now reflects the acquisition of MIG 4 VCT's assets and
liabilities on 26 July 2024 with portfolio performance of the enlarged entity
being reflected from that date. On the portfolio investee companies
themselves, despite the continuing uncertain macroeconomic conditions, various
investee companies demonstrated some positive revenue and profits growth, in
particular Veritek Global, Preservica, and Active Navigation although the
consumer facing businesses have found delivery of growth to be harder, such as
MyTutor and Bella & Duke. The net result has been positive, and the
overall value in the year increased by a modest £1.71 million (2023: £5.43
million), or 1.4% (2023: 7.4%) on a like-for-like basis, compared to the
opening portfolio value at 1 October 2023 of £72.72 million and the assets
acquired from MIG 4 VCT of £56.43 million. This net increase was comprised of
an unrealised increase in portfolio valuations of £1.94 million and net
realised losses of £0.23 million.
At the year-end, the portfolio was valued at £135.95 million (2023: £72.72
million) which includes the assets acquired from MIG 4 VCT as part of the
Merger. The portfolio is substantially comprised of growth capital
investments, particularly of investments made since the VCT rule change in
2015 and, as Shareholders will be aware, these younger, less proven
investments have a more variable return profile. Shareholders should continue
to note therefore that whilst the potential upside for the Company's
Shareholders of these type of investments may be higher, conversely the
likelihood of investee company failures also increases. The Company's largest
five assets by value represent over 50% of the portfolio's value with
Preservica accounting for 26.7%. The overall portfolio value is greatly
affected by the performance of these investments and these higher value assets
continue to be monitored closely by the Investment Adviser as part of its risk
mitigation measures.
During the year under review, the Company invested £4.62 million (2023:
£2.72 million) into five new investments:
Ozone £1.50 million Open banking software developer
Azarc £0.53 million Cross-border customs automation software provider
CitySwift £0.77 million Passenger transport data and scheduling software provider
SciLeads £0.83 million Digital platform within life science vertical
OnSecurity £0.99 million B2B cybersecurity business providing independent third-party penetration
testing services
The Company also invested a total of £4.34 million (2023: £0.62 million)
into seven existing portfolio companies during the year:
RotaGeek £0.23 million Provider of cloud-based enterprise software
FocalPoint £0.17 million GPS enhancement software provider
MyTutor £0.64 million Digital marketplace connecting school pupils seeking one to one online
tutoring
Orri £0.25 million An intensive day care provider for adults with eating disorders
ActiveNAV £1.95 million A global provider of file analysis software for information governance,
security and compliance
VivaCity Labs £0.94 million An AI and Urban Traffic Control business
Dayrize £0.16 million A provider of a rapid sustainability impact assessment tool
The VCT's portfolio valuation methodology has continued to be applied
consistently and in line with IPEV guidelines with four of the top ten largest
valuations triangulated by an independent external valuation in the year.
Following the year-end, two new investments were made, £0.55 million of which
was made into Mobility Mojo, a software platform supporting accessibility
audits and £1.25 million was made into Gentianes Solutions (trading as Much
Better Adventures), a Adventure Travel Marketplace, and three further
follow-on investments comprising £0.31 million into Branchspace Limited,
£0.54 million into Preservica, and £0.12 million info FocalPoint.
The Company received £3.88 million in proceeds from the partial exit of MRG,
whose value was fully reflected at the previous year-end. Over the life of
this investment, the Company has received total proceeds of £7.35 million
(including £0.47 million received after the year-end) which equates to a
multiple on cost of 3.3x, an IRR of 26.0%. Conversely, the Company was unable
to support further investment into Bleach Holdings Limited and was required to
exit its holding for only minimal proceeds. The Company had reduced its
valuation of Bleach in previous years such that a modest £0.16 million
realised loss was incurred on disposal in the year. Further, the Company's
holding in Northern Bloc was fully impaired recognising a loss of £0.07
million in the year.
Further details of this investment activity and the performance of the
portfolio are contained in the Investment Adviser's Review and the Investment
Portfolio Summary in the Annual Report.
Revenue Account
The results for the year are set out in the Income Statement in the Annual
Report and show a revenue return (after tax) of 0.57 pence per share (2023:
1.11 pence per share).
The revenue return for the year of £1.00 million has decreased from last
year's figure of £1.66 million due to lower dividends received however loan
stock interest receivable has increased over the year. Investment adviser fees
have increased due to higher net assets, but other expenses have reduced due
to a reduction in trail commission payable. The revenue return also includes
the impact of one off costs relating to the Merger.
Liquidity and Fundraising
Cash and liquidity fund balances as at 30 September 2024 amounted to £52.79
million representing 28.0% of net assets. After the year-end, following a
3.00 pence dividend payment, cash and liquid balances reduced to £46.17
million, 25.5% of net assets. The majority of cash resources are held in
liquidity funds with AAA credit ratings, the returns on which have benefitted
from higher levels of interest rates which will help support future returns to
Shareholders. The Board however continues to monitor credit risk in respect of
all its cash and near cash resources and still prioritises the security and
protection of the Company's capital.
On 2 September 2024, the Company launched a Joint Offer for Subscription
alongside Mobeus Income & Growth VCT plc ("MIG") to each raise an initial
amount of up to £35 million, as well as an over-allotment facility of £10
million for the tax year 2024/25. Following strong demand, the Company
received applications for the full amount sought of £45 million (including
the over-allotment facility). Two allotments took place after the year-end, on
1 October 2024 and 28 October 2024, issuing a total of 62,562,671 new Ordinary
shares at an average effective offer piece of 71.93 pence per share, raising
net funds for the Company of £43.39 million. These additional funds will
allow the Company to take advantage of new investment opportunities, fund
further expansion of existing portfolio businesses, provide attractive returns
for shareholders in the form of dividend payments and buy back its shares from
those Shareholders who may wish to sell.
Share buy-backs
During the year, the Company bought back and cancelled 4,163,732 of its own
shares (2023: 3,975,746), representing 2.7% (2023: 3.1%) of the shares in
issue at the beginning of the year, at a total cost of £2.87 million (2023:
£2.98 million), inclusive of expenses.
It is the Company's policy to cancel all shares bought back in this way. The
Board regularly reviews its buyback policy, where its priority is to act
prudently and in the interest of remaining Shareholders, whilst considering
other factors, such as levels of liquidity and reserves, market conditions and
applicable law and regulations. Under this policy, the Company seeks to
maintain the discount at which the Company's shares trade at approximately 5%
below the latest published NAV.
Change of Auditor
The Board will be recommending the appointment of Johnston Carmichael to
become the Company's auditor for the year ending 30 September 2025. This is to
ensure cost and time efficiencies are maintained through the Company and
Mobeus Income & Growth VCT plc ("MIG") having the same auditor as well as
the same year-end. MIG had reached the 20 year limit for audit tenure with
BDO. Following a comprehensive and robust audit tender process for both the
Company and MIG, the Boards of both companies will be recommending this
appointment to shareholders at their AGM.
Shareholder Communications & Annual General Meeting
May I remind you that the Company has its own website which is available at:
www.incomeandgrowthvct.co.uk (http://www.incomeandgrowthvct.co.uk) .
The Investment Adviser held another virtual shareholder event on 1 March 2024,
showcasing some exciting
portfolio company growth journeys as well as a presentation by the Investment
Adviser and representatives of the four Mobeus VCTs, a recording of which is
available on the Company's website or by registering for access here:
https://mvcts.connectid.cloud/ (https://mvcts.connectid.cloud/) . It is
anticipated that the next Shareholder Event will take
place in September 2025.
The Board is pleased to be able to hold the next Annual General Meeting
("AGM") of the Company in person at 2.30 pm on 5 March 2025 at 1st Floor, 8
Fenchurch Place, London EC3M 4PB. The Board is aware that a number of
Shareholders hold shares in the Company and the other Mobeus VCT, MIG, which
shares a 30 September year-end. A joint presentation by the Investment
Adviser to the Company's and MIG VCT Shareholders will therefore take place at
1.30 pm and a light lunch will be available from 1.00 pm. The MIG VCT AGM will
be held before the presentation at 1.00 pm.
A webcast will also be available at the same time for those Shareholders who
cannot attend in person. However, please note that you will not be able to
vote via this method and you are encouraged to return your proxy form before
the deadline of 2.30 pm on Monday, 3 March 2025. There will however be the
ability to send questions into the meeting via the link.
Information setting out how to join the meeting by virtual means will be shown
on the Company's website a few days before the AGM. Directions to the AGM
venue will also be available on the website. For further details, please see
the Notice of the Meeting which can be found at the end of the Annual Report
&
Financial Statements.
Votes Against AGM Resolutions
At the Annual General Meeting of the Company held on 29 February 2024, over
20% of the votes received were lodged against the resolutions to approve the
Remuneration Report and to approve the disapplication of pre-emption rights.
As required under the AIC Code of Corporate Governance Code, those
Shareholders that voted against the resolutions were contacted in April 2024
to ascertain the background and reasons for their vote. I thank those
Shareholders who responded to the request with their reasons for voting
against the resolutions. From the responses, it was clear that the key factors
were Shareholders' concerns about the level of fees received by the Board and
of new shareholders being added to the Register of Members, thereby diluting
current Shareholders' holding and potential dividend income. The Board
considers its fees to be competitive, in line with the amount of assets under
management and commensurate with the time commitment required to be undertaken
by the Board. The Board considers the level of fees on an annual basis, as
well as bench-marking against peers.
With regard to the issuance of shares to new investors, the Board consider it
in the Company's interest to periodically raise new funds to:
(i) take advantage of new investment opportunities and to
support existing portfolio companies and
(ii) maintain (bearing in mind the annual running costs and
outflows through dividends and buybacks) and further grow the net asset base
of the Company over which to spread the annual running costs.
Further fundraisings are typically raised at an issue price per share of the
NAV plus costs, which avoids economic dilution of the existing NAV per share
for existing Shareholders. The Board acknowledges that there may be a
potential short-term dilutive impact of individual shareholder returns - from
sharing gains on existing investments with new Shareholders. At the same time,
existing Shareholders are partially
"derisked" in cash for part of the very same investments at current market
value.
In any event, the Board believes that both these counterveiling arguments are
outweighed by having sufficient liquidity to meet its investment objectives
and the potential to generate enhanced returns in the future, as well as the
ability to support dividend payments.
VCT Regulations - Retirement Date of the UK Government's Venture Capital
Schemes
The Board and Investment Adviser were pleased to see the European Commission
approve the extension of the VCT scheme until 5 April 2035. This was
formalised by UK legislation on 3 September 2024. The regulations bring into
effect the extension of the Enterprise Investment Scheme ("EIS") and the
Venture Capital Trust ("VCT") Scheme sunset clause to 2035. The Board welcomes
this news and would like to thank the Investment Adviser, The Venture Capital
Trust Association ("VCTA"), the Association of Investment Companies ("AIC")
and other parties involved for their help in getting the new legislation
enacted.
Consumer Duty
The Financial Conduct Authority's (FCA) new Consumer Duty regulation came into
effect on 31 July 2023. Consumer Duty is an advance on the previous concept of
'treating customers fairly', which sets higher and clearer standards of
consumer protection across financial services and requires all firms to put
their customers' needs first.
As previously notified, the Company is not regulated by the FCA and therefore
it does not directly fall into the scope of Consumer Duty. However, Gresham
House as the Investment Adviser, and any IFAs or financial platforms used to
distribute future fundraising offers, are subject to Consumer Duty.
The Board will ensure that the principles behind Consumer Duty are upheld and
will work with the Investment Adviser on the information now available to
assist consumers and their advisers to be able to discharge their obligations
under Consumer Duty.
Environmental, Social and Governance ("ESG")
The Board and the Investment Adviser believe that the consideration of
environmental, social and corporate governance ("ESG") factors throughout the
investment cycle will contribute towards enhanced Shareholder value.
Gresham House has a dedicated sustainable investment team which conducts an
annual survey of our
unquoted portfolio companies to understand how they are responding to relevant
ESG risks and opportunities. The results of the November 2023 survey of
investee companies highlighted that the portfolio companies who participated
were taking action on implementing a range of sustainability initiatives
within their businesses. Each portfolio company in the survey identified areas
for improvement over the next 12 months which are being monitored by the
Investment Adviser and their progress tracked throughout
the year.
The FCA reporting requirements consistent with the Task Force on
Climate-related Financial Disclosures ("TCFD") do not currently apply to the
Company but will be kept under review, the Board being mindful of any
recommended changes. The Board is aware of the FCA's Sustainability Disclosure
Requirements and investment labels (together the "rules"). As the Company is
classified as a Collective Investment Undertaking, the scope of the rules
capture such UK-domiciled unauthorised funds, however given that the shares in
the Company (the "product") do not have a sustainable investment objective,
the rules only apply
on a very limited basis (through the Investment Adviser) in relation to the
Company. The Gresham House TCFD Report can be found on its website at: TCFD
report - Gresham House (https://greshamhouse.com/tcfd/) .
Fraud Warning
Shareholders continue to be contacted in connection with sophisticated but
fraudulent financial scams which purport to come from or to be authorised by
the Company. This is often by a phone call or an email usually originating
from outside of the UK, claiming or appearing to be from a corporate finance
firm offering to buy your shares at an inflated price.
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 in the Annual Report.
Outlook
Despite some recent return to stability on the domestic front following the UK
election and subsequent budget, the wider geopolitical and economic
environment remains uncertain. The Company's portfolio companies have been
operating under challenging economic conditions for some time now and the
Board and Investment Adviser are encouraged with the level of resilience
shown. With a more certain fiscal roadmap now laid out and the prospect for
further interest rate reductions, the Board has cautious
optimism that portfolio performance can be maintained and improved. The
Investment Adviser continues to target new opportunities in exciting new
businesses and is reporting a strong pipeline under current review.
The sole successful partial exit of MRG during the year represents a somewhat
quiet period for the Mobeus VCT portfolio in terms of realisations compared to
past periods. Expectations are that the exit environment will likely remain
subdued for the time being. However, a period of stability should facilitate
more measured growth which will ultimately lead to exits but with no fixed
timescale associated
with the Company's investments, there is no imperative to force an exit and
the Investment Adviser is able to influence the best time to sell to optimise
value.
In summary, the Company continues to add to its large, well-diversified
portfolio which is managed by a professional and experienced investment team.
The Board and Investment Adviser will continue to work together to drive
shareholder returns further.
I would like to take this opportunity once again to thank all Shareholders for
your continued support and to extend a warm welcome to our new Shareholders in
the Company.
Maurice Helfgott
Chairman
13 January 2025
INVESTMENT ADVISER'S REVIEW
Portfolio Review
The year to date has been marked by a continuing period of uncertainty,
against which markets have delivered modest growth. Inflation and interest
rates appear to have peaked, but concerns regarding geo-political tensions in
Europe and the Middle East persist. The UK and US election results will
hopefully
allow more clarity on the future economic and political landscape although the
impact of the UK Government's first budget has caused an element of market
turbulence, potential inflationary pressures and pausing of interest rate
reductions.
Despite this unsettled environment, it is encouraging to see that two thirds
of the portfolio companies recorded continued growth in either revenues or
profits over the year. This steady positive progress
contrasts the observation that the portfolio includes several companies
contemplating top up rounds to enable them to reach a delayed breakeven. The
ability to invest further VCT capital is a useful opportunity to build
meaningful stakes as well as enhancing the Company's influence and protecting
the VCTs' position. Over 70% of the portfolio recorded profit increases versus
the previous year which is very encouraging and demonstrates the
responsiveness and effectiveness of portfolio company boards in maintaining
close cost management.
The nature of the VCT assets are that many portfolio companies are seeking to
prove and develop nascent business models. Most of the recent group of earlier
stage investments are steadily building out their pipelines and capability as
they balance investment with the rate of commercial development. At this stage
of their development Gresham House is still hopeful that the majority will
deliver the relevant commercial proof points, albeit it will take longer and
probably require additional capital earlier than had originally been
envisioned. In some cases, this could be a positive by allowing the Company to
amass more significant stakes on possibly more advantageous terms.
We are pleased to have been able to provide new funding to five significant
investments during the year as well as provide follow on funding for a number
of portfolio companies. The exit environment remains subdued, but the partial
exit of MRG at the start of the period illustrates that investee companies can
still be realised at attractive prices. Unless there is a change in market
dynamics, it is likely that portfolio companies will be held for longer
periods although looking forward, there are a number of assets starting to
plan for exit in 2024/25. Gresham House believes that these are realistic
prospects which could deliver significant realised value to the Company.
The Company's recent successful fundraise after the period end will provide
strong liquidity to take advantage of the improving new investment environment
for the Company as the UK is starting to see
some stability post the election and budget. Gresham House is seeing a number
of interesting investment
propositions which are expected in time to be value accretive to the VCT's
portfolio.
2024 2023
£m £m
Opening portfolio value 72.72 73.08
MIG 4 VCT acquisition 56.43 -
New and follow-on investments 8.96 3.34
Disposal proceeds (3.87) (9.13)
Net unrealised (losses)/gains (0.23) 0.41
Valuation movements: unrealised 1.94 5.02
Net investment portfolio gains 1.71 5.43
Portfolio value at 30 September 135.95 72.72
The value of the Company's portfolio has materially increased in size due to
the acquisition of Mobeus Income & Growth 4 VCT's portfolio of assets, the
vast majority in which the Company had existing holdings.
The Company made new and follow-on investments totalling £8.96 million (2023:
£3.34 million) during the year, of which £4.62 million was to five new
growth capital investments and £4.34 million was to seven follow-on
investments. Further details of these investments are on the following pages.
After the year end, new investments were made into Mobility Mojo and Much
Better Adventures, as well as follow-ons
into Branchspace, Preservica and FocalPoint.
Unless there is a change in market dynamics, it is likely that portfolio
companies will be held for longer periods although looking forward, there are
a number of assets starting to plan for possible exit in 2024/25. Gresham
House believes that these are realistic prospects which could deliver
significant realised value to the Company.
The portfolio's largest investments have experienced some strong revenue
growth which has continued to drive values over the period, in particular
Active Navigation, Preservica and Caledonian Leisure. Pleasingly, Veritek
Global, a historic MBO investment has started to see material traction having
pivoted its business model in recent years and returned to profitability and
finally, legacy investment Aquasium has seen a material uplift in the year. By
contrast, there are also some portfolio companies that are experiencing
tougher trading such as, MyTutor and Dayrize. The portfolio companies continue
to be focused on establishing a path to profitability.
During the year, the MRG partial exit generated proceeds of £3.88 million
resulting in a return of 3.3x and an IRR of 26% over the life of the
investment.
The portfolio's valuation changes in the year are summarised as follows:
2024 2023
£m £m
Increase in the value of unrealised investments 10.63 11.49
Decrease in the value of unrealised investments (8.69) (6.47)
Net increase in the value of unrealised investments 1.94 5.02
Realised gains - 1.28
Realised losses (0.23) (0.87)
Net realised (losses)/gains in the year (0.23) 0.41
Net investment portfolio movement in the year 1.71 5.43
New investments during the year
The Company made five new investments totalling £4.62 million during the
year, as detailed below:
Company Business Date of Investment Amount of new investment (£m)
Ozone API Open banking software provider December 2023 1.50
Ozone API (https://ozoneapi.com) is a software developer providing banks and
financial institutions with a low cost, out-of-the box solution enabling them
to deliver open APIs which comply with open banking and finance standards
globally. The software goes beyond compliance and enables customers to
monetise open banking and finance opportunities which are growing
significantly following regulatory & market development. This funding is
the first equity investment into Ozone and enables the team to invest into
their product and go-to-market teams as they look to capitalise on the large
and fast-growing global market.
Cross-border customs December 2023 0.53
Azarc automation software
provider
Azarc.io (https://azarc.io) specialises in business process automation using
distributed ledger technology. Its Verathread® product has been applied to
automating cross-border customs clearances, albeit it has wider supply chain
applications. Founded in 2021, Azarc successfully secured British Telecom as a
customer and a long-term strategic partner in the UK and aims to improve
efficiencies over traditional paper-based customs clearances for import and
export trade. This investment will support the company's growth trajectory
with BT and expedite its expansion into international import/export hubs
through new partnerships.
Cityswift Passenger transport December 2023
data and scheduling 0.77
software provider
Huddl Mobility Limited (trading as CitySwift) (https://cityswift.com) is a
software business that works with bus operators and local authorities to
aggregate, cleanse and access insight from complex data sources from across
their networks, enabling them to optimise schedules and unlock revenue
generating or cost reduction opportunities. This investment will be used to
accelerate new customer acquisition and unlock significant opportunities
within the existing customer base - CitySwift already works with major bus
operators and local transport authorities including National Express,
Stagecoach and Transport for Wales.
SciLeads Digital Platform within March 2024 0.83
the life science verticals
Based in Belfast, SciLeads (https://scileads.com) is a data and lead
generation platform operating within life science verticals, allowing
customers to identify, track and convert potential leads. SciLeads has grown
ARR significantly and this investment will be used to accelerate new customer
acquisition and professionalise the product and customer success functions to
cross-sell opportunities within the existing customer base.
OnSecurity B2B cybersecurity June 2024 0.99
business providing
independent third-party
penetration testing
Based in Bristol, OnSecurity ((https://www.onsecurity.io) is a B2B
cybersecurity business providing independent third-party penetration testing
services, a type of ethical hacking that simulates a real-world attack on a
computer system, network, or web application to identify and remediate
vulnerabilities that could be exploited by malicious actors. OnSecurity is an
agile and collaborative
platform solution that provides high quality human pentesting with elements of
automation to minimise low value, menial tasks. This investment will be used
to drive growth through developing their platform to target larger potential
clients and develop economies of scale.
Further investments during the year
A total of £4.34 million was invested into seven existing portfolio companies
during the year, as detailed below:
Company Business Date of Investment Amount of new investment (£m)
RotaGeek Provider of cloud-based November 2023 0.23
enterprise software
RotaGeek (https://www.rotageek.com/) is a provider of cloud-based enterprise
software to help larger retail, leisure and healthcare organisations to
schedule staff effectively. RotaGeek has proven its ability to solve the
scheduling issue for large retail clients, competing due to the strength of
its technologically advanced proposition. Since investment it has also
diversified and started to prove its applicability in other verticals such as
healthcare and hospitality. This investment will help the company focus on
operational delivery and continue sales and client contract win momentum.
Focal Point Positioning GPS enhancement December 2023 0.17
software provider
Focal Point Positioning Limited (https://focalpointpositioning.com/) is a deep
tech business with a growing IP and software portfolio. Its proprietary
technology applies advanced physics and machine learning to dramatically
improve the satellite-based location sensitivity, accuracy, and security of
devices such as smartphones, wearables, and vehicles and reduce costs. The
further investment was agreed at the time of the original funding in September
2022.
MyTutor Digital marketplace for January 2024 0.64
online tutoring
MyTutorweb (trading as MyTutor) ((https://mytutor.co.uk) is a digital
marketplace that connects school age pupils who are seeking private online
tutoring with university students. The business is satisfying a growing demand
from both schools and parents to improve pupils' exam results. This further
investment will aim to drive changes in product and margin through operating
business improvements and seek to expand its offering to school and channel
partners.
Orri Specialists in eating disorder support March 2024, 0.25
July 2024
Orri Limited (https://orri-uk.com) is an intensive daycare provider for adults
with eating disorders. Orri provides an alternative to expensive residential
in-patient treatment and lighter-touch outpatient services by providing highly
structured day and half day sessions either online or in-person at its clinic
on Hallam Street, London. This additional funding represents a bridging round
to provide sufficient funding to allow the business to reach break-even.
Potential further funding will allow a targeted geographic roll out once the
core business is proven.
ActiveNav A provider of enterprise-level file analysis May 2024 1.95
software
Data Discovery Solutions, trading as ActiveNav (https://activenav.com), is a
data analysis software solution which makes it easier for companies to clean
up network drives, respond to new data protection laws and dispose of
redundant and out-dated documents. ActiveNav's solution is used by significant
blue-chip customers, particularly those in highly regulated industries such as
energy and professional services, as well as government entities in the USA,
Canada, Australia and the UK. This further funding will assist the development
of ActiveNav's exciting new cyber breach response division 'Actfore', which
was established in late 2022.
Dayrize A provider of a rapid June 2024, September 2024 0.16
sustainability impact
assessment tool
Founded in 2020, Amsterdam-based Dayrize (https://dayrize.io/) has developed a
rapid sustainability impact assessment tool that delivers product-level
insights for consumer goods brands and retailers, enabling them to be leaders
in sustainability. Its proprietary software platform and methodology bring
together an array of data sources to provide a single holistic product level
sustainability score that is comparable across product categories in under two
seconds. This funding round is to help refine its business plan, establish
greater product-market fit and drive conversion of its customer pipeline.
Capital structure terms have also been amended to encourage further funding
from its existing angel network.
Vivacity Provider of artificial August 2024 0.94
intelligence & urban
traffic control systems
Vivacity (https://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.
Valuation changes of portfolio investments still held
The total valuation increases were £10.63 million with the main increases
being:
● Veritek Group: £1.82 million
● Aquasium Technology: £1.23 million
● Active Navigation: £1.20 million
● Preservica: £1.15
million
Veritek Global has undertaken a marked turnaround having pivoted its business
model in recent years. Aquasium Technology, a legacy investment is seeing
growing international interest for its product. Active Navigation continues to
gain momentum for its incident response platform and Preservica has had a
challenging few months, but continues to grow its recurring revenues.
The main reductions within total valuation decreases of £(8.69) million were:
● MyTutor: £(3.26)
million
● Bella & Duke: £(1.05)
million
● Dayrize B.V.: £(0.66) million
● Virgin Wines: £(0.65)
million
MyTutor and Bella & Duke have been impacted by a challenging environment
for consumer facing businesses. IPV has experienced delays in securing new
contracts and partnerships, although through cost-saving initiatives has
improved its profitability. Dayrize has secured several new contracts, however
its cash requirement has been higher than anticipated. Unfortunately,
Dayrize's need for further capital has accelerated over recent months such
that, post the year end, the VCT has agreed to a capital structure plan to
facilitate further funding from its existing angel network without requiring
further funding from the VCT. This will result in a staged recovery of the
Company's loan capital over the next two years, but only a nominal recovery
for the Company's equity instruments. Although disappointing, this is believed
to be the best outcome for Shareholders. Finally, Virgin Wines, despite
releasing positive trading news has been subject to wider AIM market
volatility over the past year.
The Company's investment values have been partially insulated from market
movements and lower revenue growth by the preferred investment structures
utilised in the financing of many of the portfolio companies. This acts to
moderate valuation swings and the net result can be more modest falls when
portfolio company values decline.
Realisation during the year
The Company completed one exit during the year, as detailed below:
Company Business Period of Investment Total cash proceeds over the life of the investment/
Multiple over cost
Master Removers Group A specialist logistics, December 2014 £7.35 million
storage and removals to 3.3x cost
business February 2024
The Company sold its investment in Master Removers Group (2019) Limited to
Elanders AB and alongside this, sold its shares in MRG's domestic removals
business to management. The Company received £3.88 million from the sale plus
£0.82 million after the year end. Total proceeds received by the Company to
date over the life of the investment are £7.35 million compared to an
original investment cost of £2.26 million. On a combined I&G and MIG 4
VCT basis (MIG 4 VCT amounts being received prior to the Merger), including
amounts received after year end, total proceeds are £12.86 million compared
to an original cost of £3.95 million. Overall, this investment generated a
multiple on cost of 3.3x and an IRR of 26%.
Other losses during the year
The Company realised its investment in Bleach Holdings Limited ("Bleach")
during the year. Bleach had significantly underperformed in the face of issues
such as Covid-19 and the subsequent consumer downturn. Despite a restructuring
in 2023, against a challenging backdrop across the retail sector, Bleach
required further funding to support its scaling which the VCTs could not
provide under current VCT rules. A well-known hair-care provider agreed to
acquire the business and safeguard important jobs but disappointingly only at
a level that generated a minimal return for the VCTs. The Company had
reduced its valuation of Bleach materially in previous periods such that upon
realisation a modest loss of just £0.16 million was recognised in the year.
Northern Bloc Ice Cream has had similar trading difficulties such that
this investment was recognised as a permanent impairment resulting in a £0.07
million realised loss.
Portfolio and income yield
In the year under review, the Company received the following amounts of
income:
2024 2023
£m £m
Interest received in the year 0.63 0.58
Dividends received in the year 0.05 0.64
OEIC and bank interest received in the year 2.04 1.97
Total portfolio income in the year 2.79 3.19
Net asset Value at 30 September 188.70 122.78
Income Yield (Income as a % of Net asset Value at 30 September)* 1.4% 2.6%
* Yield appears lower compared to the prior year due to the acquisition of MIG
4 VCT's assets being reflected in the net asset value at the year-end with
interest and dividend income only reflected for the period since the merger.
Investments made after the year-end
The Company made two new and three follow-on investments of £2.77 million
after the year-end, as detailed below:
New:
Company Business Date of Investment Amount of new investment (£m)
Mobility Mojo A software platform October 2024 0.55
supporting accessibility
audits
Based in Dublin, Mobility Mojo (https://mobilitymojo.com) was founded in 2018
and empowers organisations worldwide to create more accessible and inclusive
spaces. Mobility Mojo's innovative software platform enables companies to
capture, track, enhance, promote and benchmark the accessibility of their
buildings in a standardised and cost-effective way across their entire
portfolio. The solution significantly reduces the time and expense typically
associated with traditional paper-based accessibility audits and it is
adaptable to a diverse set of environments, including office spaces, hotels
and retail banks. The funding will support Mobility Mojo in expanding its
marketing and sales teams, enhancing its SaaS platform with new AI-driven
capabilities and recruiting key talent to its leadership team.
Online travel operator
Much Better specialising in creating November 2024 1.25
Adventures unique 'adventure' group trips
Much Better Adventures (https://muchbetteradventures.com)) has developed a
reliable, engaging, user-friendly platform that resonates with customers. This
is reflected in the positive customer reviews and strong repeat rates. It has
built a strong organic search presence in the UK through a combination of a
high-quality website and social content, and curating trips that appeal to its
clear Ideal Customer Profile, a highly marketable segment that fits with the
product offering. With this investment the business will be robustly funded
with the ability to tune expenditure to market conditions.
Existing:
Company Business Period of Investment Amount of further investment (£m)
Branchspace Digital retail software November 2024 0.31
provider to aviation and
travel industry
Branchspace (https://www.branchspace.com/) is a well-established specialist
digital retailing consultancy and software provider to the aviation and travel
industry. Branchspace's offering helps customers to transform their technology
architecture to unlock best-in-class digital retailing capabilities, driving
distribution efficiencies and an improved customer experience. Across two
complementary service offerings Branchspace can effectively cover the entire
airline tech stack and has carved a defensible position as sector experts,
serving clients including IAG, Lufthansa and Etihad. This funding round which
was agreed at the time of the original transaction will seek to support its
growth plans.
Focal Point GPS enhancement December 2024 0.12
Positioning software provider
Azarc.io (https://azarc.io (https://azarc.io) ) specialises in business
process automation using distributed ledger technology. Its Verathread®
product has been applied to automating cross-border customs clearances, albeit
it has wider supply chain applications. Founded in 2021, Azarc successfully
secured British Telecom as a customer and a long-term strategic partner in the
UK and aims to improve inefficiencies over traditional paper-based customs
clearances for import and export trade. This investment will support the
company's growth trajectory with BT and expedite its expansion into
international import/export hubs through new partnerships.
Preservica Seller of proprietary digital archiving software December 2024 0.54
Preservica (https://preservica.com (https://preservica.com) ) 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. The business has seen annual
recurring revenues nearly double over the last two financial years. This
additional funding will give the business extra headroom to deliver 20-25% ARR
growth whilst seeking an exit in 2025.
Environmental, Social, Governance considerations
The Board and the Investment Adviser believe that the consideration of
environmental, social and corporate governance ("ESG") factors throughout the
investment cycle should contribute towards enhanced shareholder value.
The Investment Adviser has a dedicated team which is focused on sustainability
as well as the Investment Adviser's Sustainability Executive Committee who
provide oversight and accountability for the Investment Adviser's approach to
sustainability across its operations and investment practices. This is viewed
as an opportunity to enhance the Company's existing protocols and procedures
through the adoption of the highest industry standards. Each investment
executive is responsible for setting and achieving their own individual ESG
objectives in support of the wider overarching ESG goals of the
Investment Adviser.
The Investment Adviser's Private Equity division has its own Sustainable
Investment Policy, in which it commits to:
● Ensure its team understands the imperative for effective ESG
management and is equipped to support and training.
● Incorporate ESG into the monitoring processes of the unquoted
portfolio companies.
● Engage with the dedicated sustainable investment team and
conduct regular monitoring of ESG
risks, sustainability initiatives and performance in its investments.
Further detail on ESG can be found in the Chair's statement and in the
Director's Report in the Annual Report.
Outlook
Geo-political flux is likely to persist throughout 2025, although domestically
the economic landscape is expected to be on a surer footing. This environment
should also present attractive opportunities for your Company but, as a
selective investor, still has the advantage of being able to take a
longer-term view of both new and portfolio follow-on investments. The early
stage cohort of investments are taking on the challenges presented and are
expected to accelerate their funding plans, however this should also produce
attractive further investment opportunities.
The first Budget under the new Labour Government was held after the
year-end. Of particular note and concern for the portfolio and its
companies, there is an expected impact of increased Employer's National
Insurance contributions on portfolio companies.
Gresham House's seasoned investment managers and advisers are a vital source
of knowledge and experience available to support the Company's portfolio of
management teams. In this respect, Gresham House is well placed by having one
of the largest and most experienced portfolio teams in the industry with an
average of over 18 years' relevant industry experience.
Pleasingly, the portfolio continues to perform in delivering growth against a
challenging backdrop, although the early-stage companies will need careful
monitoring and guidance. The new and
further investment landscape should provide continued opportunities to expand
the portfolio with assets with the potential to generate strong returns for
investors. The Company's strong liquidity provides Gresham House with ample
capacity to fulfil these prospects.
Gresham House Asset Management Limited
Investment Adviser
13 January 2025
Annual General Meeting
The AGM will be held at 2.30 pm on Wednesday, 5 March 2025 at 1st Floor, 8
Fenchurch Place, London EC3M 4PB and will also be available by webcast for
those Shareholders who are unable to attend in person. Details of how to join
the meeting by virtual means will be shown on the Company's website.
Shareholders joining virtually should note you will not be able to vote at the
meeting and therefore you are encouraged to lodge your proxy form either by
returning their proxy form or voting on-line using the Vote Here button on the
Company's website: www.incomeandgrowthvct.co.uk
(http://www.incomeandgrowthvct.co.uk) . Directions to the AGM venue will be
available on the website.
For further details, please see the Notice of the Meeting which can be found
at the end of the Annual Report & Financial Statements.
Further Information
The Annual Report & Financial Statements for the year ended 30 September
2024 will be available shortly on www.incomeandgrowthvct.co.uk
(http://www.incomeandgrowthvct.co.uk) .
It will also be submitted shortly in full unedited text to the Financial
Conduct Authority's National Storage Mechanism and will be available for
inspection at National Storage Mechanism | FCA
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) in accordance with
DTR 6.3.5(1A) of the Financial Conduct Authority's Disclosure Guidance and
Transparency Rules.
Contact:
Gresham House Asset Management Limited
Company Secretary
mobeusvcts@greshamhouse.com (mailto:mobeusvcts@greshamhouse.com)
+44 20 7382 0999
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