REG - Mobeus Inc&Gwth 4 - Annual Financial Report
17/04/2024 07:01
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RNS Number : 8680K Mobeus Income & Growth 4 VCT PLC 17 April 2024
MOBEUS INCOME & GROWTH 4 VCT PLC
LEI: 213800IFNJ65R8AQW943
Annual Report & Financial Statements for the Year Ended 31 December 2023
Results Announcement
The Company announces the Annual Report and Financial Statements for the year
ended 31 December 2023 have been published on its website www.mig4vct.co.uk
(https://www.mobeusvcts.co.uk/investor-area/vct-investors/mobeus-income-growth-4-vct-plc)
. The results were approved by the Board of Directors on 16 April 2024.
The highlights Include:
As at 31 December 2023:
Net assets: £81.24 million
Net asset value ("NAV") per share: 73.09 pence
➤ Net asset value ("NAV") total return(1) per share was
5.0%(.).
➤ Share price total return(1) per share was 3.9%.
➤ Dividends paid in respect of the financial year totalled
11.00 pence per share. Cumulative dividends paid to date stand at 164.20 pence
per share.
➤ £4.76 million was invested into eight new growth capital
investments and four existing portfolio companies during the year.
➤ Net unrealised gains were £4.31 million in the year.
➤ The Company realised investments totalling £2.13 million
of cash proceeds and generated net realised gains in the year of £0.32
million.
(1) Definitions of key terms and alternative performance measures shown above
and throughout this report are shown in the Glossary of Terms.
Strategic Report
Chair's Statement
I am pleased to present the annual results for the Mobeus Income & Growth
VCT plc for the year ended 31 December 2023. Having been appointed as Chair
of the Board in May 2023, this is my first statement for the Annual Financial
Report.
Overview
The Company has seen continuing challenging UK economic conditions during this
financial year. Rising inflation and high interest rates have both impacted
consumer and business confidence which caused a general softening of trading
performance. Worldwide, central banks have been assessing the impact of their
rising rates and there are early signs that inflation is continuing, perhaps
more persistently than anticipated. Despite this and the confirmation that the
UK had entered into recession in the last quarter of 2023, stock market
multiples appear to have stabilised somewhat following the material downward
re-rating of growth stocks experienced over much of 2023 and a number of
portfolio companies have experienced good growth in the year. Positive NAV
performance was generated during the year, in particular over the last six
months of the year, from strong performance by a number of key assets and a
degree of resilience within the remainder of the portfolio.
The Company has continued to be an active investor and provided investment
finance to eight new companies during the year: Connect Earth; Cognassist;
Dayrize; Mable Therapy; Branchspace; Ozone Financial Technology; Azarc and
CitySwift. Follow-on investment activity continued with further investments
made during the year into Legatics, Orri, RotaGeek and FocalPoint.
Overall, the portfolio remains well funded and diversified, however, there are
three key assets which represent 47.3% of portfolio value. As is the nature of
growth assets, the risk of company failure is ever present. The Company has
strong liquidity to support the Investment Adviser's team who are actively
seeking opportunities within the existing portfolio and new investments.
The Board and Investment Adviser were pleased with the Chancellor's
confirmation in the Autumn Budget held on 22 November 2023, of the intention
to extend the sunset clause to 6 April 2035, meaning that future investors
will still benefit from the tax reliefs available from VCTs, subject to EU
approval. The risk of tax benefits being removed has subsequently been
reduced.
Performance
The Company's NAV total return per share increased by 5.0 % (2022: a fall of
15.5%) after adding back a total of 11.00 pence per share in dividends paid
during the year. The increase was principally the result of positive valuation
movements across the five largest investments by value, in particular,
Preservica, as well as higher interest income generated on cash held awaiting
investment. In addition, the successful portfolio exit of Tharstern Group
generated a positive net realised gain for the Company.
At the year-end, the Company was ranked 12th out of 37 Generalist VCTs over
three years, 3rd out of 36 Generalist VCTs over five years and 7th out of 30
over ten years in the Association of Investment Companies' ("AIC") analysis of
NAV Cumulative Total Return. 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 31 December 2023, or
those of our peers.
Dividends
The Board continues to be committed to providing an attractive dividend stream
to Shareholders and was pleased to announce an interim dividend of 5.00 pence
per share which was paid on 26 May 2023 to Shareholders on the register on 21
April 2023. A second interim dividend of 6.00 pence per share, was paid on 8
November 2023 to Shareholders on the register on 13 October 2023 and together,
this brings the total dividends paid in respect of the financial year ended 31
December 2023 to 11.00 pence per share. To date, cumulative dividends paid
since inception total 164.20 pence per share. The Company has now met or
exceeded the Board's dividend target of paying at least 4.00 pence per share
in respect of each financial year over the last ten years.
Post the year-end on 6 February 2024, the Company announced a 2.00 pence per
share dividend for the year ending 31 December 2024 that was paid on 22 March
2024 to Shareholders on the Register on 16 February 2024.
Please 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.
On 20 June 2023, the Board obtained Court approval to cancel the Company's
share premium reserve and capital redemption reserve. Subject to HMRC's Return
of Capital rules, this will enable additional distributable reserves to be
available for dividends and will help the Company to meet its dividend target
in future years.
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. As part of
the 5.00 pence per share dividend paid on 26 May 2023, 1,177,245 Ordinary
shares were allotted to participants of the DIS at a price of 74.83 pence per
share. For the further 6.00 pence per share dividend paid on 8 November 2023,
1,515,451 Ordinary shares were allotted at a price of 70.19 pence per share to
DIS members.
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.mig4vct.co.uk , or
alternatively, existing DIS members can opt-out by contacting the Company's
registrar, using their contact details provided under Corporate Information in
the Annual Report & Financial Statements.
Investment Portfolio
The portfolio movements across the year were as follows:
2023 2022
£m £m
Opening portfolio value 45.95 65.58
New and further investments 4.76 3.78
Disposal proceeds (2.13) (8.70)
Net realised gains 0.32 0.74
Valuation movements: unrealised 4.31 (15.45)
Net investment portfolio gains/(losses) 4.63 (14.71)
Portfolio value at 31 December 53.21 45.95
Notwithstanding the current challenging environment, a number of investee
companies have shown positive revenue growth over the year (e.g. Preservica,
MPB and Bella & Duke). Alongside the improvements in market multiples used
as the basis of the Company's valuations, this has driven the portfolio value
increase compared to last year. The overall value of the portfolio improved by
£4.63 million, or 10.1 %, on a like for like basis (adjusted for new
investments in the year) compared to the opening value of the portfolio at 1
January 2023 of £45.95 million (2022: £65.58 million, or (22.4)%).
At the year-end, the portfolio was valued at £53.21 million (1 January 2023:
£45.95 million). The portfolio's value is now substantially comprised of
growth capital investments at 94.4% (2022: 89.8%). Over 55% of the portfolio's
value is comprised of the Company's largest five assets by value, with
Preservica accounting for c.28%. The Investment Adviser closely monitors these
higher value assets as part of its risk mitigation measures. The VCT's
portfolio valuation methodology has continued to be applied consistently and
in line with IPEV guidelines. During the year, this was triangulated with an
independent valuation, which was commissioned for Preservica and Bella &
Duke. The intention is that the valuation of the larger investee companies
will be externally benchmarked over the course of the next year.
During the year, the Company invested a total of £4.76 million (2022: £3.78
million) into new and existing portfolio investments. New investments
totalling £4.01 million (2022: £2.03 million) were made into eight new
investments:
Connect Earth £0.25 million Environmental data provider
Cognassist £0.50 million Education and neuro-inclusion solutions business
Dayrize £0.46 million Provider of a rapid sustainability impact assessment tool
Mable Therapy £0.40 million Therapy & counselling for children and young adults
Branchspace £0.39 million Digital retailing consultancy and software provider to the aviation and travel
industry
Ozone £1.08 million Open banking software developer
Azarc £0.38 million Cross-border customs automation software provider
CitySwift £0.55 million Passenger transport data and scheduling software provider
The Company also invested a total of £0.75 million (2022: £1.75 million)
into four existing portfolio companies during the year:
Legatics £0.33 million SaaS LegalTech software provider
Orri £0.13 million Intensive day care provider for adults with eating disorders
RotaGeek £0.16 million Provider of cloud-based enterprise software
FocalPoint £0.13 million GPS enhancement software provider
The Company received £2.13 million in proceeds from the realisation of
Tharstern Group, generating a realised gain of £0.49 million. Over the life
of this investment, the Company has received total proceeds of £3.01 million
which equates to a multiple on cost of 2.6x and an IRR of 15.0%.
I reported in the Half-Year Report on HMRC's recent stricter interpretation of
the Financial Health Test. Additional guidance has since been published on
this matter which outlines that each potential new VCT investment will be
assessed independently based on the specific financial circumstances of the
investee company. Although it will take time to see these assessments in
action, this updated guidance and expected increased flexibility is a welcome
development. The Board, AIC and Venture Capital Trust Association will
continue to monitor this.
Further details of the Company's 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 & Financial Statements.
Since the year-end, the Company invested £0.47 million into My Tutor, an
existing investment company, and completed the sale of Master Removers Group,
securing a 3.3x return against cost over the life of the investment which
could increase to 3.4x if further deferred proceeds are received. The
valuation of Master Removers Group at 31 December 2023 materially reflets cash
proceeds receivable after the year end. The Company also made a new investment
of £0.6 million into SciLeads Limited in March 2024 and £0.06 million
investment into existing investment company, Orri Limited, also in March 2024.
Liquidity & Fundraising
Cash and liquidity fund balances as at 31 December 2023 amounted to £28.08
million representing 34.6% of net assets. Following the dividend payment on 22
March 2024, this has decreased to £26.23 million, or 33.0 % of net assets.
The majority of cash resources are held in liquidity funds with AAA credit
ratings, the returns on which have benefitted from the increases in interest
rates over the past year 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.
Following the success of the two offers launched in 2022 for the 2021/22 and
2022/23 tax years, the Company has since benefited from strong levels of
liquidity available for new investment opportunities as well as funding
further expansion of the businesses within its investment portfolio. These
liquid funds also aid the Company's ability to deliver attractive returns for
its Shareholders by way of the payment of dividends over the medium term, and
buy back its shares from those Shareholders who may wish to sell. The Board
decided not to fundraise in the 2023/24 tax year, however the Board will
consider later in the year whether to offer a fundraising for the 2024/25 tax
year.
Share buybacks
During the year, the Company bought back and cancelled 1,916,726 of its own
shares (2022: 1,796,536), representing 1.8% of the shares in issue at the
beginning of the year (2022: 2.2%), at a total cost of £1.37 million,
inclusive of expenses (2022: £1.46 million). It is the Company's policy to
cancel all shares bought back in this way. The Board regularly reviews its
buyback policy and currently seeks to maintain the discount at which the
Company's shares trade at no more than 5% below the latest published NAV.
Board Composition
At the start of the year under review, the Board comprised of four directors.
Jonathan Cartwright retired as Chair and a Non-Executive Director after the
Annual General Meeting in May 2023 and I was appointed Chair of the Board with
immediate effect. I would like to once again thank Jonathan for all his hard
work and service to the Company. As previously announced, Lindsay Dodsworth
joined the Board on 1 January 2023. The Board has consisted of three directors
since May 2023 to date.
Shareholder Communications & Annual General Meeting
May I remind you that the Company has its own website: www.mig4vct.co.uk.
The Investment Adviser held another 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/.
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 Monday, 20 May 2024 on the
2(nd) floor, Central Point, 35 Beech Street, London EC2Y 8AD which is a
three-minute walk from Barbican Tube Station on the Circle, Metropolitan and
Hammersmith & City tube lines. The Board is aware that a number of
Shareholders hold shares in the Company and another Mobeus VCT, Mobeus Income
& Growth 4 VCT plc (MIG4). Given the common financial year-ends, the
Boards of the companies decided to hold both AGMs on the same day with a
presentation from the companies' Investment Adviser taking place between the
two meetings, during which a light lunch will be available. The MIG VCT AGM
will take place earlier on 20 May 2024 commencing at 1.00 pm and will be
followed by the joint Investment Adviser presentation at 1.30 pm. Shareholders
are welcome to join us for the Investment Adviser presentation if not already
attending the earlier MIG VCT AGM.
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 16 May 2024.
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. 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 Dis-application of Pre-emption Rights Resolution
At the Annual General Meeting of the Company held on 24 May 2023, over 20% of
the votes received were lodged against the resolution to approve the
disapplication of pre-emption rights. The same also occurred at the October
2022 General Meeting when the composite resolution received over 20% of votes
Against.
As required under the AIC Code of Corporate Governance Code, those
Shareholders that voted against the resolutions were contacted in July and
October 2023 to ascertain the background and reasons for their vote. I thank
the Shareholders who kindly responded to my request with their reasons for
voting against the resolutions. From the responses, it was clear that the key
factor was Shareholders' concern about new shareholders being added to the
Register of Members, thereby diluting current Shareholders' holding and
potential dividend income. By the issuance of shares to new investors, this:
● allows the Company to continue to take advantage of new investment
opportunities and to support existing portfolio companies as deemed
appropriate;
● maximises the pool of potential VCT investors thereby increasing the
probability that the full offer amount is raised; and
● seeks the delivery of attractive returns for its Shareholders, including
the payment of dividends over the medium-term.
One Shareholder also responded on the dilutive effect that raising excess cash
had on Shareholders. The Board is of the opinion that the benefit to the
Company's Shareholders in having sufficient liquidity to meet its investment
objectives and the potential to generate enhanced returns in the future, as
well as the ability to make dividend payments, greatly outweighs any potential
short-term dilutive impact of individual shareholder returns. Your Board has
received many enquiries as to when the Company will likely be fundraising
again and understands that the Company's Shareholders would like to invest
further in the Company. However, the Board only considers launching a
fundraise when forecasts show it necessary to take advantage of new
investments and/or follow on investments into the existing portfolio companies
to assist with their growth as well as meeting the running costs and managing
the buyback policy of the Company. The Board reviews the Company's liquidity
levels at each quarterly Board meeting.
It should be noted that some of the Company's largest Shareholders voted
Against the resolutions and have responded that they will continue to do so
which will most likely lead to the votes against the dis-application rights
resolution receiving over 20% of votes Against at all future meeting. As a
result, the course of action described above and in accordance with the AIC
Corporate Governance Code, will continue to be followed and Shareholders
contacted following each vote.
We will once again, at the Annual General Meeting of the Company in May 2024,
propose a resolution to dis-apply pre-emption rights.
Mobeus VCTs Merger Discussions
As per the announcement on 28 February 2024, the Company entered into
discussions to merge the four Mobeus VCTs into two VCTs (Mergers) to achieve,
amongst other things, cost savings, administration efficiency and simplicity.
If the Mergers do proceed, the current intention is that the Company would
merge with The Income & Growth VCT plc ("I&G") under a scheme of
reconstruction (s110 of the Insolvency Act 1986) with the assets and
liabilities of the Company being transferred to I&G in consideration for
shares being issued to the Company's Shareholders on a relative net asset
basis. It is also proposed that Mobeus Income & Growth VCT plc and Mobeus
Income & Growth 2 VCT plc should merge. Please note that a merger solely
on this basis would be outside the provisions of The City Code on Takeovers
and Mergers. If the Boards agree, shareholder approval of a merger would be
sought from Shareholders in both companies at a General Meeting of each
company. Your Board is aware that a number of Shareholders have holdings in
both/all of the companies. Once a decision has been reached by each of the
four Mobeus VCT Boards, the outcome will be communicated to Shareholders.
Change of Registrar
On 4 December 2023, the Company, along with the three other Mobeus VCTs,
changed its Registrar to City Partnership (UK) Limited ("City") bringing all
four VCTs under one Registrar for the first time. The Board believes the move
has brought additional benefits to Shareholders including the ability to
access multiple Mobeus and Baronsmead VCT shareholdings in one place using
City's online portal, the Hub.
Shareholders are encouraged to register their email address with City via the
Hub portal or by calling them to reduce the printing/posting costs of the
Company. Further details can be found in the Corporate Information section of
the Annual Report & Financial Statements.
Co-investment Scheme
The Board is keen to ensure that the Investment Adviser retains a motivated
and incentivised investment team which can generate attractive future returns
for the Company. To improve the alignment of interests with shareholders, on
26 July 2023, the Boards of the four Mobeus VCTs released a joint announcement
detailing the adoption of a Co-investment incentive scheme ("the Scheme")
under which members of the Investment Adviser's VCT investment and
administration team will invest their own money into a proportion of the
ordinary shares of each investment made by the Mobeus VCTs (the co-investment
under the Scheme will represent 8% of the four VCTs' overall ordinary share
investment in an investee company).
The Scheme will apply to investments made on or after 26 July 2023, such
co-investment to be at the same time and on substantially the same terms as
the investment by the Mobeus VCTs. The Board will keep the Scheme arrangements
under regular review.
Acquisition of Investment Adviser, Gresham House
Further to the announcement on 17 July 2023 on the acquisition of the
Investment Adviser by Searchlight Capital Partners L.P., the acquisition has
now completed, and Gresham House plc delisted from the London Stock Exchange
on 20 December 2023, to become a privately owned company. The acquisition is
expected to have minimal impact on the Company and business is continuing as
usual.
For further information please visit the website link:
https://greshamhouse.com/ about/
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 does not
therefore 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
has worked with the Investment Adviser on the information now available to
assist consumers and their advisers to discharge their obligations under
Consumer Duty.
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 of the Annual Report & Financial
Statements.
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 more 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 2024.
The future FCA reporting requirements consistent with the Task Force on
Climate-related Financial Disclosures, which commenced on 1 January 2021, do
not currently apply to the Company but will be kept under review, the Board
being mindful of any recommended changes.
Outlook
The geopolitical and economic context for the next year is liable to be
challenging although this can also provide an opportunity for the Company to
make high quality investments and build strategic stakes in businesses with
great potential for the future.
Notwithstanding the recent MRG exit, the exit environment will most likely be
subdued in comparison to recent years. However, this is not seen as a
significant issue given that the Company is not time limited. The combined
impact of inflation, interest rates and restrictions in Government spending
can be expected to impact both consumer and business confidence. We therefore
anticipate that further stresses will become evident across the UK business
population over the forthcoming year. We expect that all sectors will be
vulnerable, although the Company has a reasonably large and diverse portfolio,
managed by a professional and capable investment team, will help to mitigate
the challenges that lie ahead. Your Board is however, expecting a period of
uncertainty ahead of an upcoming election in the UK, and whatever the outcome,
we hope the investment climate continues to present attractive opportunities.
I would like to take this opportunity once again to thank all Shareholders for
their continued support.
Graham Paterson
Chair
16 April 2024
Investment Adviser's Report
Portfolio Review
The difficult UK and worldwide economic conditions are creating challenging
circumstances for our growth companies although some stability is now being
seen in market multiples compared to the previous year. Inflation is proving
more stubborn than hoped and has since ticked up again since the year-end in
the US, UK and eurozone fuelled by wage settlements, oil prices and supply
chain issues stemming from geo-political tensions in the Gulf. Such
macro-economic conditions have not been faced by management teams in a
generation, however Gresham House's experienced Non-Executive Directors and
consultants continue to support the portfolio's companies during these
turbulent times.
Strong cash management and capital efficiency is the key focus for our
portfolio directors' management teams. With ample liquidity following the
fundraises in 2022, the Company is very well placed to support portfolio
companies with follow-on funding where it is appropriate and can be structured
on attractive terms. Strong liquidity also benefits the new investment
environment for the Company which, in our view, is robust as we are seeing
several interesting investment propositions, albeit mainly in competition with
other VCTs who face similar deployment challenges in a market which is
generally accepted to be c. 35% down as regards new investment opportunities.
Trading conditions for the portfolio remain tough across most sectors as both
companies and consumers continue to restrain their spending. Certain sectors
remain under particular pressure, be it end product or as part of the supply
chain. In terms of portfolio assets, this is seen mainly in areas such as
products (e.g. Wetsuit Outlet, Buster and Punch) and software and services
(e.g. Bidnamic, Proximity) in so far as they relate to the consumer sector.
The direct impact of high interest rates on the Company's portfolio is
appropriately limited because most portfolio companies do not have any
significant third-party debt. The outlook is therefore mixed, with the
emphasis on robust funding structures and preparation for all circumstances.
The current environment poses particular
challenges for the smallest companies who are attempting to prove nascent
business models. Against this backdrop, most of the recent cohort of earlier
stage investments are behind original investment case but continue to make
slow but steady progress. They are steadily building out their pipelines and
capability as they balance investment with the rate of commercial development.
After several quarters of slippage, it is pleasing to see several of this
group starting to secure cornerstone contracts. 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 our
view, this is not necessarily a bad thing in terms of deployment and amassing
more significant stakes on potentially more advantageous terms. Though there
may be some pain points to work through, with this should come enhanced
influence and control.
The portfolio movements in the year are summarised as follows:
2023 2022
£m £m
Opening portfolio value 45.95 65.58
New and follow-on investments 4.76 3.78
Disposal proceeds (2.13) (8.70)
Net investment portfolio movement in the year 4.63 (14.71)
Portfolio value at 31 December 53.21 45.95
Despite concerns about the wider trading environment, the portfolio's largest
investments have experienced some strong revenue growth, which has underpinned
a positive return over the second half of the Company's financial year.
Preservica continues to see strong trading and is outperforming its budget,
giving a material uplift in its valuation. MPB Group continues to grow its
revenue line and there are potentially material developments expected at
Active Navigation. Veritek Global, an historic MBO investment, has started to
see material traction having pivoted its business model in recent years.
The successful exit of Master Removers Group after the year-end in February
2024 also provided up to a 3.4x multiple of cost and an IRR of over 26% over
the life of the investment. 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.
By contrast however, there were also some larger portfolio value falls such as
MyTutor, Bleach, and Wetsuit Outlet which continue to experience challenging
trading conditions. The portfolio companies are now more focussed on
establishing a path to profitability. AIM-listed Virgin Wines continues to be
at the behest of market movements despite releasing results in line with
expectations. Disappointingly, after experiencing very difficult trading
conditions, Tapas Revolution entered administration during the year with no
expected recovery for the Company.
The Company made total investments of £4.76 million during the year
comprising eight new growth capital investments totalling £4.01 million and
four follow-on investments totalling £0.75 million. Further details of these
investments are below. After the year-end, further follow-on investments were
made into MyTutor and Orri and a new investment was made into SciLeads.
The portfolio's valuation changes in the year
are summarised as follows:
Investment Portfolio Capital Movement 2023 2022
£m £m
Increase in the value of unrealised investments 8.89 1.08
Decrease in the value of unrealised investments (4.58) (16.53)
Net (decrease)/increase in the value of unrealised investments 4.31 (15.45)
Realised gains 0.49 1.18
Realised losses (0.17) (0.44)
Net realised gains in the year 0.32 0.74
Net investment portfolio movement in the year 4.63 (14.71)
New Investments during the year
The Company made eight new investments totalling £4.01 million during the
year, as detailed below:
Company Business Date of Investment Amount of new investment (£m)
Connect Earth Environmental data provider March 2023 0.25
Founded in 2021, Connect Earth (https://connect.earth/) is a London-based
environmental data company that seeks to facilitate easy access to
sustainability data. With its carbon tracking API technology, Connect Earth
supports financial institutions in offering their customers transparent
insights into the climate impact of their daily spending and investment
decisions. Connect Earth's defensible and scalable product platform suite has
the potential to be a future market winner in the nascent but rapidly growing
carbon emission data market, for example, by enabling banks to provide end
retail and business customers with carbon footprint insights of their
spending. This funding round is designed to facilitate the delivery of the
technology and product roadmap to broaden the commercial reach of a proven
product development as well as international growth.
Cognassist Education and neuro-inclusion solutions March 2023 0.50
Cognassist (https://cognassist.com/) is an education and neuro-inclusion
solutions company that provides a Software-as-a- Service (SaaS) platform
focused on identifying and supporting individuals with hidden learning needs.
The business is underpinned by extensive scientific research and an extensive
cognitive dataset. Cognassist has scaled its underlying business within the
education market. This investment will empower Cognassist to continue its
growth within education and penetrate the enterprise market, where demand for
neuro-inclusive employee support solutions is rapidly emerging.
Dayrize A provider of a rapid sustainability impact assessment tool May 2023 0.46
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 drive product development and develop its
market strategy to build on an opportunity to emerge as a market leader in the
industry.
Mable Therapy Digital health platform for speech therapy and counselling for children and July 2023 0.40
young adults
Based in Leeds, Mable (https://www.mabletherapy.com/) is the UK's leading
digital health platform for speech therapy and counselling for children and
young adults. All sessions are undertaken live with qualified paediatric
therapists, and Mable uses gamification (games, activities and other
interactive resources) to provide improved therapeutic outcomes in a
child-friendly environment. This is a significant and growing area of need,
with 1.4 million children in the UK with long-term speech, language or
communication needs - Mable has the potential to transform the lives of
children in their crucial early stages of development. The funding will be
used to accelerate growth in existing B2C and B2B customer groups as well as
capitalising on new, potentially significant, routes to market.
Branchspace Digital retail software provider to aviation and travel industry August 2024 0.39
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 will
seek to accelerate product development, increasing the customer reach of their
SaaS offering to establish itself as the leading choice for airline digital
retailing solutions.
Ozone API Open banking software developer December 2023 1.08
Ozone Financial Technology Limited (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.
Azarc Cross-border customs automation software provider December 2023 0.38
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.
CitySwift Passenger transport data and scheduling software provider December 2023 0.55
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.
A total of £0.75 million was invested into
four existing portfolio companies during the year, as detailed below:
Company Business Date of Investment Amount of new investment (£m)
Legatics SaaS LegalTech software July 2023 0.33
Legatics (https://www.legatics.com/) transforms legal transactions by enabling
deal teams to collaborate and close deals in an interactive online
environment. Designed by lawyers to improve legacy working methods and solve
practical transactional issues, the legal transaction management platform
increases collaboration, efficiency and transparency. As a result, Legatics
has been used by around 1,500 companies, and has been procured by more than
half of the top global banking and finance law firms, with collaborations
having been hosted in over 60 countries. This funding round will provide
headroom to further accelerate growth in sales via marketing as well as
increasing product development.
Orri Specialists in eating disorder support August 2023 0.13
Orri Limited (https://www.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, together with outpatient services. Orri currently operates two
sites in central London.
RotaGeek Provider of cloud-based enterprise software May 2023 0.16
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.
FocalPoint GPS enhancement software provider December 2023 0.13
Focal Point Positioning Limited (https://focalpointpositioning.com/) is a
deeptech 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.
Valuation changes of portfolio investments still held
The total valuation increases were: £8.89 million, with the main increases
being:
Preservica: £3.77 million
MPB Group: £1.70 million
Active Navigation: £0.61 million
Veritek Global: £0.60 million
Preservica continues to perform well and is improving recurring revenues.
MPB's revenue growth continues alongside demand for its platform. Active
Navigation is gaining traction for its incident response offering. Veritek has
pivoted its business model and is now generating material growth in its
revenues.
The main reductions within total valuation decreases of £4.58 million were:
MyTutor: £(1.36) million
Virgin Wines: £(0.83) million
Bleach London: £(0.80) million
Wetsuit Outlet: £(0.48) million
MyTutor has been impacted by declining sector multiples combined with slower
than anticipated growth over the year. Despite Virgin Wines, a listed company
on AIM, trading in line with expectations, market sentiment remains largely
negative towards companies in this sector. Bleach is trading behind budget,
but has recently received third party funding to support its cash position.
Wetsuit Outlet is being materially impacted by the decline in consumer
spending.
The Company's investment values have been partially insulated from market
movements and lower revenue growth by the preferred investment structures
utilised in many of the portfolio companies. This acts to moderate valuation
swings and the net result can be more modest falls when portfolio values
decline.
Other gains/(losses) during the year
The Company realised a £0.49 million gain from the exit of Tharstern Group.
Two companies were written down resulting from poor trading. These were SEC
Group Limited (formerly RDL Corporation Limited), resulting from a
restructuring and Spanish Restaurant Group which entered administration during
the year.
Realisations during the year
The Company completed one exit during the year, as detailed below:
Company Business Period of Total cash proceeds over the life of the investment/
Investment Multiple over cost
Tharstern Software based management information systems July 2014 to March 2023 £3.79 million
2.6x cost
The Company realised its investment in Tharstern Group for £2.13 million
(realised gain in year: £0.49 million). Total proceeds received over the life
of the investment were £3.01 million compared to an original cost of £1.16
million, representing a multiple on cost of 2.6x and an IRR of 15.0%.
Portfolio income and yield
In the year under review, the Company received the following amounts in
income:
Investment Portfolio Yield 2023 2022
£m £m
Loan interest received in the year 0.42 0.71
Dividends received in the year 0.08 0.93
OEIC and bank interest in the year 1.66 0.38
Total income in the year 2.16 2.02
Net Asset Value at 31 December 81.24 83.54
Portfolio Income Yield (Income as a % of Portfolio value at 31 December) 2.7% 2.4%
Investments after the year end
The Company made one new and two further investments totalling £1.13 million
after the year-end, as detailed below:
New:
Company Business Date of investment Amount of new
Investment (£m)
SciLeads Digital platform within life science verticals March 2023 0.60
Based in Belfast, SciLeads Limited (https://scileads.com
(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 to £4.4mn (+50% this year)
and this investment will be used to accelerate new customer acquisition and
professionalise the product and customer success functions to unlock up and
cross-sell opportunities within the existing customer base.
Existing:
Company Business Date of investment Amount of further investment
Orri Specialists in eating order support March 2024 0.06
Orri Limited (https://www.orri-uk.com/ (https://www.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, together with outpatient services. Orri currently
operates two sites in central London.
MyTutor Digital marketplace for online tutoring January 2024 0.47
MyTutorweb (trading as MyTutor) (https://www.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, alongside other existing shareholders and Australian strategic
co-investor, SEEK, aims to build and reinforce its position as a UK category
leader in the online education market. This additional funding will give the
business extra headroom to support its more focused product and growth
strategy.
Realisation after the year-end
Company Business Period of investment Total cash proceeds over the life of the investment / Multiple over cost
Master Removers Group A specialist logistics, storage and removals business December 2014 to February 2024 £5.52 million
3.3x cost
The Company sold its investment in Master Removers Group (2019) Limited
("MRG") to Elanders AB and alongside this, sold its shares in MRG's domestic
removals business to management. The Company received £2.91 million from the
sale. Further sale and contingent proceeds of up to £0.55 million are
receivable at a later date under the terms of the transaction. Total proceeds
received to date over the life of the investment are £5.52 million compared
to an original investment cost of £1.69 million, representing a multiple on
cost of 3.3x and an IRR of 26.2%. This may increase to 3.4x as further
proceeds are received.
Environmental, Social and 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. More
ESG information can be found in the Chair's Statement above and the Directors'
Report in the Annual Report & Financial Statements.
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 carry this out through management
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 within the Annual Report & Financial Statements.
Outlook
As geo-political tensions persist into 2024, much of the world is preparing
for elections and the "higher for longer" mantra is again being applied to
interest rates, the number of UK businesses experiencing financial stress is
set to increase. This will impact all sectors and businesses to varying
degrees and may present attractive opportunities for a selective investor with
the advantage of being able to take a longer-term view, such as your Company.
However, the economic backdrop will also impact our existing portfolio
companies and would present a challenge to less experienced management teams
and their advisers. Markets are volatile and uncertain and business planning
is acutely difficult. As such, the experience of seasoned investment managers
will be increasingly important in the coming year as they seek to support
their portfolio management teams in navigating through some particularly
challenging short-term trading conditions. In this respect, Gresham House
feels well placed in having one of the largest and most experienced portfolio
teams in the industry with an average of over 18 years' of relevant industry
experience. The Company has ample liquidity to provide further support to its
portfolio businesses through this period and is keen to make such investments
where there is a commercial case to do so over the medium to long-term.
Gresham House Asset Management Limited
Investment Adviser
16 April 2024
Annual General Meeting
The AGM will be held at 2.30 pm on Monday, 20 May 2024 on the 2(nd) floor,
Central Point, 35 Beech Street, London EC2Y 8AD and will also be 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. 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 31 December
2023 will be available shortly on the Company's website: www.mig4vct.co.uk
(https://www.mobeusvcts.co.uk/investor-area/vct-investors/mobeus-income-growth-4-vct-plc)
.
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 data.fca.org.uk/#/nsm/nationalstoragemechanism
(http://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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