REG - Mobeus Inc&Gwth - Annual Financial Report
04/04/2023 18:15
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RNS Number : 3845V Mobeus Income & Growth VCT PLC 04 April 2023
MOBEUS INCOME & GROWTH VCT PLC
LEI: 213800HKOSEVWS7YPH79
Annual Report & Financial Statements for the Year Ended 31 December 2022
Results Announcement
The Company has today published on its website Mobeus Income & Growth VCT
plc
(https://www.mobeusvcts.co.uk/investor-area/vct-investors/mobeus-income-growth-vct-plc)
the Annual Report and Financial Statements for the year ended 31 December
2022.
The highlights Include:
As at 31 December 2022:
Net assets: £100.32 million
Net asset value ("NAV") per share: 64.01 pence
➤ Net asset value ("NAV") total return(1) per share was
(15.8)%(2).
➤ Share price total return(1) per share was (8.8)%(3).
➤ Dividends paid and declared in respect of the financial
year totalled 8.00 pence per share. Cumulative dividends paid to date since
inception in 2004 stand at 156.80 pence per share.
➤ £4.71 million was invested into four new growth capital
investments and six existing portfolio companies during the year.
➤ Net unrealised losses were £(19.52) million in the year.
➤ The Company realised investments totalling £11.27 million
of cash proceeds and generated net realised gains in the year of £0.96
million.
(1) Definitions of key terms and alternative performance measures shown above
and throughout this report are shown in the Glossary of Terms.
(2) Further details on the NAV total return are shown in the Performance and
Key Performance Indicators section of the Strategic Report.
(3) The difference in NAV and share price total returns arises principally due
to the timing of NAV announcements.
Strategic Report
Chairman's Statement
I am pleased to present the annual results for the Mobeus Income & Growth
VCT plc for the year ended 31 December 2022.
Overview
The Company's financial year took place against a backdrop of significant
political and economic disruption. The end of 2021 represented a high point
for many technology and growth markets which were subsequently impacted by
global events such as the Russian invasion of Ukraine, political turmoil in
the UK and across Europe as well as rising inflation and the associated
increase in interest rates. All of this has led to increased volatility and
a substantial downward re-rating of growth stocks across global markets.
It appears that we are learning to live with higher inflation and the
Russian/Ukraine war as these have now morphed from one-off shocks to become
daily reality. Since the year-end, inflation has moderated somewhat and,
against predictions, the UK economy also narrowly avoided recession. The
forecast for 2023 however is that the UK will still probably enter recession,
although it may be somewhat less severe than had been expected. This will
likely result in additional challenges for your portfolio companies,
particularly in respect of inflation and dampened customer demand. Your
Company is well prepared for most scenarios with its strong liquidity
available to support the portfolio and through extensive planning and
preparation by Gresham House with each of the portfolio companies' management
teams. The Company has continued to provide finance to new and existing
investee companies and delivered two notable exits during the year in the form
of Media Business Insight (MBI) and Equip Outdoor Technologies (EOTH). The
recent equity disposal of EOTH in November was a particular high point as we
anticipate a quieter exit environment during 2023 than in previous years.
The Board was pleased to learn of the commitment from the UK Government to
extend the VCT 'sunset clause' beyond the end date of 5 April 2025, although
Shareholders should note the VCT industry has seen no further detail provided
to date and any extension will most likely require parliamentary approval.
This clause was due to expire in 2025 and would have meant that investor
income tax relief would have no longer been available on new VCT
subscriptions.
Performance
For the year ended 31 December 2022, the Company experienced a negative NAV
total return per share of (15.8)% (2021: +42.2%) and a negative share price
total return of (8.8)% (2021: +47.8%). This difference in difference in NAV
and share price total returns arises principally due to the timing of NAV
announcements and is explained more fully under Performance in the Strategic
Report.
The reduction in shareholder value over the financial year resulted from falls
in the valuation of the portfolio. This was driven initially by lower
benchmark market comparables and, more recently, also by softening trading
performance of investee companies. This timing differential is due to markets
very quickly factoring in the impact of inflation and higher interest rates on
consumer spending and business investment. The full extent of the impact of
these on portfolio company trading will only emerge over time.
At the year-end, the Company was ranked 1st over both five and ten-year
periods (out of 37 and 31 Generalist VCTs respectively) in the Association of
Investment Companies' analysis of NAV Total Return (assuming dividends are
reinvested). Shareholders should note that the AIC's rankings are based on the
latest available published NAVs and therefore do not fully reflect the NAV per
share decrease up to 31 December 2022. For further details on the performance
of the Company, please refer to the Strategic Report.
Dividends
The Board endeavours to meet the Company's annual dividend target of at least
4.00 pence per share and provide an attractive income stream to Shareholders.
The Board was pleased to have announced a second interim dividend of 4.00
pence per share, which was paid on 7 November 2022 to Shareholders on the
register on 16 September 2022.
This second interim dividend, together with a first interim dividend of 4.00
pence per share paid on 15 July 2022, to Shareholders on the register on 10
June 2022, brings dividends paid and proposed in respect of the financial year
ended 31 December 2022 to 8.00 pence per share. To date, cumulative dividends
paid since inception are 156.80 pence per share.
As reported in previous years, the continuing move of the portfolio towards
younger growth capital investments coupled with the realisations of older,
more mature companies that have provided a good income yield, are likely to
make dividends harder to achieve from income and capital returns generated in
any given year. Thus, the Board continues to monitor the sustainability of
the annual dividend target. Shareholders should also note that there may
continue to be circumstances where the Company is required to pay dividends in
excess of income and capital gains 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.
Following a query at the Annual General Meeting held in May 2022, the Board
would like to inform Shareholders that it periodically considers the potential
for the Company to operate a Dividend Investment Scheme. In line with previous
considerations, the Board has concluded that the costs still outweigh the
potential benefit to Shareholders and to the Company.
Investment Portfolio
The portfolio movements across the year were as follows:
2022 2021
£m £m
Opening portfolio value 79.81 51.14
New and further investments 4.71 7.54
Disposal proceeds (11.27) (15.23)
Net realised gains 0.96 5.45
Valuation movements (19.52) 30.91
Net investment portfolio (losses)/gains (18.56) 36.36
Portfolio value at 31 December 54.69 79.81
In the current changing environment, a number of investee companies
experienced a decline in consumer confidence with a resultant impact on
trading. There was a fall of £18.56 million in the overall value of the
portfolio across the year to 31 December 2022 (2021: increase of £36.36
million), or a fall of (23.2)% on a like-for-like basis compared to the value
of the portfolio at the start of the year. Notably, almost half of the fall
of £18.56 million above relates to Virgin Wines which declined by £8.71
million. Virgin is an AIM-listed investment, which has suffered from the
negative sentiment of its sector, in spite of broadly positive news flows from
the company itself and relative outperformance versus its peers.
The negative NAV total return for the year principally comprised unrealised
falls in the value of investments still held of £19.52 million (primarily
Virgin Wines, MyTutor and Buster & Punch) partially mitigated by an uplift
of Tharstern together with exit proceeds from EOTH and MBI which contributed
to net realised gains of £0.96 million.
During the year, the Company invested a total of £4.71 million into four new
and six existing portfolio companies (2021: £7.54 million; four new, eight
existing). New investments totalling £2.44 million were made into:
Proximity Insight retail technology software;
Bidnamic a marketing
technology business;
FocalPoint a GPS
enhancement software supplier; and
Orri
an intensive day care provider for adults with eating disorders
Additional funding totalling £2.27 million was provided across six existing
portfolio companies:
Caledonian Leisure: a provider of UK leisure and experience
breaks;
Northern Bloc: a dairy and allergen-free ice
cream brand;
Rotageek: a workforce
management software system;
Andersen EV: a provider of premium EV
chargers;
Vivacity
: an AI and Urban
Traffic Control business; and
Bleach London: a hair colourants brand
The Company generated a total of £10.66 million in proceeds from full and
partial realisations alongside loan repayments and other capital receipts of
£0.61 million. The Company therefore generated total proceeds of £11.27
million in the year to 31 December 2022. More detail on these realisations is
provided.
In June 2022, the Company realised its investment in MBI generating proceeds
of £4.83 million from the sale (including deferred proceeds and loan
repayments made earlier in the year) resulting in a realised gain in the year
of £0.54 million. This exit contributed to returns received over the life of
the investment amounting to £7.36 million, a 2.2x multiple of cost and an IRR
of 13.8%.
In October 2022, Andersen EV, the electric charger provider, was compelled to
enter into administration as a result of a substantial deterioration in its
trading conditions which resulted in a realised loss of £(0.61) million being
recognised during the year. This was particularly disappointing as the
Company, alongside the other Mobeus VCTs, made a follow on investment into the
company in May 2022. The company had secured some impressive clients and
funding was provided to drive product development in a premium brand which
operated in the emerging electric car charging market. However, over the
summer months, a combination of global supply issues, inflationary cost
increases and the removal of Government consumer support for the purchase of
EV chargers quickly impacted its ability to continue trading and so
necessitated the appointment of administrators. On 22 December 2022, Parsley
Box Group PLC delisted from the AIM market and the shares were cancelled. It
has subsequently re-registered as a private company.
The end of the year brought the pleasing exit of the equity in EOTH, trading
as Rab and Lowe Alpine, with amounts received on completion totalling £6.89
million including preference share dividends, generating a realised gain in
the year of £0.49 million. Total proceeds received over the life of this
investment are £8.96 million to date, a 6.9x multiple of cost and an IRR of
23.2%. The Company has retained its interest yielding loan stock to continue
to generate income in the future.
Deferred proceeds from Red Paddle and Vectair were also received in the year;
both investments were realised in a previous year generating realised gains
totalling £0.55 million.
During these uncertain times, the management of the portfolio is absolutely
critical and the Investment Adviser is, and has been, focused on deploying its
Talent Management team to support its investments. We continue to expect
follow-on investments to remain a significant feature of growth capital
investments as they seek to achieve scale and move to profitability. Follow-on
investment requests are subject to the same scrutiny as new deals and both
rely on certain criteria being met, including the HMRC Financial Health Test.
Shareholders should be aware that this is an effective tightening of the
interpretation of HMRC policy and practice in a technical aspect of the VCT
financing rules, now resulting in the restriction of potential follow-on
investments to support certain companies, where more than half their
subscribed share capital has been lost. In a small number of cases, this may
result in the Company not being able to make follow-on investments, even where
a compelling business case exists, which in turn could impact the prospects of
the portfolio company. The Board continues to monitor developments in the
interpretation of this area of legislation carefully.
Since the year-end, the Company has invested £0.89 million into two new
investment companies, Connect Earth and Cognassist, in March 2023. Also
following the year-end, again in March 2023, the sale of the Company's total
holding in Tharstern Group Limited was completed achieving a 2.6x return
against cost over the life of the investment.
Revenue account
The results for the year are set out in the Income Statement and show a
revenue return (after tax) of 1.03 pence per share (2021: 0.54 pence per
share). The revenue return for the year of £1.42 million has increased from
last year's comparable figure of £0.68 million. This is primarily the
result of higher dividends received from EOTH as well as loan interest that
was not previously recognised received upon the sale of MBI.
Liquidity & Fundraising
Cash and cash equivalents held by the Company as at 31 December 2022 amounted
to £45.72 million, or 45.6% of net assets. The Board continues to monitor
credit risk in respect of its cash and near cash resources and to prioritise
the security and protection of the Company's capital.
In January 2022, the Company completed a fundraise of £10 million for the
2021/2022 tax year which was fully subscribed in less than 24 hours. This
level of demand was pleasing, but the Board was aware that a number of
investors were left disappointed having not been able to subscribe. Later in
the year, on considering the future cash requirements of the Company and the
potential demand for the Company's shares, the Board approved a further
fundraise for the 2022/23 tax year. Having provided a period of time between
the launch of the prospectus and acceptance of applications, the Board was
pleased that the initial amount of £14m (as well as an over-allotment
facility of a further £8m), launched early in October 2022, was fully
subscribed by 5 December 2022. Shares were allotted in November 2022 and
February 2023 and your Company extends a warm welcome to an equal mix of both
new and existing shareholders.
The fundraising launched in October 2022 was to ensure that the Company
retained adequate levels of liquidity to continue to take advantage of new
investment opportunities and fund further expansion of the businesses in its
investment portfolio; seeking the delivery of attractive returns for its
Shareholders, including the payment of dividends; and buying back its shares
from those Shareholders who may wish to sell shares. It is not the intention
of the Board to conduct another fundraise in 2023.
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 of the Annual Report.
Share buybacks
During the year, the Company bought back and cancelled 1,663,597 of its own
shares (2021: 1,259,139), representing 1.1% of the shares in issue at the
beginning of the year (2021: 1.0%), at a total cost of £1.07 million,
inclusive of expenses (2021: £0.92 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.
Shareholder Communications & Annual General Meeting
May I remind you that the Company has its own website which is available at:
www.migvct.co.uk (http://www.migvct.co.uk) .
Following the well-received virtual Shareholder Event held on 25 February
2022, the Investment Adviser held another successful virtual Shareholder Event
with a live Q&A session on 23 March 2023 with 280 attendees.
Your Board is pleased to be able to hold the next Annual General Meeting
("AGM") of the Company in person at 1.00 pm on Wednesday, 24 May 2023 at the
offices of the Company's solicitors, Shoosmiths LLP, 1 Bow Churchyard, London
EC4M 9DQ. A joint presentation with Mobeus Income & Growth 4 VCT plc
Shareholders by the Investment Adviser will take place at 1.30 pm and a light
lunch will be available.
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 22 May 2023. Information setting out how to join the meeting
by virtual means will be shown on the Company's website. For further details,
please see the Notice of the Meeting which can be found at the end of the
Annual Report & Financial Statements.
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.
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 team which is focused on sustainability and the Board
views this as an opportunity to enhance the Company's existing protocols and
procedures through the adoption of the highest industry standards.
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.
Consumer Duty
The Financial Conduct Authority (FCA) has introduced the concept of Consumer
Duty, the rules and principles of which come into effect during the course of
2023. Consumer Duty is an advance on the existing concept of 'treating
customers fairly' and looks to ensure good outcomes for purchasers of
investment products.
As a quoted equity, VCTs and other investment trusts are not themselves
subject to Consumer Duty. But the investment adviser to the Company, Gresham
House, is in their role as promoter of the VCTs, as are your financial adviser
or any investment platform you may use, if they are FCA regulated.
It is encumbent on all parties to uphold the principles behind Consumer Duty
and to that end we are working with the Investment Adviser to review what
information we should provide to assist consumers and their advisers to
discharge their obligations under Consumer Duty.
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 successful exit of EOTH in
November, 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, which mitigates the challenges that
lie ahead.
I would like to take this opportunity once again to thank all Shareholders for
their continued support.
Clive Boothman
Chairman
4 April 2023
Investment Adviser's Report
Portfolio Review
Many quoted market values declined significantly in the year to 31 December
2022 and the current economic conditions continue to create challenging
circumstances. UK Business has seen both demand and operating margins come
under pressure in the face of widely reported increases in inflation, interest
rates and the associated threat of recession. The impact of this is now being
seen on consumer confidence and business investment.
Portfolio value change in the early half of 2022 was therefore characterised
by declining market multiples with relatively stable company level trading
performance carried over in part from the momentum gained during 2021.
However, in the latter months of 2022 and into 2023, the situation has
reversed. Markets and multiples appear to be stabilising while value change
has been driven by the challenging economic conditions which have started to
feed through to portfolio company trading performance. The Company's
investment values have been insulated partially from market movements by the
preferred investment structures employed in many of the portfolio companies.
These act to moderate valuation swings and the net result is a more modest
decline in portfolio value.
Whilst inflation is moderating following the rises in base rates, it is still
at a very high level and therefore a recession is expected in the UK during
2023 - albeit recent comment suggests this may be shallower and shorter than
originally feared. There are also early signs that supply chains are
returning to normality, that the labour shortage is easing and that there are
pockets of positive market sentiment. The outlook is therefore mixed, and the
emphasis is thus on robust funding structures and on being prepared for all
eventualities. The Gresham House non-executive directors who sit on each
portfolio company board have responded by working with their boards to ensure
that appropriate scenario planning has been done to achieve the best results
during these uncertain times. There is also now a greater focus on cash
management and capital efficiency. With ample liquidity following the recent
fund raise, the Company is also well placed to support portfolio companies
with follow-on funding where it is appropriate and can be done on attractive
terms.
There are some specific highs in the portfolio such as Preservica which
continues to see strong trading and is out-performing budget. The partial
exit from EOTH was also an excellent result after a long running process which
had to negotiate numerous economic and geo-political hurdles. By contrast,
there were also some significant falls. The largest was at Virgin Wines, where
market sentiment shifted heavily against the whole sector despite Virgin
itself outperforming its peers. MyTutor was also impacted by declining sector
multiples combined with slower than anticipated growth over the year.
The portfolio movements in the year are summarised as follows:
2022 2021
£m £m
Opening portfolio value 79.81 51.14
New and follow-on investments 4.71 7.54
Disposal proceeds (11.27) (15.23)
Net investment portfolio movement in the year (18.56) 36.36
Portfolio value at 31 December 54.69 79.81
The Company made four new growth capital investments during the year totalling
£2.44 million:
Proximity Insight - £0.73 million. Retail
technology software;
Bidnamic - £0.58
million. Marketing technology business;
FocalPoint - £0.60
million. A GPS enhancement software provider; and
Orri Limited - £0.53
million. An intensive day care provider for adults with eating disorders.
These investments were made by all six VCTs managed by Gresham House,
including the two Baronsmead VCTs.
During the year, the Company also made follow-on investments into six
portfolio companies totalling £2.27 million, a breakdown of which is included
later in this review.
Two good exits were achieved during the year at MBI and EOTH. On MBI, the
Company received a total of £4.83 million in proceeds during the year
generating a realised gain of £0.54 million. For EOTH the Company received a
total of £5.83 million in proceeds during the year producing a realised gain
of £0.49 million and the interest yielding loan stock was also retained.
These were both extremely successful investments which, over their lifetime,
produced returns of 2.2x and 6.9x as a multiple of the original investment
cost.
As alongside these successes, it was disappointing that Andersen EV went into
administration towards the end of the year despite securing some large clients
such as Porsche and JLR. Andersen encountered very challenging trading
conditions with substantially reduced demand, supply chain issues, cost
pressures and the removal of government consumer support for the purchase of
EV chargers. A realised loss of £0.61 million was recognised during the
financial year as a result.
The investment and divestment activity during the year has further increased
the proportion of the portfolio comprised of investments made since the 2015
VCT rule change to 80.3% by value at the year-end (31 December 2021: 63.6%).
The portfolio's valuation changes in the year are summarised as follows:
Investment Portfolio Capital Movement 2022 2021
£m £m
Increase in the value of unrealised investments 0.98 32.82
Decrease in the value of unrealised investments (20.50) (1.91)
Net (decrease)/increase in the value of unrealised investments (19.52) 30.91
Realised gains 1.57 5.53
Realised losses (0.61) (0.08)
Net realised gains in the year 0.96 5.45
Net investment portfolio movement in the year (18.56) 36.36
New Investments during the year
The Company made four new investments totalling £2.44 million during the
year, as detailed below:
Company Business Date of Investment Amount of new Investment (£m)
Proximity Insight Retail software February 2022 0.73
Proximity Insight (proximityinsight.com) is a retail technology business that
offers a 'Super-App' that is used by the customer-facing teams of brands and
retailers to engage, inspire and transact with customers. Headquartered in
London with offices in New York and Sydney, Proximity Insight has a global
client base that includes over 20 brands, boutiques and department stores in
fashion, beauty, jewellery, electronics and homewares. These clients use
Proximity Insight's platform to blur the lines between physical and digital
retail, enhancing the customer experience and improving the lifetime value of
their customers by upwards of 35%. The business grew annual recurring revenue
by 117% to £2.2 million in 2021, and the investment will support Proximity
Insight's continued product development and international growth.
Bidnamic Marketing technology business May 2022 0.58
Lads Store Limited, trading as "Bidnamic" (bidnamic.com) is a marketing
technology business that offers a SaaS platform for online retailers to manage
their search engine marketing spend. The technology was all developed
internally and uses bespoke machine learning algorithms to automate the
management and optimisation of online retailers' Google shopping spend. The
ARR of the business has grown substantially over the last two years and this
is projected to continue. The investment round will be used to further to
enhance the product's capabilities and drive continued ARR growth through
expanding the sales & marketing team and building a presence in North
America.
FocalPoint GPS enhancement September 0.60
software provider 2022
Focal Point Positioning Limited (focalpointpositioning.com) is a deep tech
business with a growing IP and software portfolio. Its proprietary technology
applies advanced physics and machine learning dramatically to improve the
satellite-based location sensitivity, accuracy, and security of devices such
as smartphones, wearables and vehicles and reduce costs.
Orri Specialists in eating disorder support September 2022 0.53
Orri Limited (orri-uk.com) is an intensive day care 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. Orri opened its current clinic in London in February
2019 which provides a homely environment in a converted 4-storey house but
which is operating at capacity. The plan sees a larger site being leased
nearby with Hallam Street being used to provide a step-down outpatient
service.
Further investments during the year
A total of £2.27 million was invested into six existing portfolio companies
during the year, as detailed below:
Caledonian Leisure UK Leisure and experience breaks January / February 2022 0.27
Caledonian Leisure works with accommodation providers, coach businesses and
other experienced providers (such as entertainment destinations and theme
parks) to deliver UK-based leisure and experience breaks to its customers. It
comprises two brands, Caledonian Travel (caledoniantravel.com) and UK
Breakaways (ukbreakaways.com). The domestic leisure and experience travel
market was devastated by the COVID-19 pandemic, but the company was
well-placed to expand as lockdown and travel restrictions eased. A series of
planned investment tranches has helped the company prepare for and capitalise
on the strong demand for UK staycation holidays.
Northern Bloc Dairy and allergen- April 2022 0.17
free ice cream
producer
Northern Bloc Ice Cream (northern-bloc.com) is an established food brand in
the emerging and rapidly growing vegan market. By focusing on chef quality and
natural ingredients, Northern Bloc has carved out an early mover position in
the dairy and allergen-free ice cream sector. The company's focus on
plant-based alternatives has strong environmental credentials as well as it
being the first ice cream brand to move wholly into sustainable packaging.
Following the initial investment in December 2020, Northern Bloc has grown and
strengthened its prospects against a challenging market backdrop. This further
investment provides additional working capital and funds a new production
facility to increase its resilience, flexibility and margins in the future.
Andersen EV Premium EV chargers May 2022 0.34
Muller EV Limited (trading as Andersen EV) (andersen-ev.com) was a design-led
manufacturer of premium electric vehicle (EV) chargers. Incorporated in 2016,
this business secured high profile partnerships with household brands,
establishing an attractive niche position in charging points for the high-end
EV market. This follow-on funding was to further support its premium brand and
product positioning whilst ensuring all new and existing products met the most
recent and highest safety and compliance standards. Unfortunately, external
factors caused its market and trading prospects to worsen rapidly, including
substantially reduced demand, global supply chain issues, inflation and the
removal of government consumer support for the purchase of EV chargers. The
company therefore entered administration before the year end.
Workforce management software June 2022 0.28
RotaGeek
RotaGeek (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. The company has made significant commercial progress
since the VCTs first investment nearly doubling Annual Recurring Revenues
(ARR). This investment aims to help boost ARR and enable the company to take
advantage of further large client opportunities.
Vivacity Provider of artificial intelligence & urban traffic July 2022 0.78
Vivacity (vivacitylabs.com) develops camera sensors with on-board video
analytics software that enables real-time anonymised data gathering of road
transport system usage. It offers city transport authorities the ability to
manage their road infrastructure more effectively, enabling more efficient
monitoring of congestion and pollution levels as well as planning for other
issues, such as the changing nature of road usage (e.g. the increasing number
of cyclists). The technology and software represent a significant leap forward
for local planning authorities which have traditionally relied upon manual
data collection methods. This new investment will help boost the company's
revenues through development of new functionality to enhance its product suite
which can also be installed into the existing asset base.
Bleach Hair Colourants brand August 2022 0.43
Bleach London Holdings ("Bleach") (bleachlondon.com) is an established brand
which develops and markets a range of innovative haircare and colouring
products. Bleach is regarded as a leading authority in the hair colourant
market having opened one of the world's first salons focused on colouring and
subsequently launched its first range of products in 2013. This further
investment was part of a wider £5.5 million investment round alongside
existing shareholders and a strategic partner. The funds will be used to drive
further expansion into the strategically important North American market and
to consolidate the brand's position in the UK.
Portfolio valuation movements
Across the portfolio, comparable market multiples that are used as the basis
of valuation have declined over the year, some by over 30%, but the levels at
the year-end reflect a degree of stabilisation over the final quarter.
Together with several downward revisions to trading forecasts in the latter
half of the year, this has driven a general decline in investee company
values. As noted, the preference investment structures used in many of the
portfolio companies serve to moderate the impact of such company value
movements on VCT value. The need to protect and develop value going forwards
in such an uncertain environment underlines the need for portfolio readiness
and planning, robust funding and close monitoring by the Gresham House team.
The main reductions within total valuation decreases of £(20.50) million,
were:
● Virgin Wines
£(8.71)
million
●
MyTutor
£(2.03) million
● Buster and Punch £(1.64)
million
● Wetsuit Outlet
£(1.36) million
● Active Navigation £(1.30)
million
Virgin Wines has suffered from negative sentiment across its sector despite
outperforming its peers. More recently, it also experienced some short term
operational difficulties particularly in the last quarter of 2022. MyTutor's
growth has slowed post COVID coupled with a decline in market multiples.
Buster and Punch and Wetsuit Outlet are both consumer facing businesses that
have experienced challenging trading conditions which resulted in profit
downgrades. ActiveNav has developed a new business line which has gained
significant traction and offers potential but the core business has grown more
slowly than planned which has led to an overall reduction in its valuation.
The uplifts within the total valuation increase of £0.98 million were:
●
Tharstern
£0.55 million
●
Orri
£0.26 million
●
Preservica
£0.17 million
Tharstern has continued to deliver strong trading performance. Following the
year-end, in March 2023, the Company completed a successful sale of Tharstern
generating a 2.6x return. Preservica continues to build its high retention,
long contract term Software-as-a-Service ("SaaS") business, improving
recurring revenues year on year. Orri is performing as planned and the
valuation uplift simply reflects the first time recognition of the
preferential investment structure.
Growth capital investing involves companies which often have not achieved
profitability and as a result, have to be measured on other metrics. The table
below shows the proportion of the portfolio that is represented by
pre-profit companies (often valued by reference to revenue multiple), compared
with more mature, established companies with a history of profitability and
which are therefore valued on an earnings multiple:
Valuation methodology 2022 2022 2021 2021
£m % of total investments £m % of total investments
Revenue multiple 38.60 70.6% 41.28 51.7%
Earnings multiple 10.90 19.9% 25.67 32.3%
Average Price 3.32 6.1% 12.52 15.7%
Recent investment price (reviewed for impairment) 0.60 1.1% 0.27 0.3%
Other 1.27 2.3% 0.07 0.1%
Total 54.69 100% 79.81 100%
Portfolio Realisations during the year
The Company realised two investments, one of which was a partial realisation,
as detailed below:
Company Business Period of Total cash proceeds over the life of the investment/
Investment Multiple over cost
MBI Publishing and events business January 2015 to June 2022 £7.36 million
2.2x cost
The Company realised its whole investment in MBI for £4.83 million (realised
gain in the year: £0.54 million) including deferred proceeds received since
completion. Total proceeds received over the life of the investment were
£7.36 million compared to an original investment cost of £3.28 million,
representing a multiple on cost of 2.2x and an IRR of 13.8%.
EOTH October 2011 to November 2022 £8.96 million
Branded clothing (Rab and Lowe Alpine) 6.9x cost
The Company realised its equity investment in EOTH for £6.89 million
(realised gain in the year: £0.49 million) including preference dividends.
Total proceeds received over the life of the investment were £8.96 million
compared to an original investment cost of £1.30 million, representing a
multiple on cost of 6.9x and an IRR of 23.2%. The Company has retained its
interest yielding loan stock investment. Once repaid, this should increase the
multiple on cost to 7.9x.
Loan stock repayments and other gains/(losses) during the year
The Company also received loan repayments totalling £0.07 from Jablite
Holdings Limited.
In addition, deferred consideration totalling £0.55 million in realised gains
was received in respect of investments realised in a previous year.
Conversely, as discussed earlier, Muller EV (trading as Andersen EV) generated
a realised loss in the year of £(0.61) million.
Portfolio income and yield
In the year under review, the Company received the following amounts in loan
interest and dividend income:
Investment Portfolio Yield 2022 2021
£m £m
Interest received in the year 0.91 1.26
Dividends received in the year 1.24 0.45
Total portfolio income in the year(1) 2.15 1.71
Portfolio Value at 31 December 54.69 79.81
Portfolio Income Yield (Income as a % of Portfolio value at 31 December) 3.9% 2.1%
(1 ) Total portfolio income in the year
is generated solely from investee companies within the portfolio.
New investment made after the year-end
£0.89 million was invested into two new investments after the year-end, as
detailed below:
Company Business Date of investment Amount of new
Investment (£m)
Connect Earth Environmental data provider March 2023 0.30
Founded in 2021, Connect Earth is a London-based environmental data company
that democratises 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.
Cognassist Education and neuro-inclusion solutions March 2023 0.59
Cognassist (cognassist.com) is an education and neuro-inclusion solutions
company that provides a Software-as-a-Service (SaaS) platform focussed on
identifying and supporting individuals with hidden learning needs. The
business is underpinned by extensive scientific research and a vast cognitive
dataset. Founded in 2019 by Chris Quickfall, Cognassist has scaled its
underlying business within the education market, enabling apprentices to
unlock government funding and helping diverse minds to thrive. This investment
will empower Cognassist to continue its growth within the education market and
penetrate the enterprise market, where demand for neuro-inclusive solutions to
adequately support employees is rapidly emerging.
Realisations after the year-end
Company Business Period of investment Total cash proceeds over the life of the 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 £2.70 million.
Total proceeds received over the life of the investment were £3.79 million
compared to an original cost of £1.46 million, representing a multiple on
cost of 2.6x and an IRR of 15.0%.
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.
The Investment Adviser has a team which is focused on sustainability as well
as the Investment Adviser's Sustainability 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.
• Conduct regular monitoring of ESG risks,
opportunities and performance in its investments.
• Incorporate ESG into its monitoring processes.
Outlook
With inflation, political uncertainty and the threat of recession impacting
consumer confidence and business investment, 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 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
4 April 2023
Annual General Meeting
The AGM will be held on Wednesday, 24 May 2023 at the offices of Shoosmiths
LLP, 1 Bow Churchyard, London EC4M 9DQ 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 and Accounts for the year ended 31 December 2022 will be
available shortly on Mobeus Income & Growth VCT plc
(https://www.mobeusvcts.co.uk/investor-area/vct-investors/mobeus-income-growth-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
(file:///C%3A/Users/b.onanuga/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/7ZS900ED/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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