REG - Mobeus Inc&Gwth - Annual Financial Report
14/01/2025 16:15
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RNS Number : 3106T Mobeus Income & Growth VCT PLC 14 January 2025
MOBEUS INCOME & GROWTH VCT PLC
LEI: 213800HKOSEVWS7YPH79
Annual Report & Financial Statements for the period ended 30 September
2024
Results Announcement
The Company announces the Annual Report and Financial Statements for the
period ended 30 September 2024 have been published on its website
www.migvct.co.uk
(https://www.mobeusvcts.co.uk/investor-area/vct-investors/mobeus-income-growth-vct-plc)
. The results were approved by the Board of Directors on 13 January 2025.
Merger with Mobeus Income & Growth 2 VCT plc
The Company merged with Mobeus Income & Growth 2 VCT plc ("MIG 2 VCT") on
26 July 2024 ("Merger") and following the transfer of its assets and
liabilities amounting to £57,709,937 to the Company, MIG 2 VCT was placed in
members' voluntary liquidation. As consideration on 26 July 2024, the Company
issued 102,889,464 new ordinary 1 pence shares at a price of 56.09 pence per
share to each MIG 2 VCT Shareholder. Accordingly, each MIG 2 VCT Shareholder
received 1.065 shares in MIG VCT for each MIG 2 VCT share that they held at
the date of the Merger (rounded down to the nearest whole number).
Financial Highlights
The highlights Include:
As at 30 September 2024:
Net assets: £144.32 million
Net asset value ("NAV") per share: 54.70 pence
➤ Net asset value ("NAV") total return(1) per share was
0.5%(2).
➤ Share price total return(1) per share was 4.5%(3).
➤ A dividend of 4.00 pence per share was declared and paid on 31
May 2024 in respect of the financial period. Cumulative dividends paid to date
since inception in 2004 amount to 170.3 pence per share.
➤ £5.13 million was invested into two new growth capital
investments and five existing portfolio companies during the period.
➤ Net unrealised losses were £(0.11) million in the period.
➤ The Company realised investments totalling £3.49 million
of cash proceeds.
(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
Chair's Statement
I am pleased to present the results for Mobeus Income & Growth VCT plc for
the period ended 30 September 2024.
Overview
On completion of the Merger of the Company with MIG 2 VCT on 26 July 2024, the
accounting reference date of the Company changed from 31 December to 30
September. This was for consistency with The Income & Growth VCT plc and
to promote calendar year end administration and audit efficiencies. The
Company is therefore reporting for the nine-month financial period from 1
January 2024 to 30 September 2024 and will report annually to 30 September
hereafter.
This period has been set against a backdrop of challenging geopolitical and UK
economic conditions although equity markets as a whole have delivered modest
growth. Inflation has started to reduce but higher interest rates continue to
impact on consumer and business confidence and to affect trading performance
in the portfolio companies. We have not yet seen the full effect of the recent
Bank of England interest rate cuts from a peak of 5.25% and there may be
further interest rate cuts in the event that inflation continues to meet the
Bank of England's 2% target. The political uncertainty and distraction
associated with the general election and subsequent budget has now subsided
bringing the prospect of a welcome period of relative stability in the UK,
albeit with continued pressures on companies from tax increases and ongoing
global economic and geopolitical risk including the potential impacts of the
change in US Administration.
The positive NAV performance reported for the first six months of the period
for a number of portfolio companies was blunted somewhat by a challenging
final quarter of the period for some assets. However, overall, due to
continued strong performance of the portfolio's larger assets, the Company's
NAV total return remained marginally positive, increasing by 0.5% for the nine
months (year ended 31 December 2023: 6.1%).
The Company has been an active investor in the period and provided funding to
two new companies: SciLeads and OnSecurity, whilst in February 2024 a highly
successful partial exit of Master Removers Group ("MRG") was delivered.
Follow-on investments were also made into five existing portfolio companies:
MyTutor, Orri, ActiveNAV, VivaCity and Dayrize. Please see the 'Investment
portfolio' section later in my Statement for further details. After the
period-end, two new investments were made into Mobility Mojo and Gentianes
Solutions (trading as Much Better Adventures), and three further follow on
investments were made into Branchspace, Preservica and FocalPoint.
Early in 2024 the portfolio companies, with the support and guidance of
Gresham House's portfolio directors, took steps to reposition their cost bases
in anticipation of medium-term challenges. Overall, the investee companies are
adequately funded although it is expected that some of the newer additions to
the portfolio are likely to bring forward their requirement for further
funding. The Company's successful fundraising after the period- end ensures
strong liquidity is available to seek opportunities within the existing
portfolio together with new investments.
Despite the uncertainty recently experienced the portfolio is resilient and
diversified. However, there is a degree of concentration as the top five
assets now represent c.57.0% of total portfolio value. As is the nature of
growth assets, the risk of company failures is ever present although the
upside for successful investments can be significant which is resulting in
value concentration amongst these larger and more stable assets.
Merger Update
The Merger of the Company with MIG 2 VCT, as set out in the announcement on 18
June 2024, was approved by Shareholders on 18 July 2024 and completed on 26
July 2024. The assets and liabilities of MIG 2 VCT were transferred to the
Company in consideration for shares being issued to the MIG 2 VCT Shareholders
upon a relative net asset basis. We welcome those new Shareholders to the
Company.
On completion of the Merger, Ian Blackburn, former chair of MIG 2 VCT, and
Sarah Clark, former director of MIG 2 VCT were appointed and welcomed to the
Board. Ian has assumed the role of Senior Independent Director of the Company
and Sarah has assumed the role of chair of the new Investment Committee.
Existing Director, Lucy Armstrong, remains chair of the Audit Committee. We
look forward to working together on behalf of the Company's Shareholders. We
would also like to thank Bridget Guerin for her extensive contributions and
service to the Company until her retirement on 26 July 2024.
The Merger payback period of under 18 months, as outlined in the Prospectus,
is on track to being achieved. This is based upon Merger costs incurred to
date compared with annual cost savings.
Performance
The Company's NAV total return per share increased by 0.5% for the nine months
(year ended 31 December 2023: 6.1%) after adding back a dividend of 4.00 pence
per share paid during the period. The increase was principally the result of
valuation uplifts and income returns from cash balances held. Positive
valuation contributions by Veritek Global, Active Navigation, and MPB were
offset by falls from MyTutor and Bella & Duke. The proceeds received on
the successful portfolio partial exit of MRG were already reflected in the
Company's NAV at 31 December 2023. Income generated from cash held awaiting
investment and loan stocks resulted in a positive revenue return.
At the period-end, the Company was ranked 1st out of 26 Generalist VCTs over
ten years, 4th out of 32 Generalist VCTs over five years, and 21st out of 32
Generalist VCTs over three years in the Association of Investment Companies'
("AIC") analysis of NAV Total Return (assuming dividends are reinvested).
Shareholders should note that, due to the lag in the disclosed performance
figures available each quarter, the AIC ranking figures do not fully reflect
the latest position at 30 September 2024 or those of our peers.
Dividends
For the period up to the date of the Merger, the Company's annual dividend
target was at least 4.00 pence per share payable in respect of each financial
year. The Board was therefore pleased to be able to declare an interim
dividend of 4.00 pence per share in respect of the period ended 30 September
2024 to reflect gains and income generated as well as ensuring compliance with
the VCT regulations. The interim dividend was paid on 31 May 2024 to
Shareholders on the Register on 3 May 2024. This achieved the Company's annual
target of 4.00 pence per share despite being over a shorter nine-month period.
No further dividends will be paid in respect of the period to 30 September
2024. This dividend payment has brought cumulative dividends paid per share
since inception to 170.30 pence.
Shareholders should note that following the Merger, and as detailed in the
Prospectus, the Company's annual dividend target was amended to 7% of the NAV
per Share at the start of each relevant financial year. This target amount
could be paid in one or several dividend payments over the year.
The portfolio consists mainly of younger growth capital investments which
carry a greater risk than the historic Management Buy-Out portfolio and are
very likely to result in increased volatility in returns Shareholders receive
in any given year. Shareholders should also note that there may be
circumstances where the Company is required to pay dividends in order to
maintain its regulatory status as a VCT, for example, to stay above the
minimum percentage of assets required to be held in qualifying investments.
Such dividends paid in excess of net income and capital gains achieved will
cause the Company's NAV per share to reduce by a corresponding amount.
Dividend Investment Scheme
Further to the Merger and a review by the Board, the Company has established a
Dividend Investment Scheme ("DIS") to allow Shareholders, should they so wish,
to receive additional shares in the Company by re-investing their total
dividend payment into new shares at the latest published NAV. Shareholders
must register their whole shareholding in the DIS, a partial election is not
permitted under the Rules of the DIS which can be found on the Company's
website: https://www.mobeusvcts.co.uk/ (https://www.mobeusvcts.co.uk/) under
the Dividend section along with the mandate form. Shareholders who hold their
shares in a Nominee company can still join the DIS scheme by instructing the
Nominee provider to elect for the DIS Shares on their behalf. Shareholders can
opt-out of the DIS by contacting City Partnership, using their details
provided under Corporate Information in the Annual Report. The new shares are
also eligible for Income Tax Relief.
Investment Portfolio
The enlarged closing portfolio incorporates MIG 2 VCT's assets reflecting the
aggregate performance since 26 July 2024. Despite the continuing uncertain
macroeconomic conditions, several investee companies have demonstrated
positive revenue and profits growth, in particular Veritek Global, Active
Navigation and MPB. However, the more consumer facing businesses, such as
MyTutor and Bella & Duke, have found delivery of growth to be harder. The
net result has been marginally negative and the overall portfolio value in the
period decreased by a modest £(0.21) million (year ended 31 December 2023:
£6.43 million), or (0.15)% (year ended 31 December 2023: 11.8%) on a
like-for-like basis, compared to the opening portfolio value at 1 January 2024
of £64.14 million and the assets acquired from MIG 2 VCT of £47.71 million.
This net decrease was comprised of an unrealised decrease in portfolio
valuations of £0.11 million and net realised losses of £0.10 million.
The portfolio movements across the period were as follows:
2024 2023
(9 mths to 30 Sept) (Year to 31 Dec)
£m £m
Opening portfolio value 64.14 54.69
MIG 2 acquisition 47.71 -
New and further investments 5.13 5.72
Disposal proceeds (3.49) (2.70)
Net realised (losses)/gains (0.10) 0.40
Valuation movements (0.11) 6.03
Net investment portfolio (losses)/gains (0.21) 6.43
Portfolio value at 31 December 113.28 64.14
During the period, the Company invested a total of £5.13 million into two new
and five existing portfolio companies (year ended 31 December 2023: £5.72
million; eight new, four existing). New investments totalling £1.55 million
(year ended 31 December 2023: £4.79 million) were made in:
SciLeads £0.71 million Digital platform within the life science vertical
OnSecurity £0.84 million B2B cybersecurity business providing independent third-party penetration
testing services
Additional funding totalling £3.58 million (2023: £0.93 million) was
provided in five existing portfolio companies during the period:
MyTutor £0.54 million A digital marketplace connecting school pupils seeking one to one online
tutoring
Orri £0.23 million An intensive day care provider for adults with eating disorders
ActiveNAV £1.79 million A global provider of file analysis software for
Information governance, security
and compliance
VivaCity Labs £0.88 million An AI and Urban Traffic Control business
Dayrize £0.14 A provider of a rapid sustainability impact assessment tool
million
At the period-end, the portfolio was valued at £113.28 million (year ended 31
December 2023: £64.14 million) including the assets acquired from MIG 2 VCT
as part of the Merger. The portfolio substantially comprises growth capital
investments, and, as Shareholders will be aware, these younger, less proven
investments have a more variable return profile.
Shareholders should continue to note therefore that whilst the potential
upside for the Company's Shareholders of these type of investments may be
higher, conversely the likelihood of investee company failures also increases.
The Company's largest five assets by value represent over 50% of the
portfolio's value, with Preservica accounting for 27.5%. The overall portfolio
value is greatly affected by the performance of these investments and these
higher value assets continue to be monitored closely by the Investment Adviser
as part of its risk mitigation measures.
The VCT's portfolio valuation methodology has continued to be applied
consistently and in line with International Private Equity and Venture Capital
Valuation ("IPEV") guidelines with four of the top ten largest holdings by
value also triangulated by an independent external valuation in the period.
Following the period-end, two new investments were made, £0.42 million into
Mobility Mojo, a software platform supporting accessibility audits, and £0.97
million into Gentianes Solutions (trading as Much Better Adventures), an
Adventure Travel Marketplace, and three further follow on investments
comprising £0.27 million into Branchspace, £0.46 million into Preservica
Limited and £0.10 million into FocalPoint Positioning Limited.
The Company generated £3.49 million in proceeds from the partial exit of MRG,
whose value was fully reflected at the previous year-end. Over the life of
this investment, the Company has received total proceeds of £6.62 million
(including £0.42 million received after the period-end) which equates to a
multiple on cost of 3.3x and an IRR of 26.0%. Conversely, the Company was
unable to support further investment into Bleach Holdings Limited and was
required to exit its holding for minimal proceeds. The Company had reduced its
valuation of Bleach in previous periods such that a modest £0.04 million
realised loss was incurred on disposal in the period. Further, the Company's
holding in Northern Bloc was fully impaired recognising a loss of £0.06
million in the period.
Further details of this investment activity and the performance of the
portfolio are contained in the Investment Adviser's Review and the Investment
Portfolio Summary in the Annual Report.
Revenue account
The results for the period are set out in the Income Statement and show a
revenue return (after tax) of 0.24 pence per share (year ended 31 December
2023: 0.73 pence per share).
The revenue return for the period of £0.45 million compares to the
comparative full year figure of £1.22 million. This movement in revenue
return is not directly comparable due to the current period reflecting nine
months rather than the full year.
Liquidity & Fundraising
Cash and liquidity fund balances as at 30 September 2024 amounted to £31.26
million representing 21.7% of net assets. The majority of cash resources are
held in liquidity funds with AAA credit ratings, the returns on which have
benefitted from higher levels of interest rates and will help support future
returns to Shareholders. The Board continues to monitor credit risk in respect
of all its cash and near cash resources and still prioritises the security and
protection of the Company's capital.
On 2 September 2024, the Company launched a Joint Offer for Subscription
alongside The Income & Growth VCT plc ("I&G VCT") to each raise an
initial amount of up to £35 million, as well as an over-allotment facility of
£10 million for the tax year 2024/25. Following strong demand, the Company
received applications for the full amount sought of £45 million (including
the over-allotment facility). Two allotments took place after the period-end,
on 1 October and 28 October 2024, issuing a total of 77,500,488 new Ordinary
shares at an average effective offer price of 58.06 pence per share, raising
net funds for the Company of £43.47 million. These additional funds will
allow the Company to take advantage of new investment opportunities, fund
further expansion of existing portfolio businesses, provide attractive returns
for Shareholders in the form of dividend payments and buy back its shares from
those Shareholders who may wish to sell.
Share buybacks
During the period, the Company bought back and cancelled 3,321,634 of its own
shares (year ended 31 December 2023: 4,413,159), representing 2.0% of the
shares in issue at the beginning of the period (year ended 31 December 2023:
2.8%), at a total cost of £1.80 million, inclusive of expenses (year ended 31
December 2023: £2.55 million).
It is the Company's policy to cancel all shares bought back in this way. The
Board regularly reviews its buyback policy and seeks to maintain the discount
at which the Company's shares trade at no more than 5% below the latest
published NAV.
Change of Auditor
Under current legislation an Auditor can only serve for 20 years and BDO has
reached this length of tenure. Following a comprehensive and robust audit
tender process, the Board has decided to recommend the appointment of Johnston
Carmichael as the Company's Auditors at the forthcoming AGM for the year
ending 30 September 2025.
Shareholder Communications & Annual General Meeting
May I remind you that the Company has its own website: http://www.migvct.co.uk
(http://www.migvct.co.uk) .
The Investment Adviser held another virtual shareholder event on 1 March 2024,
showcasing some exciting portfolio company growth journeys as well as a
presentation by the Investment Adviser and representatives of the Mobeus VCTs,
a recording of which is available on the Company's website or by registering
for access here: https://mvcts.connectid.cloud/
(https://mvcts.connectid.cloud/) . It is anticipated that the next Shareholder
Event will take place in September 2025.
The Board is pleased to be able to hold the next Annual General Meeting
("AGM") of the Company in person at 1.00 pm on 5 March 2025 at First Floor, 8
Fenchurch Place, London, EC3M 4PB. The Board is aware that a number of
Shareholders also hold shares in I&G VCT, which shares a 30 September
year-end. A joint presentation by the Investment Adviser to the Company and
I&G VCT Shareholders will therefore take place at 1.30 pm and a light
lunch will be available. The I&G AGM will be held following the
presentation at 2.30 pm for joint Shareholders to attend.
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 1.00 pm on Monday, 3 March 2025. There will however be the
ability to send questions into the meeting via the link.
Information setting out how to join the meeting by virtual means will be shown
on the Company's website a few days before the AGM. Directions to the AGM
venue will also be available on the website. For further details, please see
the Notice of the Meeting which can be found at the end of the Annual Report.
VCT Regulations - Retirement Date of the UK Government's Venture Capital
Schemes
The Board and Investment Adviser were pleased to see the European Commission
approve the extension of the VCT scheme until 5 April 2035. This was
formalised by UK legislation on 3 September 2024. The regulations bring into
effect the extension of the Enterprise Investment Scheme ("EIS") and the
Venture Capital Trust Scheme ("VCT") sunset clause to 2035. The Board welcomes
this news and would like to thank the Investment Adviser, The Venture Capital
Trust Association ("VCTA"), the Association of Investment Companies ("AIC")
and other parties involved for their help in getting the new legislation
enacted.
Consumer Duty
The Financial Conduct Authority's ("FCA") new Consumer Duty regulation came
into effect on 31 July 2023. Consumer Duty is an advance on the previous
concept of 'treating customers fairly', which sets higher and clearer
standards of consumer protection across financial services and requires all
firms to put their customers' needs first.
As previously notified, the Company is not regulated by the FCA and 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 fundraising offers, are subject to Consumer Duty.
The Board will ensure that the principles behind Consumer Duty are upheld and
will work with the Investment Adviser on the information now available to
assist consumers and their advisers to discharge their obligations under
Consumer Duty.
Environmental, Social and Governance ("ESG")
The Board and the Investment Adviser believe that the consideration of
environmental, social and corporate governance ("ESG") factors throughout the
investment cycle will contribute towards enhanced Shareholder value.
Gresham House has a dedicated sustainable investment team which conducts an
annual survey of our unquoted portfolio companies to understand how they are
responding to relevant ESG risks and opportunities. The results of the
November 2023 survey of investee companies highlighted that the portfolio
companies who participated were taking further action on implementing a range
of sustainability initiatives within their businesses. Each portfolio company
in the survey identified areas for improvement over the next 12 months which
are being monitored by the Investment Adviser and their progress tracked
throughout the year.
The FCA reporting requirements consistent with the Task Force on
Climate-related Financial Disclosures ("TCFD") do not currently apply to the
Company but will be kept under review, the Board being mindful of any
recommended changes. The Board is aware of the FCA's Sustainability Disclosure
Requirements and investment labels (together the "rules"). As the Company is
classified as a Collective Investment Undertaking, the scope of the rules
capture such UK-domiciled unauthorised funds, however given that the shares in
the Company (the "product") do not have a sustainable investment objective,
the rules only apply on a very limited basis (through the Investment Adviser)
in relation to the Company. The Gresham House TCFD Report can be found on its
website at: TCFD report - Gresham House (https://greshamhouse.com/tcfd/) .
Fraud Warning
Shareholders continue to be contacted in connection with sophisticated but
fraudulent financial scams which purport to come from or to be authorised by
the Company. This is often by a phone call or an email usually originating
from outside of the UK, claiming or appearing to be from a corporate finance
firm offering to buy your shares at an inflated price.
The Board strongly recommends Shareholders take time to read the Company's
Fraud warning section, including details of who to contact, contained within
the Information for Shareholders section in the Annual Report.
Outlook
Despite a recent return to some stability on the domestic front following the
UK election and subsequent budget, the wider geopolitical and economic
environment remains uncertain. The Company's portfolio companies have been
operating under challenging economic conditions for some time now and the
Board and Investment Adviser are encouraged with the level of resilience
shown. With a more certain fiscal roadmap now laid out and the prospect for
further interest rate reductions, the Board has cautious optimism that
portfolio performance can be maintained and improved. The Investment Adviser
continues to target new opportunities in exciting new businesses and is
reporting a strong pipeline under current review.
The sole successful partial exit of MRG represents a somewhat quiet period for
the Mobeus VCT portfolio in terms of realisations compared to past periods.
Expectations are that the exit environment will likely remain subdued for the
time being. However, a period of stability should facilitate more measured
growth which will ultimately lead to exits but with no fixed timescale
associated with the Company's investments, there is no imperative to force an
exit, and the Investment Adviser is able to influence the best time to sell to
optimise value.
In summary, the Company continues to add to its large, well-diversified
portfolio which is managed by a professional and experienced investment team.
The Board and Investment Adviser will continue to work together to drive
shareholder returns further.
I would like to take this opportunity once again to thank all Shareholders for
their continued support and to extend a warm welcome to our new members of the
Company.
Clive Boothman
Chair
13 January 2025
Investment Adviser's Review
Portfolio Review
The period has been marked by continuing uncertainty, against which markets
have delivered modest growth. Inflation and interest rates appear to have
peaked, but concerns regarding geo-political tensions in Europe and the Middle
East persist. The UK and US election results will hopefully allow more clarity
on the future economic and political landscape although the impact of the UK
Government's first budget has caused an element of market turbulence,
potential inflationary pressures and pausing of interest rate reductions.
Despite this unsettled environment, it is encouraging to see that the majority
of the portfolio companies recorded continued growth in either revenues or
profits over the last nine months. This steady positive progress contrasts
with the observation that the companies within the portfolio have many
projects under consideration with several companies contemplating top up
rounds to enable them to reach a delayed breakeven. The ability to invest
further VCT capital is a useful opportunity to build meaningful stakes as well
as enhancing the Company's influence and protecting the VCTs' position. Over
70% of the portfolio recorded profit increases or reduced losses versus the
previous year which is very encouraging and demonstrates the responsiveness
and effectiveness of portfolio company boards in maintaining close cost
management.
It is in the nature of VCT assets that many portfolio companies are seeking to
prove and develop nascent business models. Most of the recent group of earlier
stage investments are steadily building out their pipelines and capability as
they balance investment with the rate of commercial development. At this stage
of their development Gresham House is still hopeful that the majority will
deliver the relevant commercial proof points, albeit it may take longer and
probably require additional capital earlier than had originally been
envisioned. In some cases, this could be a positive by allowing the Company to
build more significant stakes on possibly more advantageous terms.
We are pleased to have been able to provide new funding to two significant
investments during the period as well as follow on funding for a number of
portfolio companies. The exit environment remains subdued, but the partial
exit of Master Removers Group at the start of the period illustrates that
investee companies can still be realised at attractive prices. Unless there is
a change in market dynamics, it is likely that portfolio companies will be
held for longer periods although looking forward, there are a number of assets
starting to plan for exit in 2025. Gresham House believes that these are
realistic prospects which could deliver significant realised value to the
Company.
The Company's recent successful fundraise after the period-end will provide
strong liquidity to take advantage of the improving new investment environment
for the Company as the UK is starting to see some stability post the election
and budget. Gresham House is seeing a number of interesting investment
propositions which are expected in time to be value accretive to the VCT's
portfolio.
The portfolio movements in the period/year are summarised as follows:
Period ended 30 September 2024 Year ended 31 December 2023
£m £m
Opening portfolio value 64.14 54.69
MIG 2 VCT acquisition 47.71 -
New and further investments 5.13 5.72
Disposal proceeds (3.49) (2.70)
Net investment portfolio movement in the period/year (0.21) 6.43
Portfolio value at period/year-end 113.28 64.14
The value of the Company's portfolio has materially increased in size due to
the acquisition of MIG 2 VCT's portfolio of assets, the vast majority in which
the Company had existing holdings.
The Company made new and follow-on investments totalling £5.13 million (year
ended 31 December 2023: £5.72 million) during the period, of which £1.55
million was into two new growth capital investments and £3.58 million was
into five follow-on investments. Further details of these investments are on
the following pages. After the period-end, new investments were made into
Mobility Mojo and Much Better Adventures, as well as follow-ons into
Branchspace, Preservica and FocalPoint.
The portfolio's largest investments have experienced some strong revenue
growth which has continued to drive values over the period, in particular MPB,
Active Navigation, and Caledonian Leisure. Pleasingly, Veritek Global, an
historic MBO investment, has started to see material traction having pivoted
its business model in recent years and returned to profitability. By contrast,
there are also some portfolio companies that are experiencing a tough
environment such as MyTutor and IPV reflecting the ongoing difficulties for
consumer facing businesses to deliver growth. The portfolio companies continue
to be focused on establishing a path to profitability.
During the period, the MRG partial exit generated proceeds of £3.49 million
resulting in a return of 3.3x and an IRR of 26% over the life of the
investment.
The portfolio's valuation changes in the period/year are summarised as
follows:
Investment Portfolio Capital Movement Period ended 30 September 2024 Year ended 31 December 2023
£m £m
Increase in the value of unrealised investments 6.51 11.40
Decrease in the value of unrealised investments (6.62) (5.37)
Net (decrease)/increase in the value of unrealised investments (0.11) 6.03
Realised gains - 0.62
Realised losses (0.10) (0.22)
Net realised (losses)/gains in the period/year (0.10) 0.40
Net investment portfolio movement in the period/year (0.21) 6.43
New Investments during the period
The Company made two new investments totalling £1.55 million during the
period, as detailed below:
Company Business Date of Investment Amount of new investment (£m)
SciLeads Digital platform within the science verticals March 2024 0.71
Based in Belfast, SciLeads (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 significantly and this investment will be used to accelerate new
customer acquisition and professionalise the product and customer success
functions to cross-sell opportunities within the existing customer base.
OnSecurity B2B cybersecurity business providing independent third-party penetration June 2024 0.84
testing
Based in Bristol, OnSecurity (https://www.onsecurity.io
(https://www.onsecurity.io) ) is a B2B cybersecurity business providing
independent third-party penetration testing services, a type of ethical
hacking that simulates a real-world attack on a computer system, network, or
web application to identify and remediate vulnerabilities that could be
exploited by malicious actors. OnSecurity is an agile and collaborative
platform solution that provides high quality human pentesting with elements of
automation to minimise low value, menial tasks. This investment will be used
to drive growth through developing their platform to target larger potential
clients and develop economies of scale.
Further investments during the period
A total of £3.58 million was invested into five existing portfolio companies
during the period, as detailed below:
Company Business Date of Investment Amount of further investment (£m)
MyTutor Digital marketplace for online tutoring January 2024 0.54
MyTutorweb (trading as MyTutor) (https://www.mytutor.co.uk/
(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 aiming to satisfy a growing demand from both schools and
parents to improve pupils' exam results. This further investment will aim to
drive changes in product and margin through operating business improvements
and seek to expand its offering to school and channel partners.
Orri Specialists in eating disorder support March 2024, July 2024 0.23
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 at its clinic on Hallam Street, London. This
additional funding represents a bridging round to provide sufficient funding
to allow the business to reach break-even. Potential further funding will
allow a targeted geographic roll out once the core business is proven.
ActiveNav A provider of a rapid sustainability impact May 2024 1.79
assessment tool
Data Discovery Solutions, trading as ActiveNav (https://activenav.com
(https://activenav.com) ), is a data analysis software solution which makes it
easier for companies to clean up network drives, respond to new data
protection laws and dispose of redundant and out-dated documents. ActiveNav's
solution is used by significant blue-chip customers, particularly those in
highly regulated industries such as energy and professional services, as well
as government entities in the USA, Canada, Australia and the UK. This further
funding will assist the development of ActiveNav's exciting new cyber breach
response division 'Actfore', which was established in late 2022.
Dayrize A provider of a rapid sustainability impact assessment tool June 2024, September 2024 0.14
Founded in 2020, Amsterdam-based Dayrize (https://dayrize.io/
(https://dayrize.io/) ) has developed a rapid sustainability impact assessment
tool that delivers product-level insights for consumer goods brands and
retailers. Its proprietary software platform and methodology bring together an
array of data sources to provide a single holistic product level
sustainability score that is comparable across product categories in under two
seconds. This funding round is to help refine its business plan, establish
greater product- market fit and drive conversion of its customer pipeline.
Capital structure terms have also been amended to encourage further funding
from its existing angel network.
VivaCity Provider of artificial intelligence & urban traffic control systems August 2024 0.88
VivaCity (https://VivaCitylabs.com (https://VivaCitylabs.com) ) develops
camera sensors with on-board video analytics software that enables real-time
anonymised data gathering of road transport system usage. It offers city
transport authorities the ability to manage their road infrastructure more
effectively, enabling more efficient monitoring of congestion and pollution
levels as well as planning for other issues, such as the changing nature of
road usage (e.g. the increasing number of cyclists). The technology and
software represent a significant leap forward for local planning authorities
which have traditionally relied upon manual data collection.
Valuation changes of portfolio investments still held
The total valuation increases were £6.51 million, with the main increases
being:
Veritek Global: £1.17 million
Active Navigation: £0.84 million
MPB Group: £0.73 million
Caledonian Leisure: £0.59 million
Veritek Global has undertaken a marked turnaround having pivoted its business
model in recent years. Active Navigation continues to gain momentum for its
incident response platform. MPB continues to grow revenues internationally and
Caledonian is performing well through its demand for UK travel holidays.
The main reductions within total valuation decreases of £(6.62) million were:
MyTutor: £(2.65) million
Bella & Duke: £(1.02) million
IPV: £(0.58) million
Dayrize B.V.: £(0.58) million
MyTutor and Bella & Duke have been impacted by a challenging environment
for consumer facing businesses. IPV has experienced delays in securing new
contracts and partnerships, although through cost-saving initiatives has
improved its profitability.
Dayrize has secured several new contracts, however its cash requirement has
been higher than anticipated. Unfortunately, Dayrize's need for further
capital has accelerated over recent months such that, post the period-end, the
VCT has agreed to a capital structure plan to facilitate further funding from
its existing angel network without requiring further funding from the VCT.
This offers the prospect of a staged recovery of the VCT's loan capital over
the next two years, but only a nominal recovery for the VCT's equity
instruments. Although disappointing, this is believed to be the best outcome
for Shareholders.
The Company's investment values have been partially insulated from market
movements and lower revenue growth by the preferred investment structures
utilised in the financing of many of the portfolio companies. This acts to
moderate valuation swings and the net result can be more modest falls when
portfolio company values decline. Conversely, this can mean value growth above
the VCT's preference amounts may be limited for a time as enterprise values
increase through the catch-up 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 30 September % of total investments 31 December 2023 % of total investments
2024 £m
£m
Revenue multiple 78.27 69.1% 35.81 55.8%
Gross profit multiple 15.31 13.5% 8.77 13.7%
Earnings multiple 10.29 9.1% 9.33 14.5%
Bid Price 3.52 3.1% 2.24 3.5%
Net asset value 3.19 2.8% 2.09 3.3%
Cost less impairment 2.02 1.8% 1.02 1.6%
Estimated Realisation proceeds 0.68 0.6% - 0.0%
Recent investment price (subsequently calculated as appropriate) - 0.0% 4.88 7.6%
Total 113.28 64.14
Realisations during the period
The Company completed one exit during the period, as detailed below:
Company Business Period of Total cash proceeds over
investment the life of the investment/ Multiple over cost
Master Removers Group A specialist logistics, storage and removals business December 2014 to February 2024 £6.62 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 £3.49 million from the
sale plus £0.68 million after the period-end. Total proceeds received by the
Company to date over the life of the investment are £6.62 million compared to
an original investment cost of £2.03 million. On a combined MIG and MIG 2 VCT
basis (MIG 2 VCT amounts being received prior to the Merger), including
amounts received after period-end, total proceeds are £10.60 million compared
to an original cost of £3.25 million. Overall, this investment generated a
multiple on cost of 3.3x and an IRR of 26%.
Other losses during the period
The Company realised its investment in Bleach Holdings Limited ("Bleach")
during the period. Bleach had significantly underperformed in the face of
issues such as Covid-19 and the subsequent consumer downturn. Despite a
restructuring in 2023, against a challenging backdrop across the retail
sector, Bleach required further funding to support its scaling which the VCTs
could not provide under current VCT rules. A well-known hair-care provider
agreed to acquire the business and safeguard important jobs but
disappointingly only at a level that generated a minimal return for the VCTs.
The Company had reduced its valuation of Bleach materially in previous periods
such that upon realisation a modest loss of just £0.04 million was recognised
in the period. Northern Bloc Ice Cream has had similar trading difficulties
such that this investment was recognised as a permanent impairment resulting
in a £0.06 million realised loss in the period.
Portfolio income and yield
In the period under review, the Company received the following amounts in
interest and dividend income:
Investment Portfolio Yield Period ended 30 September 2024 Year ended 31 December 2023
£m £m
Interest received in the period 0.47 0.54
Dividends received in the period 0.02 0.09
OEIC and bank interest received in the period 1.10 2.03
Total portfolio income in the period 1.59 2.66
Net Asset Value at period 144.32 95.99
Income Yield (Income as a % of Net asset value at period-end)* 1.1% 2.8%
* Yield appears lower due to a shorter period under review, as well as the
acquisition of MIG 2 VCT's assets being reflected in the net asset
value at the period-end with interest and dividend income only reflected for
the period since the Merger.
Investments after the period-end
The Company made two new and three further investments totalling £2.22
million after the period-end, as detailed below:
New:
Company Business Date of investment Amount of new investment (£m)
Mobility Mojo A software platform supporting accessibility audits October 2024 0.42
Based in Dublin, Mobility Mojo (https://www.mobilitymojo.com/) was founded in
2018 and empowers organisations worldwide to create more accessible and
inclusive spaces. Mobility Mojo's innovative software platform enables
companies to capture, track, enhance, promote and benchmark the accessibility
of their buildings in a standardised and cost-effective way across their
entire portfolio. The solution significantly reduces the time and expense
typically associated with traditional paper-based accessibility audits and it
is adaptable to a diverse set of environments, including office spaces, hotels
and retail banks. The funding will support Mobility Mojo in expanding its
marketing and sales teams, enhancing its SaaS platform with new AI-driven
capabilities and recruiting key talent to its leadership team.
Much Better Adventures Online travel operator November 2024 0.97
specialising in creating unique 'adventure' group trips
Much Better Adventures (https://www.muchbetteradventures.com/) has developed a
reliable, engaging, user-friendly platform that resonates with customers. This
is reflected in the positive customer reviews and strong repeat rates. It has
built a strong organic search presence in the UK through a combination of a
high-quality website and social content, and curating trips that appeal to its
clear Ideal Customer Profile, a highly marketable segment that fits with the
product offering. With this investment the business will be robustly funded
with the ability to tune expenditure to market conditions.
Existing:
Company Business Date of investment Amount of further investment (£m)
Branchspace Digital retail software provider to aviation and travel industry November 2024 0.27
Branchspace (https://www.branchspace.com/ (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.
Preservica Seller of proprietary digital archiving software December 2024 0.46
Preservica (https://preservica.com (https://preservica.com) ) is a SaaS
software business with blue chip customers and strong recurring revenues. It
has developed market leading software for the long-term preservation of
digital records, ensuring that digital content can remain accessible,
irrespective of future changes in technology. The business has seen annual
recurring revenues nearly double over the last two financial years. This
additional funding will give the business extra headroom to deliver 20-25% ARR
growth whilst seeking an exit in 2025.
FocalPoint GPS enhancement software provider December 2024 0.10
Focal Point Positioning Limited (https://focalpointpositioning.com/
(https://focalpointpositioning.com/) ) is a deep tech business with a growing
IP and software portfolio. Its proprietary technology applies advanced physics
and machine learning to dramatically improve the satellite-based location
sensitivity, accuracy, and security of devices such as smartphones, wearables,
and vehicles and reduce costs. The further investment was agreed at the time
of the original funding in September 2022.
Environmental, Social, Governance considerations
The Board and the Investment Adviser believe that the consideration of
environmental, social and corporate governance ("ESG") factors throughout the
investment cycle should contribute towards enhanced shareholder value.
The Investment Adviser has a dedicated team which is focused on sustainability
as well as the Investment Adviser's Sustainability Executive Committee who
provide oversight and accountability for the Investment Adviser's approach to
sustainability across its operations and investment practices. This is viewed
as an opportunity to enhance the Company's existing protocols and procedures
through the adoption of the highest industry standards. Each investment
executive is responsible for setting and achieving their own individual ESG
objectives in support of the wider overarching ESG goals of the Investment
Adviser.
The Investment Adviser's Private Equity division has its own Sustainable
Investment Policy, in which it commits to:
· Ensure its team understands the imperative for effective ESG management
and is equipped to 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 above and in the
Director's Report in the Annual Report.
Outlook
Geo-political flux is likely to persist throughout 2025, although domestically
the economic landscape is expected to be on a surer footing. This environment
should also present attractive opportunities for your Company but, as a
selective investor, it still has the advantage of being able to take a
longer-term view of both new and portfolio follow-on investments. The
early-stage cohort of investments are taking on the challenges presented and
are expected to accelerate their funding plans, however this should also
produce attractive further investment opportunities.
The first Budget under the new Labour Government was held after the period-
end, the content of which weighed heavily on the overall health of the UK
economy. Of particular note and concern for the portfolio and its companies,
there is an expected impact of increased Employer's National Insurance
contributions.
Gresham House's seasoned investment managers and advisers are a vital source
of knowledge and experience available to support the Company's portfolio of
management teams. In this respect, Gresham House is well placed by having one
of the largest and most experienced portfolio teams in the industry with an
average of over 18 years' relevant industry experience.
Pleasingly, the portfolio continues to perform in delivering growth against a
challenging backdrop, although the early-stage companies will need careful
monitoring and guidance. The new and further investment landscape should
provide continued opportunities to expand the portfolio with assets with the
potential to generate strong returns for investors. The Company's strong
liquidity provides Gresham House with ample capacity to fulfil these
prospects.
Gresham House Asset Management Limited
Investment Adviser
13 January 2025
Annual General Meeting
The AGM will be held at 1.00 pm on Wednesday, 5 March 2025 on the 1st floor, 8
Fenchurch Place, London, EC3M 4PB 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 period ended 30 September 2024 will be
available shortly on the Company's website: http://www.migvct.co.uk
(http://www.migvct.co.uk) .
It will also be submitted shortly in full unedited text to the Financial
Conduct Authority's National Storage Mechanism and will be available for
inspection at 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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