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Mobeus Inc&Gwth - Half-year Report

RNS Number : 7971Y
Mobeus Income & Growth VCT PLC
11 September 2020
 

 

MOBEUS INCOME & GROWTH VCT PLC

 

 

 

HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2020

 

Mobeus Income & Growth VCT plc ("the Company") today announces its half-year results for the six months ended 30 June 2020.

 

As at 30 June 2020:

Net assets: £74.71 million

Net asset value ("NAV") per share: 58.86 pence

 

 

Financial Highlights

 

Results for the six months ended 30 June 2020

 

·      Net asset value total return1 per share was 0.1% for the six months. 

 

 

·      Share price total return1 per share fell by 5.1% for the six months.

 

 

·      The Company declared an interim dividend in respect of the current year of 6.00 pence per share, paid to Shareholders on 7 May 2020.

 

 

·      The Company realised investments for a total of £9.35 million, a gain of £1.99 million for the six months over their valuation at 31 December 2019.

 

 

·      The Company invested £1.68 million into one new growth capital investment and two follow-on investments.

 

1 Alternative performance measure (APM). See glossary of terms on page 30 of the Half-Year Report.

 

 

Performance summary

 

The table below shows the recent past performance of the original fundraising launched in 2004. Performance data for all fundraising rounds and for former Matrix Income & Growth 3 VCT plc ("MIG3 VCT") shareholders are shown in the tables on pages 28 and 29 of the Half-Year Report and will be available on the Company's website.

 

 

Reporting date

 

 

 

 

Net
assets

 

 

NAV per Share

 

 

Share

 Price

 (mid-market price)1

 

Cumulative dividends paid

per share

 

 

 

Cumulative total return per share to shareholders2

Dividends

per share declared in

respect of the period

 

 

 

(NAV

basis)

 

(Share price basis)

 

As at

(£m)

(p)

(p)

(p)

(p)

(p)

(p)

30 June 2020

74.71

58.86

50.50

134.80

193.66

185.30

6.003

31 December 2019

71.89

68.78

63.754

124.80

193.58

188.55

10.00

30 June 2019

77.13

73.00

61.50

118.80

191.80

180.30

4.00

 

 

 

 

 

 

 

 

 

 

1      Source: Panmure Gordon (mid-price). Note that the Share price at 30 June 2020 is by reference to the last announced NAV per share at 31 March 2020 of 52.78p (after adjusting for a 6.00 pence per share dividend paid in May 2020).

2      Cumulative total return per share comprises either the NAV per share (NAV basis) or the mid-market price per share (share price basis), plus cumulative dividends paid since launch in 2004.

3      The Directors declared an interim dividend of 6.00 pence per share in respect of the year ending 31 December 2020. The dividend was paid to Shareholders on 7 May 2020.

4      The share price has been adjusted for a 4.00 pence dividend paid after the year-end on 8 January 2020 which was ex-div at 31 December 2019.

 

 

Chairman's Statement

I am pleased to present the Company's Half-Year Report for the six months ended 30 June 2020.

 

Overview

The 2020 half-year was preceded by a strong NAV total return of 13.6% for the year ended 31 December 2019. This excellent performance continued in the early part of 2020 with two profitable realisations, Biosite and Auction Technology Group, the latter of which was the Company's most successful exit in its history.

 

Midway through this half-year, COVID-19 and the UK Government's lockdown measures provoked significant uncertainty and instability. This resulted in a significant dip in consumer and business confidence and the public markets saw a sharp fall for the first quarter of the year.

 

Over this unprecedented time, the  Board has liaised closely with the Investment Adviser, Mobeus Equity Partners LLP ("Mobeus"), who responded well in ensuring that all practical steps were being taken to enable each company to trade through the crisis where possible and could seek to grow in value thereafter.

 

Amongst many portfolio initiatives, all investee companies were alerted to, and some utilised, available government support packages. The Company also provided loan interest payment holidays to certain portfolio companies, generating vital cash headroom for them during the lockdown period.

 

The immediate impact for Shareholders of the COVID-19 crisis was that a number of valuation adjustments were made at the end of March resulting in a fall of 8.7% in underlying NAV per share for the quarter to 58.78 pence. These adjustments were partly stock market related, but also partly in response to COVID-19's impact on specific market segments and investee companies. This fall in NAV was tempered by the beneficial impact of the sale of Auction Technology Group.

 

In the second quarter, greater clarity has emerged on the impact of the crisis upon the portfolio. To date, this has been more modest than was initially expected and it has become apparent that there have been several portfolio beneficiaries arising from a structural change in activity, behaviour and consumer purchasing habits. Much of the portfolio has demonstrated a strong degree of resilience. Also, quoted stock markets have seen a significant rally since the March low point, although at the time of writing the FTSE-100 Index has still fallen by almost a fifth over the six months under review. Overall, the view of the Board and Mobeus is that the environment for our investee companies has been less volatile and less uncertain than initially thought, such that the valuation of the portfolio recovered strongly at the end of June. Over the six months to 30 June 2020, the NAV total return was stable which the Board considers a very creditable result in this environment. Further information is set out under Performance in my Statement below.

 

A number of transactions occurred during the period. In the first quarter, the Company made two profitable portfolio realisations: Biosite and Auction Technology Group. The exit of Auction Technology Group generated the Company's highest absolute profit to date. In May, two follow-on investments were made into existing portfolio companies, Rotageek and MyTutor, and one new investment was made into Andersen EV in June. Since the period-end, a follow-on investment of £1.42 million was made in Buster and Punch Holdings Limited. Further details of the investment activity are contained in the Investment Adviser's Review.

 

The Board is very encouraged by the recent profitable disposals, following the period-end, of Tovey Management (trading as Access IS) and Blaze Signs realising cash proceeds of £7.07 million and £1.98 million respectively, in what remains a challenging environment.  The impact of these realisations on the NAV per share of 58.86 pence at 30 June 2020 is estimated to be an increase of 1.71 pence per share. This is in isolation to any other matters that may affect NAV per share.

 

Performance

The Company's NAV total return per share was 0.1% for the six months to 30 June 2020 (2019: 11.0%). This NAV total return reflects a material recovery in NAV per share compared to that announced at the height of the pandemic as at 31 March 2020. The share price total return was a fall of 5.1% (2019: increase of 7.3%), at 30 June, mainly because the share price at 30 June is by reference to the 52.78 pence NAV per share at 31 March 2020 (after deducting a dividend of 6.00 pence per share paid in May 2020), and does not reflect the increase in NAV per share in the quarter to 30 June 2020.

 

Although the NAV was reduced by falls in the valuations of specific portfolio companies, reflecting the impact of COVID-19, this adverse impact was partly offset by a number of factors. Positive returns came both from realised gains from portfolio exits as well as a strong revenue return. Several of the Company's investment structures incorporate a preference, such that any reduction in the value of the enterprise does not feed directly into the same reduction in the value of the Company's investment. In addition, the Company has significant liquidity which, in accordance with its policy, has been invested in lower risk liquidity funds and bank deposit accounts and these have retained their value.

 

The Board therefore believes that the Company's performance has demonstrated a good degree of resilience over the half-year. At the period-end, your Company was ranked 12th out of 43 Generalist VCTs over five years and 2nd out of 31 over 10 years, in the Association of Investment Companies' analysis of NAV Cumulative Total Return.

 

For further details on the performance of the Company, please refer to the Investment Adviser's Report on pages 5 to 8 and the longer-term Performance Data on pages 28 and 29 of the Half-Year Report.

 

Dividends

A further interim dividend for last year of 4.00 pence per share had been paid on 8 January 2020. On 2 April 2020, the Board declared an interim dividend of 6.00 pence per share in respect of the current financial year, paid to Shareholders on 7 May 2020, whose names were on the Register on 14 April 2020.

 

Your Board has therefore already met the 4.00 pence per share annual dividend target in respect of the current financial year. However, the gradual move of the portfolio to growth capital investments may make the target more difficult to achieve in future financial years without recourse to the Company's reserves.

 

Shareholders should note that there may continue to be circumstances where the Company is required to pay dividends in order to maintain its regulatory status as a VCT, for example, to stay above the minimum percentage of assets required to be held in qualifying investments.  Such dividends may cause the Company's NAV per share to reduce by a corresponding amount.

 

Investment portfolio

In the context of a very challenging business environment, the portfolio has performed comparatively well during this period. The overall value has decreased by £0.78 million (2019: £7.59 million increase), or -1.5% (2019: +15.7%), compared to the start of the year. This fall was comprised of a net unrealised decrease in valuations of £2.77 million, partially offset by £1.99 million in realised gains over the six-month period. Taking into account these realisations, new investments and valuation movements, the portfolio was valued at £43.25 million at the period-end (31 December 2019: £51.70 million).

 

During the six-months under review, the Company invested a total of £1.68 million, (2019: £2.30 million) into one new and two existing investments. The existing investments were:

 

●             MyTutor - A digital marketplace for school tutoring                    £0.84 million

●             Rotageek - A workforce management software provider           £0.57 million

 

and the new investment was:

 

●             Andersen EV - An electric vehicle charge point business           £0.27 million

 

The Company realised investments in Pattern Analytics (trading as Biosite) and Turner Topco (trading as Auction Technology Group) during the period, which, combined with other capital receipts, generated total proceeds of £9.35 million.

 

The realisation of Auction Technology Group achieved a substantial gain over cost and represented proceeds of £6.84 million and a gain of £1.88 million in the period. Over the 11½ year life of the investment, total proceeds of £14.77 million have been received, an overall multiple of over 4.5x original cost and an IRR of 29%.

 

Pattern Analytics (trading as Biosite), an investment made after the 2015 rule change, was realised for proceeds of £2.34 million. Over the three-year life of the investment, this company generated a return on original cost of 1.5x and an IRR of 21%.

 

Other capital proceeds of £0.17 million and realised gains of £0.11 million were principally generated from Redline Worldwide, an investment realised in a prior period and a loan repayment from BookingTek, an existing portfolio company.

 

Following the period-end, there were additional realisations from:

 

●             Access IS - £8.25 million cash proceeds received since investment equating to a 2.5x multiple of cost and an IRR of 23%;

●             Blaze - £5.27 million cash proceeds received over the life of the investment; a 2.7x multiple of cost and an IRR of 14%.

 

Details of this investment activity and the performance of the portfolio are contained in the Investment Adviser's Review and the Investment Portfolio Summary later in this announcement.

 

Revenue account

The results for the period are set out in the Unaudited Condensed Income Statement and show a revenue return (after tax) of 1.54 pence per share (2019: 0.92 pence per share). The revenue return for the period of £1.92 million has increased from last year's comparable figure of £0.98 million. This increase is mainly due to a significant receipt of loan interest, previously unrecognised, arising from the sale of Auction Technology Group, partially offset by a number of provisions against loan interest.

 

Fundraising

The Board was very pleased with the support in respect of the Company's Offer for Subscription which was launched on 25 October 2019. This Offer became fully subscribed within two months and raised £15.00 million in total.  The Company allotted a total of 23,233,293 shares of 1 penny each in the Company on 8 January and 2 April 2020. The Board extends a warm welcome to all new Shareholders.

 

Shareholder Event

The Investment Adviser held its annual Shareholder event on 4 February 2020 and is planning to hold a virtual event in the first quarter of 2021. Details will be notified to Shareholders once confirmed and will be shown on the Company's website:  www.migvct.co.uk.

 

Share buybacks

During the six months under review, the Company bought back and cancelled 840,716 of its own shares, representing 0.8% (2019: 1.2%) of the shares in issue at the beginning of the period, at a total cost of £0.42 million (2019: £0.76 million) inclusive of expenses.

 

It is the Company's policy to cancel all shares bought back in this way. The Board regularly reviews its buyback policy and currently seeks to maintain the discount at which the Company's shares trade at no more than 5% below the latest published NAV.

 

Liquidity

Following the Company's successful fundraising and significant realisation proceeds, cash or near cash resources held by the Company as at 30 June 2020 was £31.77 million or 42.5% of net assets. After the period-end, following the realisations of Access and Blaze, and the further investment in Buster and Punch, the pro forma level of liquidity will be £39.41 million or 51.2% of net assets. The Board considers the Company to be in a strong cash position.

 

Shareholder communications

May I remind you that the Company has its own website which is available at www.migvct.co.uk containing useful information for Shareholders.

 

Outlook

The full impact of COVID-19 is still unclear and is likely to be felt for several years to come. Nevertheless, your Board considers that your Company is well positioned to cope with most of the likely scenarios in so far as they can presently be foreseen. The successful realisations and recent fundraising have given the Company strong liquidity not only to support the existing portfolio if appropriate and allowed by VCT regulations, but also to capitalise on opportunities which may arise for new investment. The portfolio comprises a foundation of mature investments that are still providing an income return, as well as a younger growth capital portfolio seeking to achieve scale, higher levels of profitability and hence value.

 

The challenges arising from the COVID-19 pandemic should not be underestimated. However, once conditions stabilise, the Board and Mobeus believe that attractive new and follow-on investment opportunities will emerge and are pleased to see that some recovery has been achieved in the last quarter.

 

As the world gradually returns to a new normal in the aftermath of COVID-19, attention may well return to Brexit and the degree to which the UK can reach agreements with the rest of the EU for tariff-free access to our respective markets. All the portfolio companies have been planning for that since before the COVID-19 pandemic took centre stage.

 

Finally, I would like to take this opportunity once again to thank all Shareholders for their continued support.

 

Clive Boothman

Chairman

11 September 2020

 

 

Investment Policy

The Investment Policy is designed to meet the Company's objective.

 

Investments

The Company invests primarily in a diverse portfolio of UK unquoted companies. Investments are made selectively across a number of sectors, principally in established companies. Investments are usually structured as part loan stock and part equity in order to produce a regular income stream and to generate capital gains from realisations.

 

There are a number of conditions within the VCT legislation which need to be met by the Company and which may change from time to time. The Company will seek to make investments in accordance with the requirements of prevailing VCT legislation.

 

Asset allocation and risk diversification policies, including the size and type of investments the Company makes, are determined in part by the requirements of prevailing VCT legislation. No single investment may represent more than 15% (by VCT tax value) of the Company's total investments at the date of investment.

 

Liquidity

The Company's cash and liquid funds are held in a portfolio of readily realisable interest bearing investments, deposit and current accounts, of varying maturities, subject to the overriding criterion that the risk of loss of capital be minimised.

 

Borrowing

The Company's articles of association permit borrowings of amounts up to 10% of the adjusted capital and reserves (as defined therein). However, the Company has never borrowed and the Board would only consider doing so in exceptional circumstances.

 

 

Investment Review

 

COVID-19 Pandemic

In March 2020, in response to the COVID-19 pandemic, the UK Government introduced lockdown and social distancing measures. These measures had an immediate adverse impact on UK businesses, with many companies experiencing a significant reduction in consumer and business demand. Businesses' ability to trade was further impacted by restrictions on their employees' working practices and disruption to their supply chains. The six months to 30 June 2020 have therefore been characterised by ongoing volatility and uncertainty caused by these lockdown measures, together with global stock market falls. Following the low point in March however, there has been a strong trend of recovery in stock market and business activity levels.

 

Looking forward, there are still uncertainties ahead. The impact on transaction activity has been mixed. New investment activity has been low due to difficulties of appraisal and diligence in lockdown and owners of businesses being unwilling to accept downward price adjustments thus far. The level of portfolio follow-on investment has been higher and there are opportunities to back known portfolio companies that are achieving strong relative performance. The realisation activity outlook continues to be positive with several approaches received from trade and financial investors for a number of investee companies.

 

Portfolio review

Overall, the value of the portfolio decreased by £0.78 million over the period comprising a decrease of £2.77 million in the unrealised portfolio and gains of £1.99 million through realisations. This represents a recovery of the majority of the value lost in the first quarter. It is important to note that the usual approach to portfolio valuation by the Investment Adviser continued to be applied throughout this period and that the recovery in the second quarter was not all market related. It reflected a number of other factors such as earnings and revenues being more resilient than expected, the removal of provisions related to the uncertainty that were put in place during the March quarter, and improved cash generation as the UK Government lock down restrictions were eased.

 

There have been a number of portfolio companies that have been clear beneficiaries from UK lockdown which have traded strongly throughout. There is a reasonable expectation that some of these gains will prove permanent. The majority of the portfolio has remained resilient, more so than first thought at the 31 March valuation point which coincided with the height of uncertainty. In particular, there have been very few COVID-19 closures, Tapas Revolution being the only temporary one of note.  Several portfolio companies that saw significant falls in activity early in the crisis are now trading strongly again whilst a number have raised capital to ensure that they are ready to capitalise on demand when it returns.

 

In the six months to 30 June 2020, the Company made two follow-on investments of £0.84 million into MyTutor and £0.57 million into Rotageek. One new growth capital investment has also been made into Andersen EV of £0.27 million, a manufacturer of premium electric vehicle (EV) chargers.

 

Following the period-end, there was an additional follow-on investment of £1.42 million into Buster and Punch.

 

The Company realised its investments in Biosite and Auction Technology Group during the period, receiving a total of £9.18 million in proceeds from these realisations, which contributed to total receipts of £9.35 million during the period. The realisation of Biosite generated proceeds of £2.45 million over the life of the investment and contributed a gain over original cost of 1.5x. Auction Technology Group generated a realised gain in the period of £1.88 million and generated proceeds over the life of the investment of £14.77 million compared to an original cost of £3.27 million, a multiple on cost of 4.5x over the 11½ years this investment was held - an exceptional return for Shareholders.

 

Following the period-end, there were additional realisations from Access IS and Blaze receiving a total of £9.05 million in cash proceeds. The gains from these will be reflected in the second half of the financial year.

 

The investment portfolio's activity in the six months to 30 June 2020 is summarised as follows:

 

 

2020

£m

2019

£m

Opening portfolio value

51.70

48.49

New and follow-on investments

1.68

2.30

Disposal proceeds

(9.35)

(10.08)

Net realised gains

1.99

2.33

Valuation movements

(2.77)

5.26

Portfolio value at 30 June

43.25

48.30

 

The investment and divestment activity during the period has increased the proportion of the portfolio comprised of investments made since the change in the VCT rules to 52.2% by value at the period-end (31 December 2019: 45.2%). The portfolio decreased from 34 to 32 investments at the period end.

 

The portfolio's contribution to the overall results of the Company for the six-month period is summarised as follows:

 

Investment Portfolio Capital Movement

2020

£m

2019

£m

Increase in the value of unrealised investments

4.59

6.54

Decrease in the value of unrealised investments

(7.36)

(1.28)

Net (decrease) / increase in the value of unrealised investments

(2.77)

5.26

Realised gains

2.05

2.33

Realised losses

(0.06)

-

Net realised gains in the period

1.99

2.33

Net portfolio movement in the period

(0.78)

7.59

 

Valuation changes of portfolio investments still held

The valuation reductions of £2.77 million principally arise from the Investment Adviser's review of the portfolio and the impact of COVID-19.

 

Within total valuation decreases, the main reductions were CGI Creative Graphics International - £1.44 million, Tapas Revolution - £1.35 million, and Media Business Insight - £0.97 million. These three companies saw some of the most significant impacts of a sudden decline in demand for their products or services which, even as restrictions are being eased, may take time for value to recover.

 

By contrast, in 5 of the 32 investee companies, trading has benefited from the lockdown, being Access IS, Virgin Wines, MyTutor, Parsley Box and Bleach London. Within total valuation increases, the principal contributors were Access IS: £1.28 million, Virgin Wines: £0.90 million and, Parsley Box: £0.84 million. Access IS's valuation reflects the long-term nature of many of its projects. Both Virgin Wines and Parsley Box have generated record earnings and revenues respectively and time will tell if this increased demand will continue in the medium-term.

 

The period also saw portfolio companies, Jablite and Super Carers, appointing administrators. These two companies were struggling before the impact of COVID-19. Valuation reductions for these companies had already been made, so there has been only a modest £0.06 million realised loss as a result of these administrations.

 

Growth capital investing involves companies which often have not achieved profitability, and as a result, have to be measured on other metrics.  The table below shows the proportion of the portfolio that is represented by high growth but yet to be profitable companies (often valued by reference to revenue or gross profit multiple), compared with more mature, established companies with a history of profitability and which can therefore be valued on an earnings multiple.

 

Valuation methodology

30 June 2020

£m

31 December 2019

£m

Earnings multiple

20.34

30.94

Revenue multiple

19.84

14.14

Gross profit multiple

1.32

3.51

Recent investment price

0.27

2.98

Other

1.48

0.13

Total

43.25

51.70

 

Investment portfolio yield

In the period under review, the Company received the following amounts in interest and dividend income:

Investment Portfolio Yield

2020

£m

2019

£m

Interest received in the period

2.39

1.20

Dividends received in the period

0.30

0.26

Total portfolio income in the period1

2.69

1.46

Portfolio value at 30 June

43.25

48.30

Portfolio Income Yield (Income for the half year as a % of Portfolio value at 30 June)

6.2%

3.0%

1 The increase in income was principally due to interest of £1.78 million received on the loan instruments in Auction Technology Group being paid, as part of the sale transaction, which had not previously been recognised. This income will not be repeated.

 

New investments in the half-year

The Company made one new investment during the period, as detailed below.

 

Company

Business

Date of Investment

Amount of new investment (£m)

 

Andersen EV

Electric vehicle (EV) chargers

 

June 2020

 

0.27

Muller EV Limited (trading as Andersen EV) is a design-led manufacturer of premium electric vehicle (EV) chargers.

Incorporated in 2016, this business has secured high profile partnerships with Porsche and Jaguar Land Rover, establishing an attractive niche position in charging points for the high end EV market. The Company's funds will be used to scale the

business through investment in further products and software, sales and marketing and electric vehicle manufacturer

partnerships. Andersen is well positioned in a nascent sector experiencing significant growth and has increased sales by over 350% for its most recent financial year.

 

 

 

Follow-on investments made in the half-year

The Company made two follow-on investments totalling £1.41 million into existing portfolio companies in the period, as detailed below:

Company

Business

Date of Investment

Amount of new investment (£m)

 

MyTutor

Digital marketplace connecting school pupils seeking one-to- one online tutoring

 

May 2020

 

0.84

MyTutorWeb Limited (trading as MyTutor) is a digital marketplace that connects school pupils who are seeking private

one-to-one tutoring with university students. The business is satisfying a growing demand from both schools and parents to

improve pupils' exam results to enhance their academic and career prospects. This further investment, alongside other

existing shareholders, seeks to build and reinforce its position as a UK category leader in the online education market as well

as to begin to develop a broader, personalised, learning product offering. The COVID-19 impact on the education sector has

significantly heightened the awareness of online learning and tutoring. MyTutor has grown strongly over the last six months

with average year-on-year revenue growth of 70%.

 

Rotageek

Workforce management

software

 

May 2020

 

0.57

Rota Geek Limited is a provider of cloud-based enterprise software to help larger retail leisure and healthcare organisations

predict and meet demand to schedule staff more effectively. This investment will be used to capitalise on opportunities that

will emerge as the retail sector recovers from lockdown restrictions. Rotageek has also moved into healthcare to help address the workforce management issues of a sector that has become chronically overburdened. For the year ended 31 December 2019, revenues have grown over 45% on the prior year.

 

 

 

Follow-on investments post the half-year

After the period-end, the Company made one follow-on investment as detailed below:

Company

Business

Date of Investment

Amount of new investment (£m)

 

Buster & Punch

 

Lighting and interiors

brand

 

September 2020

 

1.42

Buster and Punch is a well-established, premium branded, fast growing business which designs and manufactures a complete range of high-quality functional fittings (lighting, electrical and hardware and other accessories) for the home. The VCT first invested in 2017 and since then, the business delivered consistent high growth across its ranges, with revenues growing in excess of 65%, and reaching nearly £10 million in 2020. Buster and Punch's products are now sold in 99 countries via both its highly invested ecommerce platform and direct services to consumers, trade and retailers across the world. Buster and Punch also operates flagship showrooms in London, Stockholm and Los Angeles. To support the continued growth of Buster and Punch, the new funding will be used to drive the global business plans of the fast-growing luxury interior fashion label with further expansion and strategic new penetration into the US and Asia Pacific markets.

 

 

 

Realisations in the half-year

The Company realised two investments during the period, as detailed below:

Company

Business

Period of investment

Total cash proceeds over the life of the investment / Multiple over cost

 

Biosite

Workforce management and security services

November 2016 to February 2020

£2.45 million

1.5 x cost

The Company sold its investment in Biosite to ASSA ABLOY AB for £2.34 million. Since investment in 2016, the investment has generated proceeds of £2.45 million compared to an original investment cost of £1.58 million, which is a multiple on cost of 1.5x and an IRR of 21%.

Auction Technology Group

SaaS based online auction marketplace platform

October 2008 to February 2020

£14.77 million

4.5 x cost

The Company sold its investment in Auction Technology Group to TA Associates for £8.62 million (including £1.78 million loan interest due on completion). This investment generated proceeds of £14.77 million over the life of the investment compared to an original cost of £3.27 million, which is a multiple on cost of 4.5x and an IRR of 29%.

 

 

 

Realisations post the half-year

Following the period end, there were additional realisations from Access IS and Blaze.

Company

Business

Period of investment

Total cash proceeds over the life of the investment/ Multiple over cost

Access IS

Data capture and scanning hardware

October 2015 to

August 2020

£8.25 million

2.5 x cost

The Company sold its investment in Tovey Management Limited (trading as Access IS) to ASSA ABLOY AB for £7.04 million. Since investment in 2015, the investment has generated proceeds of £8.25 million compared to an original investment cost of £3.26 million, which is a multiple on cost of 2.5x and an IRR of 23%.

Blaze

Manufacturer and installer of signs

April 2006 to September 2020

£5.27 million

2.7 x cost

The Company sold its investment in Blaze Signs Holdings Limited via a secondary buy out backed by Elaghmore Advisor LLP and has received cash proceeds of £1.98 million. Over the 14 years this investment was held, cash proceeds of £5.27 million have been received compared to original cost of £1.95 million, which is a multiple of cost of 2.7x and an IRR of 14%.

 

 

 

Mobeus Equity Partners LLP

 Investment Adviser

 11 September 2020

 

 

Investment Portfolio Summary

as at 30 June 2020

 

 

 

 

Qualifying  investments

 

 

Market sector

Date of investment

Total book cost

 

£'000

Valuation

 

 

 

£'000

Like for like valuation increase/ (decrease) over period1

% value of net assets

Unquoted  investments

 

 

 

 

 

 

Tovey Management Limited (trading as Access IS)

Provider of data capture and scanning hardware

Electronic

& electrical equipment

Oct-15

2,979

5,715

27.1%

7.7%

Virgin Wines Holding Company Limited

Online wine retailer

General retailers

Nov-13

2,439

4,029

28.8%

5.4%

MPB Group Limited

Online marketplace for used photographic and video equipment

General retailers

Jun-16

1,900

3,640

5.1%

4.9%

Preservica Limited

Seller of proprietary digital archiving software

Software and computer services

Dec-15

2,099

3,370

24.6%

4.5%

Vectair Holdings Limited

Designer and distributor of washroom products

Support services

Jan-06

138

2,434

(16.8)%

3.3%

My Tutorweb Limited (trading as MyTutor) Digital marketplace connecting school pupils seeking one-to-one online tutoring

Support services

May-17

2,374

2,374

-

3.2%

Proactive Group Holdings Inc

Provider of media services and investor conferences for companies primarily listed on secondary public markets

General financial 

Jan-18

926

2,331

-

3.1%

EOTH Limited (trading as Equip Outdoor Technologies)

Branded outdoor equipment and clothing

General retailers

Oct-11

1,000

2,203

(13.8)%

2.9%

Vian Marketing Limited (trading as Red Paddle Co)

Design, manufacture and sale of stand-up paddleboards and windsurfing sails

Leisure goods

Jul-15

1,189

1,768

-

2.4%

Parsley Box Limited

Supplier of home delivered ambient ready meals for the elderly

General retailers

May-19

854

1,744

93.8%

2.3%

Data Discovery Solutions Limited (trading as Active Navigation)

Provider of global market leading file analysis software for information governance, security and compliance

Software and computer services

Nov-19

1,413

1,713

21.3%

2.3%

 

Buster and Punch Holdings Limited

Industrial inspired lighting and interiors retailer

General retailers

Mar-17

668

1,320

13.2%

1.8%

 

Rota Geek Limited

Workforce management software

Support services

Aug-18

1,142

1,290

0.9%

1.7%

 

Arkk Consulting Limited (trading as Arkk Solutions)

Provider of services and software to enable organisations to remain compliant with regulatory reporting requirements

Software and computer services

May-19

1,447

1,270

(14.0)%

1.6%

 

Bleach London Holdings Limited

Hair colourants brand

General retailers

Dec-19

674

944

40.0%

1.3%

 

Tharstern Group Limited

Software based management information systems

Software and computer services

Jul-14

1,377

915

(34.4)%

1.2%

 

IPV Limited

Provider of media asset software

Software and computer services

Nov-19

890

890

-

1.2%

 

Blaze Signs Holdings Limited

Manufacturer and installer of signs

Support services

Apr-06

492

847

(19.6)%

1.1%

 

 

 

Media Business Insight Holdings Limited

A publishing and events business focused on the creative production industries

Media

Jan-15

2,518

806

(42.3)%

1.1%

 

Master Removers Group 2019 Limited

(trading as Anthony Ward Thomas, Bishopsgate and Aussie Man & Van)

A specialist logistics, storage and removals business

Support services

Dec-14

419

536

(43.2)%

0.7%

 

Manufacturing Services Investment Limited (trading as Wetsuit Outlet)

Online retailer in the water sports market

General retailers

Jul-17

2,174

482

(31.1)%

0.6%

 

Kudos Innovations Limited

Online platform that provides and promotes academic research dissemination

Support services

Nov-18

421

421

(36.3)%

0.6%

 

Muller EV Limited (trading as Andersen EV)

Provider of premium electric vehicle (EV) chargers

Electronic

& electrical equipment

Jun-20

270

270

New investment

0.4%

 

CGI Creative Graphics International Limited Vinyl graphics to global automotive, recreational vehicle and aerospace markets

General industrials

Jun-14

1,808

240

(85.7)%

0.3%

 

Spanish Restaurant Group Limited (formerly

Ibericos Etc. Limited) (trading as Tapas

Revolution)

Spanish restaurant chain

Travel & leisure

Jan-17

1,245

167

(89.0)%

0.2%

 

Jablite Holdings Limited

Manufacturer of expanded polystyrene products

Construction and

materials

Apr-15

502

66

(47.5)%

0.1%

 

Veritek Global Holdings Limited

Maintenance of imaging equipment

Support services

Jul-13

2,045

-

-

0.0%

 

RDL Corporation Limited

Recruitment consultants for the pharmaceutical, business intelligence and IT industries

Support services

Oct-10

1,558

-

(100.0)%

0.0%

 

Racoon International Group Limited

Supplier of hair extensions, hair care products and training

Personal goods

Dec-06

1,213

-

-

0.0%

 

BookingTek Limited

Direct booking software for hotel groups

Software and computer services

Oct-16

687

-

-

0.0%

 

Oakheath Limited (trading as Super Carers) (in liquidation)

Online platform that connects people seeking home care from experienced independent carers

Support services

Mar-18

580

-

-

0.0%

 

CB Imports Group Limited (trading as Country Baskets)

Importer and distributor of artificial flowers and floral sundries

General retailers

Dec-09

       350

-

-

0.0%

 

Total      qualifying  investments

 

 

39,791

41,785

 

55.9%

 

 

 

 

 

 

 

 

 

Non-qualifying investments

Market sector

Date of investment

Total book cost

 

£'000

Valuation

 

 

 

£'000

Like for like valuation increase/ (decrease) over period1

% value of net assets

 

Media Business Insight Limited

A publishing and events business focused on the creative production industries

Media

Jan-15

765

512

7.1%

0.7%

 

Manufacturing Services Investment Limited (trading as Wetsuit Outlet)

Online retailer in the water sports market

General retailers

Jul-17

571

343

(40.0)%

0.5%

 

EOTH Limited (trading as Equip Outdoor Technologies)

Branded outdoor equipment and clothing

General retailers

Oct-11

298

324

-

0.4%

 

Tovey Management Limited (trading as Access IS)

Provider of data capture and scanning hardware

Electronic

& electrical equipment

Oct-15

285

285

-

0.4%

 

Total non-qualifying investments

 

 

1,919

1,464

 

2.0%

 

Total investment portfolio

 

 

41,710

43,249

 

57.9%

 

Current asset investments and Cash at bank and in hand2

 

 

31,774

31,774

 

42.5%

 

Total investments

 

 

73,484

75,023

 

100.4%

 

Other assets

 

 

 

249

 

0.4%

 

Current liabilities

 

 

 

(562)

 

(0.8)%

 

Net assets

 

 

 

74,710

 

100.0%

 

Portfolio split by type

 

 

 

 

 

 

 

Investments made prior to 2015 VCT rule change

 

 

21,375

20,682

 

47.8%

 

Investments made after 2015 VCT rule change

 

 

20,335

22,567

 

52.2%

 

Total Investment Portfolio

 

 

41,710

43,249

 

100.0%

 

 

1 - This percentage change in 'like for like' valuations is a comparison of the 30 June 2020 valuations with the 31 December 2019 valuations (or where a new investment has been made in the period, the investment amount) having adjusted for partial disposals, loan stock repayments or new or new or follow-on investments in the period.

 

 

2 - Disclosed as Current Asset Investments and Cash at bank and in hand within Current assets in the Balance Sheet.

 

 

Statement of the Directors' Responsibilities 

 

Responsibility statements

In accordance with Disclosure and Transparency Rule (DTR) 4.2.10, Clive Boothman (Chairman), Bridget Guérin (Chairman of the Nomination & Remuneration and Management Engagement Committees), and Catherine Wall (Chairman of the Audit Committee), being the Directors of the Company, confirm that, to the best of their knowledge:

 

a)     the condensed set of financial statements, which has been prepared in accordance with Financial Reporting Standard 104 "Interim Financial Reporting" gives a true and fair view of the assets, liabilities, financial position and profit of the Company, as required by DTR 4.2.10;

 

b)    the Half-Year Management Report which comprises the Chairman's Statement, Investment Policy, Investment Review and Investment Portfolio Summary includes a fair review of the information required by DTR 4.2.7, being an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements;

 

c)     a description of the principal risks and uncertainties facing the Company for the remaining six months is set out below, in accordance with DTR 4.2.7; and

 

d)    there were no related party transactions in the first six months of the current financial year that are required to be disclosed in accordance with DTR 4.2.8.

 

Principal risks and uncertainties

In accordance with DTR 4.2.7, the Board confirms, that the principal risks and uncertainties facing the company have not changed materially since the publication of the Annual Report and Financial Statements for the year ended 31 December 2019 other than the risks arising from the COVID-19 pandemic, referred to in the Chairman's Statement and the Investment Advisor's Report, the impact of which has been reflected in the valuation of the Company's investment portfolio. The Board acknowledges that there is regulatory risk and continues to manage the Company's affairs in such a manner as to comply with section 274 of the Income Tax Act 2007.

 

The principal risks faced by the Company are:

 

·      Economic;

·      Loss of approval as a Venture Capital Trust;

·      Investment and strategic;

·      Regulatory;

·      Financial and operating;

·      Valuations and stock market;

·      Asset liquidity;

·      Market liquidity;

·      Counterparty; and

·      Key staff.

 

A detailed explanation of these risks can be found in the Strategic Report on pages 27 to 28 and in Note 15 on pages 62 - 68 of the Annual Report and Financial Statements for the year ended 31 December 2019, copies of which can be viewed or downloaded from the Company's website: www.migvct.co.uk.

 

Going concern

The Board has assessed the Company's operation as a going concern. The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the Half-Year Management Report. The Directors have satisfied themselves that the Company's cash position, bolstered by the recent fundraising and four disposals since the year-end, is adequate to enable the Company to continue as a going concern under any plausible stress scenario. The portfolio taken as a whole remains resilient and well-diversified although the impact of the COVID-19 pandemic is still being experienced. The major cash outflows of the Company (namely investments, share buy-backs and dividends) are within the Company's control.

 

The Board's assessment of liquidity risk and details of the Company's policies for managing its capital and financial risks are shown in Notes 15 and 16 on pages 62 to 69 of the Annual Report and Financial Statements for the year ended 31 December 2019. Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the half-year report and annual financial statements.

 

Cautionary statement

This report may contain forward looking statements with regards to the financial condition and results of the Company, which are made in the light of current economic and business circumstances. Nothing in this report should be construed as a profit forecast.

 

For and on behalf of the Board:

 

Clive Boothman

Chairman

11 September 2020

 

 

 

 

Unaudited Condensed Income Statement

for the six months ended 30 June 2020

 

 

 

 

Six months ended 30 June 2019

(unaudited)

Six months ended 30 June 2019

 (unaudited)

 

Notes

Revenue

Capital

Total

Revenue

Capital

Total

 

£

£

£

£

£

£

Net investment portfolio (losses)/gains

9

-

(787,177)

(787,177)

-

7,594,291

7,594,291

Income

4

2,770,006

-

2,770,006

1,561,649

-

1,561,649

Investment Adviser's fees

5

(214,035)

(642,106)

(856,141)

(201,020)

(603,058)

(804,078)

Other expenses

 

(253,172)

-

(253,172)

(205,390)

-

(205,390)

Profit/(loss) on ordinary activities before taxation

 

 

 

2,302,799

 

 

(1,429,283)

 

 

873,516

1,155,239

6,991,233

8,146,472

Tax on profit on ordinary activities

6

(380,390)

122,000

(258,390)

(171,952)

114,581

(57,371)

Profit/(loss) and total comprehensive income

 

 

1,922,409

 

(1,307,283)

 

615,126

983,287

7,105,814

8,089,101

Basic and diluted earnings per share

7

 

 

1.54p

 

 

(1.05)p

 

 

0.49p

0.92p

6.69p

7.61p

 

 

 

Year ended 31 December 2019

(audited)

 

Notes

Revenue

Capital

Total

 

£

£

£

Unrealised gains on investments

 

-

9,144,246

9,144,246

Income

4

2,854,837

-

2,854,837

Investment Adviser's fees

5

(406,306)

(1,218,918)

(1,625,224)

Other expenses

 

(411,005)

-

(411,005)

Profit on ordinary activities before taxation

 

 

 

2,037,526

 

 

7,925,328

 

 

9,962,854

Tax on profit on ordinary activities

6

(293,485)

231,594

(61,891)

Profit for the year and total comprehensive income

 

1,744,041

8,156,922

9,900,963

Basic and diluted earnings per share

7

1.65p

7.71p

9.36p

 

 

 

The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the net investment portfolio (losses)/gains (unrealised (losses)/gains and realised gains on investments) and the proportion of the Investment Adviser's fee charged to capital.

 

The total column is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS"). In order to better reflect the activities of a VCT and in accordance with the 2014 Statement of Recommended Practice ("SORP") updated in October 2019 by the Association of Investment Companies ("AIC"), supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of profit attributable to equity Shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 Income Tax Act 2007.

 

All the items in the above statement derive from continuing operations of the Company. No operations were acquired or discontinued in the period/year.

 

 

 

Unaudited Condensed Balance Sheet

as at 30 June 2020

 

Company registration number: 05153931

 

 

 

30 June 2020 (unaudited)

30 June 2019 (unaudited)

31 December 2019 (audited)

 

 

 

Notes

£

£

£

 

Fixed assets

 

 

 

 

 

Investments at fair value

9

43,248,661

48,296,028

51,703,161

 

Current assets

 

 

 

 

 

Debtors and prepayments

 

249,195

243,315

225,562

 

Current asset investments

10

28,570,843

19,902,109

12,914,124

 

Cash at bank

10

3,203,047

9,074,632

7,261,618

 

 

 

32,023,085

29,220,056

20,401,304

 

 

Creditors: amounts falling due within one year

 

 

(561,945)

 

(387,090)

 

(216,090)

 

Net current assets

 

31,461,140

28,832,966

20,185,214

 

Net assets

 

74,709,801

77,128,994

71,888,375

 

 

 

Capital and reserves

 

 

 

 

 

Called up share capital

 

1,269,191

1,056,569

1,045,265

 

Capital redemption reserve

 

19,711

44,644

11,304

 

Share premium reserve

 

14,397,509

43,669,335

-

 

Revaluation reserve

 

3,767,953

7,777,490

8,719,606

 

Special distributable reserve

 

31,759,150

7,984,414

45,731,919

 

Realised capital reserve

 

19,722,344

13,920,908

14,528,747

 

Revenue reserve

 

3,773,943

2,675,634

1,851,534

 

Equity Shareholders' funds

 

74,709,801

77,128,994

71,888,375

 

 

 

Basic and diluted net asset value per share

 

 

11

 

 

58.86p

 

 

73.00p

 

 

68.78p

 

 

The financial information for the six months ended 30 June 2020 and the six months ended 30 June 2019 has not been audited.

 

 

 

Unaudited Condensed Statement of Changes in Equity

for the six months ended 30 June 2020

 

 

 

 

 

 

 

Notes

Non-distributable reserves

Distributable reserves

 

 

Called up share capital

£

Capital redemption reserve

£

Share premium reserve

£

Revaluation reserve

£

Special distributable reserve

(Note a)

£

Realised capital reserve

(Note b)

£

Revenue reserve

Total

£

 

At 1 January 2020

 

1,045,265

11,304                              -

8,719,606

45,731,919

14,528,747

1,851,534

71,888,375

 

Comprehensive  income

 

 

 

 

 

 

 

 

 

for the period

 

 

 

 

 

 

 

 

 

(Loss)/profit for the period

 

-

-                           -

(2,777,454)

-

1,470,171

1,922,409

615,126

 

Total comprehensive income for the period

 

 

 

-

 

 

-                          -

 

 

(2,777,454)

 

 

-

 

 

1,470,171

 

 

1,922,409

 

 

615,126

 

 

 

Contributions by and

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

 

15,000,000

 

distributions to owners

 

 

 

 

 

Shares issued via Offer

 

 

 

 

 

for Subscription (Note c)

 

232,333

-

14,767,667

-

 

Issue costs and

 

 

 

 

 

 

 

 

 

facilitation fees on Offer

 

 

 

 

 

 

 

 

 

for Subscription (Note c)

 

-

-                   (370,158)

-

(152,153)

-

-

(522,311)

 

Shares bought

 

 

 

 

 

 

 

 

 

back (Note d)

 

(8,407)

8,407                             -

-

(424,741)

-

-

(424,741)

 

Dividends paid

8

-

-                                -

-

(11,846,648)

-

-

(11,846,648)

 

Total contributions by and distributions to owners

 

 

 

 

223,926

 

 

 

8,407      14,397,509

 

 

 

-

 

 

 

(12,423,542)

 

 

 

-

 

 

 

-

 

 

 

2,206,300

 

 

 

Other movements

 

 

 

 

 

 

 

 

 

 

(1,549,227)

 

 

 

 

 

 

1,549,227

 

 

 

 

 

 

-

 

 

 

 

 

 

-

 

Realised losses

 

 

 

 

 

transferred to special

 

 

 

 

 

reserve (Note a)

 

-

-

-

-

 

Realisation of previously

 

 

 

 

 

 

 

 

 

unrealised gains

 

-

-                                -

(2,174,199)

-

2,174,199

-

-

 

Total other movements

 

-

-                                -

(2,174,199)

(1,549,227)

3,723,426

-

-

 

At 30 June 2020

 

1,269,191

19,711    14,397,509

3,767,953

31,759,150

19,722,344

3,773,943

74,709,801

 

 

Note a: The purpose of this reserve is to fund market purchases of the Company's own shares, to write off existing and future losses and for any other corporate purpose. The transfer of £1,549,227 to the special reserve from the realised capital reserve above is the total of realised losses incurred by the Company in the period. As at 30 June 2020, the Company has a special reserve of £31,759,150, of which £7,553,664 arises from shares issued more than three years after the end of the financial year in which they were issued. Reserves originating from share issues are not distributable under VCT rules if they arise from share issues that are within three years of the end of an accounting period in which shares were issued.

 

Note b: The Realised capital reserve and the Revenue reserve together comprise the Profit and Loss Account of the Company.

 

Note c: Under the Company's Offer for Subscription launched on 25 October 2019, 23,233,293 Ordinary Shares were allotted between 8 January 2020 and 2 April 2020, raising net funds of £14,477,689 for the Company. This figure is net of issue costs of £370,158 and facilitation fees of £152,153.

 

Note d: During the period, the Company repurchased 840,716 of its own shares at the prevailing market price for a total cost of £424,741, which were subsequently cancelled. This figure is £42,866 more than that shown in the Unaudited Statement of Cash flows due to a creditor held at the period-end.

 

 

Unaudited Condensed Statement of Changes in Equity

for the six months ended 30 June 2019

 

 

 

 

 

 

 

Notes

Non-distributable reserves

Distributable reserves

 

Called up share capital

£

Capital redemption reserve

£

Share premium reserve

£

Revaluation reserve

£

Special distributable reserve

(Note a)

£

Realised capital reserve

(Note b)

£

Revenue reserve

Total

£

At 1 January 2019

1,068,659

32,191

43,644,698

5,285,632

12,681,614

8,818,475

3,546,713

75,077,982

Comprehensive

 

 

 

 

 

 

 

 

income for the period

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

5,262,037

-

1,843,777

983,287

8,089,101

Total comprehensive income for the period

 

 

-

 

 

-

 

 

-

 

 

5,262,037

 

 

-

 

 

1,843,777

 

 

983,287

 

 

8,089,101

 

Contributions by and

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

25,000

distributions to owners

 

 

 

 

 

Shares issued pursuant

 

 

 

 

 

to application

 

363

-

24,637

-

Shares bought back

 

(12,453)

12,453

-

-

(764,900)

-

-

(764,900)

Dividends paid

8

-

-

-

-

(3,443,823)

-

(1,854,366)

(5,298,189)

Total contributions by and distributions to owners

 

 

 

 

(12,090)

 

 

 

12,453

 

 

 

24,637

 

 

 

-

 

 

 

(4,208,723)

 

 

 

(1,854,366)

 

 

 

(6,038,089)

 

 

Other movements

 

 

 

 

 

 

 

 

 

(488,477)

 

 

488,477

 

 

 

 

 

 

-

Realised losses

 

 

 

 

transferred to

 

 

 

 

special reserve

 

-

-

-

-

Realisation of previously

 

 

 

 

 

 

 

unrealised gains

 

-

-

-

(2,770,179)

-

2,770,179

-

-

Total other movements

 

-

-

-

(2,770,179)

(488,477)

3,258,656

-

-

At 30 June 2019

 

1,056,569

44,644

43,669,335

7,777,490

7,984,414

13,920,908       

2,675,634

77,128,994

 

The composition of each of these reserves is explained below:

Called up share capital - The nominal value of shares originally issued increased for subsequent share issues either via an Offer for Subscription or reduced due to shares bought back by the Company.

Capital redemption reserve - The nominal value of shares bought back and cancelled is held in this reserve, so that the Company's capital is maintained.

Share premium reserve - This reserve contains the excess of gross proceeds less issue costs over the nominal value of shares allotted under recent Offers for Subscription.

Revaluation reserve - Increases and decreases in the valuation of investments held at the period-end are accounted for in this reserve, except to the extent that the diminution is deemed permanent.

In accordance with stating all investments at fair value through profit and loss, all such movements through both revaluation and realised capital reserves are shown within the Income Statement for the period.

Special distributable reserve - This reserve is created from cancellations of the balances upon the Share premium reserve, which are transferred to this reserve from time to time. The cost of share buybacks and any realised losses on the sale or impairment of investments (excluding transaction costs) are charged to this reserve. 75% of the Investment Adviser fee expense, and the related tax effect, that are charged to the realised capital reserve. This reserve will also be charged any facilitation payments to financial advisers, which arose as part of the Offer for Subscription.

Realised capital reserve - The following are accounted for in this reserve:

●             Gains and losses on realisation of investments;

●             Permanent diminution in value of investments;

●             Transaction costs incurred in the acquisition and disposal of investments;

●             75% of the Investment Adviser fee expense and 100% of any performance incentive fee payable, together with the related tax effect to this reserve in accordance with the policies; and

●             Capital dividends paid.

Revenue reserve - Income and expenses that are revenue in nature are accounted for in this reserve together with the related tax effect, as well as income dividends paid that are classified as revenue in nature.

 

 

Unaudited Condensed Statement of Cash Flows

for the six months ended 30 June 2020

 

 

Six months ended 30 June 2020 (unaudited)

Six months ended 30 June 2019 (unaudited)

Year ended

31 December 2019

(audited)

 

Notes

£

£

£

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

Profit after tax for the financial period

 

615,126

8,089,101

9,900,963

Adjustments for:

 

 

 

 

Net investment portfolio losses/(gains)

 

787,177

(7,594,291)

(9,144,246)

Tax charge for current period

6

258,390

57,371

61,891

(Increase)/decrease in debtors

 

(23,667)

331,692

285,660

Increase/(decrease) in creditors and accruals

 

44,458

49,449

(17,589)

Net cash inflow from operations

 

1,681,484

933,322

1,086,679

 

Corporation  tax  refunded/(paid)

 

 

175

 

-

 

(108,482)

Net cash inflow from operating activities

 

1,681,659

933,322

978,197

 

Cash flows from investing activities

 

 

 

 

Purchases of investments

9

(1,680,145)

(2,300,908)

(5,853,554)

Disposals of investments

9

9,347,468

10,013,168

11,772,421

Decrease/no change in bank deposits with a maturity over three months

 

 

769

 

24

 

-

Net cash inflow from investing activities

 

 

 

7,668,092

 

 

7,712,284

 

 

5,918,867

 

Cash flows from financing activities

 

 

 

 

Shares issued as part of Offer for subscription

 

15,000,000

25,000

25,000

Issue costs and facilitation fees as part of Offer for subscription

 

 

(522,311)

 

-

 

-

Equity dividends paid

8

(11,846,648)

(5,298,189)

(11,622,745)

Share capital bought back

 

(381,875)

(887,442)

(1,615,367)

Net cash inflow/(outflow) from financing activities

 

 

 

2,249,166

 

 

(6,160,631)

 

 

(13,213,112)

Net increase/(decrease) in cash and cash equivalents

 

 

 

11,598,917

 

 

2,484,975

 

 

(6,316,048)

Cash and cash equivalents at start of period

 

19,170,060

25,486,108

25,486,108

Cash and cash equivalents at end of period

 

30,768,977

27,971,083

19,170,060

 

Cash and cash equivalents comprise:

 

 

 

 

Cash at bank and in hand

10

3,203,047

9,074,632

7,261,618

Cash equivalents

10

27,565,930

18,896,451

11,908,442

 

 

Notes to the Unaudited Condensed Financial Statements

for the six months ended 30 June 2020

1.   Company information

Mobeus Income and Growth VCT plc is a public limited company incorporated in England, registration number 5153931. The registered office is 30 Haymarket, London, SW1Y 4EX.

 

2.   Basis of preparation of the Financial Statements

These Financial Statements are prepared in accordance with accounting policies consistent with Financial Reporting Standard 102 ("FRS 102"), Financial Reporting Standard 104 ("FRS 104") - Interim Financial Reporting, with the Companies Act 2006 and the 2014 Statement of Recommended Practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('the SORP') (updated in October 2019) issued by the Association of Investment Companies ("AIC").

 

The Half-Year Report has not been audited, nor has it been reviewed by the Auditor pursuant to the Financial Reporting Council's (FRC) guidance on Review of Interim Financial Information.

 

3.   Principal accounting policies

The accounting policies have been applied consistently throughout the period. Full details of principal accounting policies will be disclosed in the Annual Report, while the policy in respect of investments is included at the top of note 9 on investments.

 

4.   Income

 

Six months ended 30 June 2020 (unaudited)

Six months ended 30 June 2019 (unaudited)

Year ended 31 December 2019

 

£

£

£

 

 

 

 

 

Dividends

 

300,003

 

260,215

 

505,401

Money-market funds

61,670

81,840

151,532

Loan stock interest

2,393,778

1,196,940

2,161,352

Bank deposit interest

10,974

15,776

29,674

Interest on preference share dividend arrears

726

6,878

6,878

Other income

2,855

-

-

Total Income

2,770,006

1,561,649

2,854,837

 

5.   Investment Adviser's fees

 

In accordance with the policy statement published under "Management and Administration" in the Company's prospectus dated 9 July 2004, the Directors have charged 75% of the Investment Adviser's fees to the capital reserve. This is in line with the Board's expectation of the long-term split of returns from the investment portfolio of the Company. For further details, see note 4a on page 52 of the 2019 Annual Report.

 

Six months ended 30 June 2020

Six months ended 30 June 2019

Year ended 31 December 2019

 

£

£

£

 

 

 

 

 

Allocated to revenue return: Investment Adviser's fees

 

214,035

 

201,020

 

406,306

Allocated to capital return: Investment Adviser's fees

642,106

603,058

1,218,918

Total Income

856,141

804,078

1,625,224

 

  Between 1 July 2020 and 30 June 2021, the Investment Adviser's fee upon the net funds raised from the use of the over-      

  allotment facility of £5 million under the 2019/20 Offer will be reduced to 1% from 2% per annum, for one year.

 

Between 1 April 2018 and 31 March 2019, the Investment Adviser's fee upon the net funds raised from the use of the over- allotment facility of £10 million under the 2017/18 Offer was reduced to 1% from 2% per annum, for one year.

 

Between 1 April 2018 and 31 March 2019, the Investment Adviser's fee upon the net funds raised from the use of the overallotment facility of £10 million under the 2017/18 Offer was reduced to 1% from 2% per annum, for one year.

 

6.      Taxation 

There is a tax charge for the period as the Company has taxable income in excess of deductible expenses.

 

 

 

 

 

Revenue

£

Six months ended 30 June 2020 (unaudited)

Capital              Total

£                £

 

 

 

 

Revenue

£

Six months ended 30 June 2019 (unaudited)

Capital              Total       Revenue

£                £                £

Year ended 31 December 2019

(audited)

Capital             Total

£               £

 

 

a) Analysis of tax charge:

UK Corporation tax on profit for the period

 

 

 

380,390

 

 

 

(122,000)

 

 

 

258,390

 

 

 

171,952

 

 

 

(114,581)

 

 

 

57,371

 

 

 

293,485

 

 

 

(231,594)

 

 

 

61,891

Total current tax charge/(credit)

380,390       (122,000)

258,390

171,952

(114,581)

57,371

293,485   (231,594)

61,891

Corporation tax is based on a rate

 

 

 

 

2,302,799

 

 

 

 

(1,429,283)

 

 

 

 

873,516

 

 

 

 

1,155,239

 

 

 

 

6,991,233

 

 

 

 

8,146,472

 

 

 

 

2,037,526

 

 

 

 

7,925,328

 

 

 

 

9,962,854

of 19.0% (2019: 19.0%)

b) Profit on ordinary activities

before tax

Profit on ordinary activities

 

 

 

 

 

 

 

 

 

multiplied by rate of corporation

 

 

 

 

 

 

 

 

 

tax in the UK of 19.0% (2019: 19.0%)

437,532

(271,564)

165,968

219,495

1,328,334

1,547,829

387,129

1,505,813

1,892,942

Effect of:

 

 

 

 

 

 

 

 

 

UK dividends

(57,001)

-

(57,001)

(49,441)

-

(49,441)

(96,026)

-

(96,026)

Net investment portfolio losses/

 

 

 

 

 

 

 

 

 

(gains) not allowable/(taxable)

-

149,564

149,564

-

(1,442,915)

(1,442,915)

-

(1,737,407)

(1,737,407)

Unrelieved expenditure

-

-

-

1,898

-

1,898

2,382

-

2,382

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Under provision in prior period

(141)

-

-

-

-

-

-

-

Actual current tax charge

380,390

(122,000)

258,390

171,952

(114,581)

57,371

293,485

(231,594)

61,891

 

Over provision in prior period

(141)

-

(141)

-

-

-

-

-

-

 

  Actual current tax charge

380,390

(122,000)

258,390

171,952

(114,581)

57,371

293,485

(231,594)

61,891

 

                                                                           

7.     Basic and diluted earnings per share

The basic and diluted earnings, revenue return and capital return per share shown below for each period are respectively based on numerators i)-iii), each divided by the weighted average number of shares in issue in the period - see iv) below.

 

Six months ended 30 June 2020 (unaudited)

Six months ended 30 June 2019 (unaudited)

Year ended 31 December 2019

(audited)

 

£

£

£

 

 

 

 

i) Total  earnings  after  taxation

615,126

8,089,101

9,900,963

Basic and diluted earnings per share (Note a)

0.49p

7.61p

9.36p

ii)  Revenue earnings from ordinary activities after taxation

1,922,409

983,287

1,744,041

Basic and diluted revenue earnings per share (Note b)

1.54p

0.92p

1.65p

Net investment portfolio (losses)/gains on investments

(787,177)

7,594,291

9,144,246

Capital Investment Adviser's fees less taxation

(520,106)

(488,477)

(987,324)

iii) Total       capital  earnings

(1,307,283)

7,105,814

8,156,922

Basic and diluted capital earnings per share (Note c)

(1.05)p

6.69p

7.71p

iv) Weighted average number of shares in issue in the period

 

124,645,269

 

106,355,772

 

105,785,777

Notes:

a)      Basic earnings per share is total earnings after taxation divided by the weighted average number of shares in issue.

b)     Basic revenue earnings per share is the revenue earnings after taxation divided by the weighted average number of shares in issue.

c)      Basic capital earnings per share is the total capital earnings after taxation divided by the weighted average number of shares in issue.

8.            Dividends paid

 

Dividend

 

Type

 

For the year

ended 31 December

 

Pence per share

 

Date paid

 

Six months

ended 30 June

2020

(unaudited)

 

Six months

ended 30 June

2019

(unaudited)

 

Year ended

31 December

2019

(audited)

£

£

£

 

 

 

 

 

 

 

 

Final

Income

 

2018

 

        1.75p

 

17 May 2019

 

-

 

1,854,366

 

1,854,366

Final

Capital

2018

3.25p*

17 May 2019

-

3,443,823

3,443,822

Interim

Income

2019

      1.50p

20 September 2019

-

-

1,584,854

Interim

Capital

2019

2.50p*

20 September 2019

-

-

2,641,423

Interim

Capital

2019

2.00p*

6 December 2019

-

-

2,098,280

Interim

Capital

2019

4.00p*

8 January 2020

4,181,060

-

-

Interim

Capital

2020

6.00p*

7 May 2020

7,665,588

-

-

 

 

 

 

 

11,846,648

5,298,189

11,622,745

* These dividends were paid out of the Company's special distributable reserve.

9.            Summary of movement on investments during the period

The most critical estimates, assumptions and judgements relate to the determination of the carrying value of investments at "fair value through profit and loss" (FVTPL). All investments held by the Company are classified as FVTPL and measured in accordance with the International Private Equity and Venture Capital Valuation ("IPEV") guidelines, as updated in December 2018. This classification is followed as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income.

Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional. For investments actively traded on organised financial markets, fair value is generally determined by reference to Stock Exchange market quoted bid prices at the close of business on the balance sheet date. Purchases and sales of quoted investments are recognised on the trade date where a contract of sale exists whose terms require delivery within a time  frame determined by the relevant market. Where the terms of the disposal state that consideration may be received at some future date and, subject to the conditionality and materiality of the amount of deferred consideration, an estimate of the fair value, discounted for the true value of money, may be recognised through the Income Statement. In other cases, the proceeds will only be recognised once the right to receive payment is established and there is no reasonable doubt that payment will be received.

Unquoted investments are stated at fair value by the Directors at each measurement date in accordance with appropriate valuation techniques, which are consistent with the IPEV guidelines:-

(i)            Each investment is considered as a whole on a 'unit of account' basis, i.e. that the value of each portfolio company is considered as a whole, alongside consideration of:-

The price of new or follow on investments made, if deemed to be made as part of an orderly transaction, are considered to be at fair value at the date of the transaction. The inputs that derived the investment price are calibrated within individual valuation models and at subsequent quarterly measurement dates are reconsidered for any changes in light of more recent events or changes in the market performance of the investee company. The valuation bases used are the following:

-               a multiple basis. The enterprise value of the investment may be determined by applying a suitable price-earnings ratio, revenue or gross profit multiple to that company's historic, current or forecast post-tax earnings before interest and amortisation, or revenue, or gross profit (the ratio used being based on a comparable sector but the resulting value being adjusted to reflect points of difference identified by the Investment Adviser compared to the sector including, inter alia, a lack of marketability).

or:-

-               where a company's underperformance against plan indicates a diminution in the value of the investment, provision against the price of a new investment is made, as appropriate.

(iI) Premiums, to the extent that they are considered capital in nature, and that they will be received upon repayment of loan stock investments are accrued at fair value when the Company receives the right to the premium and when considered recoverable.

(iII) Where a multiple or the price of recent investment less impairment basis is not appropriate and overriding factors apply, a discounted cash flow, net asset valuation, realisation proceeds or a weighted average of these bases may be applied.

Capital gains and losses on investments, whether realised or unrealised, are dealt with in the profit and loss and revaluation reserves and movements in the period are shown in the Income Statement.

All investments are initially recognised and subsequently measured at fair value. Changes in fair value are recognised in the Income Statement.

A key judgement made in applying the above accounting policy relates to investments that are permanently impaired. Where the value of an investment has fallen permanently below the price of recent investment, the loss is treated as a permanent impairment and as a realised loss, even though the investment is still held. The Board assesses the portfolio for such investments and, after agreement with the Investment Adviser, will agree the values that represent the extent to which an investment loss has become realised. This is based upon an assessment of objective evidence of that investment's future prospects, to determine whether there is potential for the investment to recover in value.

Accounting standards classify methods of fair value measurement as Levels 1,2 and 3.  This hierarchy is based upon the reliability of information used to determine the valuation.  All of the unquoted investments are Level 3, i.e. fair value is measured using techniques using inputs that are not based on observable market data.

 

 Notes to the Unaudited Condensed Financial Statements

 for the six months ended 30 June 2020

 

Unquoted

equity shares

 

Level 3

Unquoted preference

shares

Level 3

Unquoted loan stock

 

Level 3

Total

 

£

£

£

£

 

 

 

 

 

Valuation at 1 January 2020

30,967,137

27,420

20,708,604

51,703,161

Purchases at cost

1,437,325

-

242,820

1,680,145

(5,941,887)

-

(3,405,581)

(9,347,468)

1,905,594

(302)

84,985

1,990,277

Net unrealised gains/(losses) on investments (Note a)

1,562,089

-

(4,339,543)

(2,777,454)

Valuation at 30 June 2020

29,930,258

27,118

13,291,285

43,248,661

Book cost at 30 June 2020

24,024,389

27,108

17,658,009

41,709,506

(2,228,496)

(302)

-

(2,228,798)

Unrealised gains/(losses) at 30 June 2020

8,134,365

312

(4,366,724)

3,767,953

Valuation at 30 June 2020

29,930,258

27,118

13,291,285

43,248,661

Gains on investments

 

 

 

 

4,162,412

(302)

2,366

4,164,476

Less amounts recognised as unrealised (gains)/losses in previous years

 

(2,256,818)

 

-

 

82,619

 

(2,174,199)

Net realised gains/(losses) based on carrying value at 31 December 2019

 

 

1,905,594

 

 

(302)

 

 

84,985

 

 

1,990,277

Net movement in unrealised gains/(losses) in the period

1,562,089

-

(4,339,543)

(2,777,454)

Net investment portfolio gains/(losses) for the period ended 30 June 2020

 

 

3,467,683

 

 

(302)

 

 

(4,254,558)

 

 

(787,177)

 

Note a) Net realised gains on investments of £1,990,277 together with net unrealised losses of £2,777,454 equal net investment portfolio losses of £787,177 as disclosed in the Income Statement.

There has been no significant change in the risk analysis as disclosed in Note 15 of the Financial Statements in the Company's Annual Report. The decrease in unrealised valuations of the loan stock investments above reflect the changes in the entitlement to loan premiums, and/or in the underlying enterprise value of the investee company. The decrease does not arise from assessments of credit or market risk upon these instruments.

Level 3 unquoted equity and loan investments are valued in accordance with IPEV guidelines as follows:

 

As at 30 June 2020 (unaudited)

£

As at 30 June 2019 (unaudited)

£

As at 31 December 2019

(audited)

£

 

 

 

 

 

Multiple of earnings, revenue, or gross margin, as appropriate

 

 

41,503,626

 

 

45,494,032

 

 

48,600,751

Net  asset value

1,409,041

163,390

125,484

Recent investment price

269,800

2,300,908

2,976,926

Estimated realisation proceeds

66,194

192,693

-

Recent investment price (reviewed for impairment)

-

145,005

-

Total

43,248,661

48,296,028

51,703,161

 

10.        Current asset investments and cash at bank

 

As at 30 June 2020 (unaudited)

£

As at 30 June 2019 (unaudited)

£

As at 31 December 2019

(audited)

£

 

 

 

 

 

OEIC Money market funds

 

27,565,930

 

18,896,451

 

11,908,442

Cash equivalents per Statement of Cash Flows

27,565,930

18,896,451

11,908,442

Bank deposits that mature after three months

1,004,913

1,005,658

1,005,682

Current asset investments

28,570,843

19,902,109

12,914,124

Cash at bank

3,203,047

9,074,632

7,261,618

 

 

11.          Basic and diluted net asset value per share

 

As at 30 June 2020 (unaudited)

As at 30 June 2019 (unaudited)

As at 31 December 2019

(audited)

 

 

 

 

 

Net assets

 

£74,709,801

 

£77,128,994

 

£71,888,375

Number of shares in issue

126,919,084

105,656,926

104,526,507

Basic and diluted net asset value per share (pence)

58.86p

73.00p

68.78p

 

12.          Post balance sheet events

On 14 August 2020, the Company realised its investment in Tovey Management Limited (trading as Access IS) generating proceeds of £7.04 million.

On 1 September 2020, the Company invested a further £1.42 million into Buster and Punch Holdings Limited, an existing portfolio company.

 

On 2 September 2020, the Company realised its investment in Blaze Signs Holdings Limited generating cash proceeds of £1.98 million.

 

13.          Financial statements for the period ended 30 June 2020

The information for the six months ended 30 June 2020 does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Financial Statements for the year ended 31 December 2019 have been filed with the Registrar of Companies. The auditor has reported on these Financial Statements and that report was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

14.          Half-Year Report

This Half-Year Report will shortly be made available on our website: www.migvct.co.uk and will be circulated by post to those Shareholders who have requested copies of the Report. Further copies are available free of charge from the Company's registered office, 30 Haymarket, London, SW1Y 4EX or can be downloaded via the website.

Contact details for further enquiries:

Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by e-mail to [email protected]

Mobeus Equity Partners LLP (the Investment Adviser) on 020 7024 7600 or by e-mail to [email protected]

 

 

DISCLAIMER

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.

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