Half-year Report
MOBEUS INCOME & GROWTH 2 VCT PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021
Mobeus Income & Growth 2 VCT plc ("the Company") today announces its interim results for the six months ended 30 September 2021.
As at 30 September 2021:
Net assets: £76.98 million
Net asset value ("NAV") per share: 105.87 pence
Financial Highlights
Results for the six months ended 30 September 2021
· Net asset value ("NAV") total return1 per share was 10.9%.
· Share price total return1 per share was 21.6%.
· The Company made two new investments totalling £1.17 million and five follow-on investments totalling £1.52 million.
· £8.32 million of unrealised gains were achieved from strong portfolio performance.
· £2.58 million of cash proceeds from realisations generating net realised gains of £0.27 million.
· An interim dividend of 12.00 pence per share has been declared for the year ending 31 March 2022 and will be paid on 7 January 2022, to Shareholders on the Register on 10 December 2021.
1 Definitions of key terms and alternative performance measures ("APMs") / Key Performance Indicators ("KIPs") shown above and throughout this Report are shown in the Glossary of terms within the Company's Interim Report.
Performance summary
The table below shows the recent past performance of the Company's current share class, first raised in 2005/06 at an original subscription price of 100 pence per share before the benefit of income tax relief. Performance data for all fundraising rounds are shown in tables within the Interim Report.
|
Reporting date
As at |
Net assets (£m) |
Net Asset value (NAV) per share (p) |
Share price 1 (p) |
Cumulative dividends paidper share (p) |
Cumulative total return per share since launch2 |
Dividends paid and proposed per share in respect of each year (p) |
||||
|
(NAV basis) (p) |
(Share price basis) (p) |
|||||||||
|
|
30 September 2021 |
76.98 |
105.87 |
98.00 |
122.00 |
227.87 |
220.00 |
12.00 3
|
||
|
|
31 March 2021 |
73.90 |
100.91 |
85.50 |
116.00 |
216.91 |
201.50 |
13.00 |
||
|
|
30 September 2020 |
58.22 |
79.25 |
68.50 |
116.00 |
195.25 |
184.50 |
7.00 |
||
1 Source: Panmure Gordon & Co (mid-market price).
2 C umulativ e total r eturn per share comprises either the NAV per share (NAV basis) or the mid-market price per share (share price b asis), plus cumulative dividends paid since launch of the current share class.
Dividends payable after the period-end in respect of year ending 31 March 2022
3 An interim dividend of 12.00 pence per share has been declared and will be paid on 7 January 2022 to Shareholders on the Register on 10 December 2021.
Chairman's Statement
Change in Management Arrangements
Further to the communication sent to all Shareholders by the Chairmen of the four Mobeus advised VCTs on 10 September 2021, I am pleased to report that the sale of the Mobeus Equity Partners LLP VCT fund and investment management business to a subsidiary of Gresham House plc ("Gresham House") completed with effect from 30 September 2021. Accordingly, the Mobeus VCTs' investment advisory arrangements have been novated from Mobeus to Gresham House Asset Management Limited.
The Board believes that the novation of the investment advisory arrangements is in the best interests of the Company because it is expected to benefit from the continuity of Mobeus personnel whilst utilising the enhanced resource of Gresham House.
The Board is pleased that Trevor Hope and Clive Austin, the two leading partners involved with managing the Mobeus VCTs' investment portfolios, are joining Bevan Duncan and Ken Wotton (who lead the investment management of the Baronsmead VCTs), as the senior management team of the Strategic Equity division within Gresham House. Trevor and Clive, alongside their investment and operations teams, will remain responsible for the investment, portfolio, and fund management of the Mobeus VCTs. Mobeus founder partners Mark Wignall and Rob Brittain will act as consultants to Gresham House to advise and support the VCTs through the transition period.
I am pleased to present the Company's Interim Report for the six months ended 30 September 2021.
Overview
In the Company's Annual Report for the year ended 31 March 2021, I reported on the record performance and unprecedented value growth of the portfolio as it recovered from the initial impact of COVID-19. I am pleased to say that momentum has been sustained into the new financial year with a strong performance in the first six months ended 30 September 2021, delivering a NAV total return per share of 10.9%.
Despite continuing Brexit concerns and COVID-19 related restrictions, M&A activity has remained buoyant and the Investment Adviser continues to see a healthy deal flow. The Company deployed £2.69 million of capital and generated £2.58 million of proceeds from investment activity during the first half of its financial year. Within these figures, the Company has added two new investments to its portfolio, deployed follow-on funding into five existing portfolio companies and realised one of its investments.
The market volatility and uncertainty that characterised the previous financial year appears to have now stabilised to some extent, though challenges do remain. There have been global supply issues that have put a strain on logistics, materials and labour, though the portfolio has largely been able to avoid their direct impacts. A sizeable proportion of the portfolio is made up of service and software-based businesses and, therefore, are less exposed to these forces.
A significant proportion of the portfolio's value is now concentrated in two AIM-listed assets, and will be subject to a higher level of inherent volatility. During the second quarter of the six-month period to 30 September 2021, the share price of these quoted assets declined but the value impact on the portfolio has been mitigated by the strong performance of the unquoted investments over the same period. This exemplifies the diversity and robustness of the portfolio, particularly as a number of the more recent growth investments start to achieve significant scale and value. This has been recognised across the industry as third-party investment in the period in portfolio businesses such as Preservica, MyTutor and MPB has led to a significant rating increases.
Performance
| 2021 (pence per share) | 2020 (pence per share) |
Net realised and unrealised gains on the investment portfolio | 11.81 | 12.84 |
Income from the investment portfolio and liquid assets | 0.49 | 1.31 |
Share buybacks and adjustments | 0.02 | 0.13 |
Gross return | 12.32 | 14.28 |
Less: Investment Adviser's fees and other expenses | (1.36) | (1.02) |
Net return | 10.96 | 13.26 |
NAV total return per share | 10.9% | 18.2% |
The share price total return for the six-month period ended 30 September 2021 was 21.6% (2020: 7.1%), compared to the NAV return of 10.9%. This difference arises principally from the retrospective timing of NAV announcements.
This positive NAV return was comprised primarily from unrealised gains in the unquoted portfolio, the realisation of Proactive Group and the partial realisation of MyTutor. These gains were partially offset by a decline in the Company's two AIM-listed assets. For further details on these portfolio movements, see the Investment Adviser's Review within the Interim Report.
At the period-end, the Company was ranked 7th out of 39 Generalist VCTs over five years and 2nd out of 30 over ten years, in the Association of Investment Companies' analysis of NAV Cumulative Total Return. Shareholders should note that these figures do not reflect the increased NAV disclosed in this Report.
Dividends
The Board continues to be committed to providing an attractive dividend stream to Shareholders and is pleased to have announced an interim dividend of 12.00 pence per share, in respect of the year ending 31 March 2022, to be paid on 7 January 2022 to Shareholders on the register on 10 December 2021.
This dividend, in addition to a 6.00 pence dividend paid in July 2021 in respect of the year ended 31 March 2021, will bring cumulative dividends paid since inception to 134.00 pence per share.
As a result of the 12.00 pence per share dividend due to be paid on 7 January 2022, the Company will have met or exceeded the Board's target of paying regular dividends of at least 5.00 pence per share in respect of each financial year for the last eleven years.
It should be noted that as the Company pays dividends, its NAV per share will reduce by a corresponding amount.
Investment portfolio
| £m |
Portfolio value at 31 March 2021 | 41.83 |
New and further investments | 2.69 |
Disposal proceeds | (2.58) |
Net realised gains | 0.27 |
Valuation movements | 8.32 |
Portfolio value at 30 September 2021 | 50.53 |
During the six months under review, the Company invested a total of £1.17 million into two new investments: Legatics (a SaaS LegalTech software business) and Vet's Klinic (a veterinary clinic roll out).
In addition, follow-on investments totalling £1.52 million were made into five existing portfolio companies: Caledonian Leisure (a provider of UK leisure and experience breaks), Bella & Duke (a premium frozen raw dog food provider), Tapas Revolution (a Spanish restaurant chain), MyTutor (an online tuition marketplace) and Andersen EV (a provider of premium EV chargers). We expect follow-on investments to continue to be a feature of the growth capital investments as they seek to achieve scale.
Since the period-end, the Company has also made follow-on investments totalling £0.89 million into Preservica, a seller of proprietary digital archiving software.
The portfolio was valued at £50.53 million at the period-end (31 March 2021: £41.83 million).The portfolio has performed well in the first six months of the Company's financial year. The overall value increased by £8.59 million (2020: £9.44 million), or 20.5% (2020: 42.9%) on a like-for-like basis, compared to the start of the year. This increase comprised a net unrealised uplift in portfolio valuations of £8.32 million, and £0.27 million in net realised gains over the period.
The valuations at the period-end reflect the continued beneficial impact of changes in UK consumer and business behaviour brought on by the pandemic and lockdown restrictions, particularly for those businesses operating direct-to-consumer models. They also underscore the success of portfolio companies in adapting to a rapidly changing environment, diversifying their product offering in order to take advantage of opportunities that have arisen.
Within the net realised gains, the principal contributor was the partial exit of the original 2017 shares held in MyTutor which generated proceeds of £0.52 million and a realised gain in the period of £0.26 million. The full exit of Proactive realised £1.59 million proceeds and has contributed to a multiple of original cost over the life of the investment of 2.6x. Proceeds received in the period from these transactions, combined with loan repayments and other capital receipts, totalled £2.58 million.
Since the period-end, the Company's investment in Vian Marketing Limited (trading as Red Paddle) was sold generating proceeds received to date over the life of this investment of £3.54 million, which is a multiple on cost of 4.9x. To date, and in isolation, the impact of this sale is a 0.54 pence uplift in NAV per share compared to the 30 September 2021 NAV per share contained within this Interim Report. Further proceeds of up to £0.29 million may be receivable in due course.
Details of this investment activity and the performance of the portfolio are contained in the Investment Adviser's Review and the Investment Portfolio Summary within the Interim Report.
Liquidity
Cash and near cash resources held by the Company as at 30 September 2021 amounted to £25.10 million, or 32.6% of net assets. Following payment of the interim dividend declared in this Report, and other transactions since the period-end, cash and near cash resources, as a percentage of proforma net assets will reduce to 28.9%.
Intention to launch an Offer for Subscription
Your Board regards it as important that the Company maintains adequate levels of liquidity in order to take advantage of new investment opportunities and fund further expansion of the businesses in our investment portfolio. We also aim to deliver attractive shareholder returns including the payment of dividends and purchase of shares from those Shareholders who may wish to sell their shares. Following a review of the Company's future cash requirements, in conjunction with other Mobeus VCTs, on 8 November 2021 the Company announced its intention to launch a joint subscription offer for new shares in the 2021/2022 tax year. Further details will be contained within a prospectus expected to be published in early 2022.
Share buy-backs
During the six months ended 30 September 2021, the Company bought back and cancelled 512,370 of its own shares, representing 0.7% (2020: 0.3%) of the shares in issue at the beginning of the period, at a total cost of £0.48 million (2020: £0.10 million), inclusive of expenses.
It is the Company's policy to cancel all shares bought back in this way. The Board regularly reviews its buyback policy, where its priority is to act prudently and in the interest of remaining Shareholders, whilst considering other factors, such as levels of liquidity and reserves, market conditions and applicable law and regulations. Under this policy, the Company seeks to maintain the discount at which the Company's shares trade at approximately 5% below the latest published NAV.
Shareholder communications
May I remind you that the Company has its own website which is available at: www.mig2vct.co.uk.
The Investment Adviser plans to hold its next Shareholder Event on behalf of all four Mobeus VCTs virtually on 25 February 2022 and an invite to register for the Event is included with this Interim Report.
Fraud Warning
We have been made aware that a number of Shareholders being contacted in connection with sophisticated but fraudulent financial scams which purport to come from the Company or to be authorised by it. 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 at the end of the Company's Interim Report, available on the Company's website.
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.
Following the novation of the investment advisory agreement to Gresham House Asset Management Limited, the Company is now advised by a market leader in sustainability. The Board views this as an opportunity to enhance the Company's existing protocols and procedures through the adoption of the
highest industry standards set out by Gresham House going forward.
Succession
As explained in the Annual Report last year, the Board remain cognisant of the tenure of the Board members. The Board's succession plans had been temporarily suspended upon the outbreak of COVID-19. Both Adam and Sally agreed to remain as directors of the Company through this unprecedented period of disruption.
Outlook
Both the direct and indirect impacts of COVID-19 have and will continue to be wide reaching and a degree of economic uncertainty still remains. Nevertheless, your Board considers that your Company remains well positioned to continue to respond and adapt in most likely scenarios that can presently be foreseen. The strong overall trading performance in the period is testament to the healthy position of the portfolio and further profitable realisations are anticipated.
The Board has been satisfied with the Company's ability to maintain a high rate of investment in quality opportunities over the year. I believe that the additional fundraising, referred to earlier in my Statement, will provide the resource required to continue creating value growth for Shareholders in what has proven to be a successful investment strategy.
I would like to take this opportunity once again to thank all Shareholders for your continued support.
Ian Blackburn
Chairman
2 December 2021
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
Change in Management Arrangements
As Shareholders may be aware, Mobeus Equity Partners LLP ("Mobeus") sold its VCT investment advisory business to Gresham House Asset Management Limited ("Gresham"). The entire VCT investment and operations teams at Mobeus joined Gresham on 1 October 2021.
At the time of writing, the integration is well underway having formed one of the largest and most experienced teams in the VCT sector and is intended to lead to enhanced prospects for Shareholders. It is expected that this combined investment team will be a major force in the supply of capital to the VCT sector and the team's enhanced market position should attract strong deal flow in order to produce attractive investment returns.
Portfolio review
Having recovered from the COVID-19 related decline by the start of 2021, and with the economic uncertainty now dissipating to some extent, the portfolio continues on a positive trajectory. It should be noted that, whilst markets helped deliver a buoyant recovery in 2020, the main driver of value growth in 2021 has been a continuation of strong underlying trading performance across the portfolio.
Whilst a few portfolio companies have experienced disruption as a result of the UK lockdowns, it is pleasing to report that a significant proportion have actually benefited from a structural change in consumer purchasing habits and are now trading above their pre COVID-19 levels.
Overall, the majority of the portfolio has demonstrated a high degree of resilience, with the vast majority of companies by number showing revenue and/or earnings progression over the previous two years. Investments classified as Retailers now comprise c.48% of the portfolio by value, all of which are demonstrating the success of the direct-to-consumer business model, with only one retaining any physical presence at all.
Significant up-ratings in the unquoted portfolio have been a consistent feature across the period, with third-party investment driving value uplifts most notably in Preservica, MyTutor and MPB. Whilst the portfolio has limited exposure to more challenging sectors such as hospitality and travel, software and other technology-enabled businesses have performed strongly. A small number of companies have struggled, though they are in the minority and their impact on overall shareholder return is minimal.
Whilst the exposure to Retailers is very well diversified across the most attractive business models, it is noted that 13.2% of the invested portfolio value is now concentrated in the two recently AIM-listed investments. The AIM market has witnessed some volatility recently, with market sentiment flattening out the initial value uplifts for both these assets and, in the case of Parsley Box, reacting to a dampened period of trading. Nevertheless, the Company's investments retain a strong position and the Investment Adviser remains confident in their medium-term prospects. In line with market practice, in both cases the Company's shareholdings are subject to lock-up arrangements for a period post-flotation which is normal for a transaction of this type.
Strong trading activity levels have created investment opportunities for the Company as portfolio companies sought to enhance their positions by building capability in light of demand. A number of further investments were therefore made into the portfolio during the period. M&A sentiment also remained buoyant with the realisation of Proactive in the period. The outlook for both follow-on investment and realisations continues to be positive.
The Company made investments totalling £2.69 million (2020: £2.45 million), comprising £1.17 million (2020: £0.22 million) into two new investments and £1.52 million (2020: £2.23 million) into five existing investments.
Overall, it is reassuring to see that the traditional investments, as well as the new growth investments, are continuing to make good progress. A strong track record for the growth investments is now emerging which validates the strategic change arising from the alteration to the VCT rules in 2015.
The portfolio's valuation changes in the period are summarised as follows:
InvestmentPortfolioCapitalMovement | 2021 £m | 2020 £m |
Increaseinthevalueofunrealisedinvestments | 10.79 | 7.91 |
Decreaseinthevalueofunrealisedinvestments | (2.47) | (0.56) |
Net increaseinthevalueofunrealisedinvestments | 8.32 | 7.35 |
Realisedgains | 0.28 | 2.09 |
Realisedlosses | (0.01) | - |
Netrealisedgainsintheperiod | 0.27 | 2.09 |
Netinvestmentportfolio gains | 8.59 | 9.44 |
The portfolio movements in the period are summarised as follows:
| 2020 £m | 2019 £m |
Opening portfolio value | 41.83 | 21.99 |
Newandfurther investments | 2.69 | 2.45 |
Disposalproceeds | (2.58) | (5.18) |
Netrealisedgains in the period | 0.27 | 2.09 |
Valuationmovements of unrealised investments | 8.32 | 7.35 |
Portfoliovalueat30September | 50.53 | 28.70 |
New investments during the period
The Company made two new investments totalling £1.17 million during the period, as detailed below:
Company | Business | Date of Investment | Amount of new investment (£m) |
Legatics | SaaS LegalTech software business | June2021 |
0.61 |
Legatics (legatics.com) transforms legal transactions by enabling deal teams to collaborate on and close deals in an interactive online environment. Designed by lawyers to improve legacy working methods and solve practical transactional issues, the legal transaction management platform increases collaboration, efficiency and transparency. As a result, Legatics has been used by around 1,500 companies, and has been procured by more than half of the top global banking and finance law firms, with collaborations having been hosted in approximately 50 countries. With this new funding round, Legatics will be looking to double the size of its team over the next 18 months and further develop its technology to deliver new features and use cases for a wider range of practice areas within new and existing customers. | |||
Vet's Klinic | Veterinary clinics | June 2021 | 0.56 |
Pets' Kitchen (trading as Vet's Klinic) is an established and profitable veterinary clinic providing veterinary services (vetsklinic.co.uk) as well as a premium pet food provider (vetskitchen.co.uk). Its primary Swindon 'super clinic' is a first opinion veterinary practice where pet owners can schedule consultations online and obtain real time feedback of in-patient care through its own technology platform. Without compromising on quality of care, this model enables a significantly higher transaction per vet compared to the industry average. This new investment will be used to roll out its unique clinic model to other sites along the M4 corridor. | |||
Further investments during the period
The Company made further investments into five existing portfolio companies in the period, totalling £1.52 million, as detailed below:
Company | Business | Date of Investment | Amount of new investment (£m) |
Caledonian Leisure | UK leisure and experience breaks | March/April/May 2021 | 0.18 |
Caledonian Leisure (caledoniantravel.com) works with accommodation providers, coach businesses and other experienced providers (such as entertainment destinations and theme parks) to deliver to its customers UK-based leisure and experience breaks. It comprises two brands, Caledonian Travel (caledoniantravel.com) and UK Breakaways (ukbreakaways.com). The domestic leisure and experience travel market has been devastated by the COVID-19 pandemic, but the company is well-placed to expand as lockdown and travel restrictions are eased. The series of planned investment tranches, will help the company prepare for and capitalise on what is expected to be strong demand for UK staycation holidays. | |||
Bella & Duke | Frozen raw dog food provider | May2021 | 0.61 |
Bella & Duke (bellaandduke.com) is a direct-to-consumer subscription service, providing premium frozen raw dog food to pet owners in the UK. Founded in 2016, the business provides an alternative to standard meal options for dog owners by focusing on the well documented health benefits of a raw food diet. This area is a growing niche in the large and established pet food market and is being driven by the premiumisation of dog food. Alongside a co-investment by the British Growth Fund ("BGF") and existing shareholders, this follow-on investment from the Company will provide additional working capital enabling Bella & Duke to continue to scale. | |||
Tapas Revolution | Spanish Restaurant chain |
June 2021 |
0.05 |
Spanish Restaurant Group Limited (trading as Tapas Revolution) (tapasrevolution.com) is a leading Spanish restaurant chain in the casual dining sector. At initial investment in January 2017, it was operating five sites and, subsequent to a further investment round in March 2018, had grown to 12 sites. Tapas was trading well and had a strong outlook up until the onset of COVID-19 which mandated the closure of much of its estate during the course of 2020 in response to the varying patterns of government restrictions. Costs have been controlled well under the circumstances and the company has been trading well since restrictions have been lifted. This further investment is to provide financial headroom and to capitalise on new site acquisition opportunities. | |||
MyTutor | Digital marketplace for online tutoring |
August 2021 |
0.52 |
MyTutorweb (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. 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. MyTutor has performed strongly over the last 18 months with 70% growth in 2019 and over 190% over the last 12 months. The company has been chosen as a Tutoring Partner for the National Tuition Programme where they will directly support 30,000 students in catching up on lost learning because of the COVID-19 pandemic. | |||
Andersen EV | Provider of premium electric vehicle (EV) chargers | September 2021 | 0.16 |
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 with revenue up by over 300% year on year. | |||
Portfolio valuation movements
The portfolio generated significant net unrealised gains of £8.32 million in the first half of its financial year. The scale of the valuation increases was underpinned by the Company's growth portfolio, many of which have direct-to-consumer business models which, as mentioned previously, have thrived in the remote working conditions necessitated by COVID-19. The AIM-listed assets have been subject to a notable decline over the second quarter of the period to 30 September 2021, though these have been outweighed by strong uplifts in the unquoted portfolio in the same period.
Total valuation increases were £10.79 million. The main valuation increases were:
· MyTutor - £2.45 million
· Bella & Duke - £1.99 million
· Preservica - £1.98 million
· Red Paddle - £1.51 million
· Media Business Insight (MBI) - £1.02 million
MyTutor, Bella & Duke, Preservica, and Red paddle have experienced strong trading and have been the subject of re-ratings following third-party investment interest. They have all significantly increased their customer base and each have strong growth prospects. MBI has recovered very strongly and has benefited its ability in providing both virtual and physical events.
Total valuation decreases were £(2.47) million. The main valuation decreases were:
● Parsley Box - £(1.29) million
● Virgin Wines - £(0.86) million
The two AIM-listed assets, Parsley Box and Virgin Wines have, as expected, been subject to increased volatility since their flotations in March 2021. Following initial uplifts in value, depressed market sentiment has impacted the share prices of both businesses and, in the case of Parsley Box, a period of dampened trading results has compounded this effect. Nevertheless, the Investment Adviser remains confident in both businesses future prospects.
The majority of the increase in portfolio value lies in the top 10 companies which represent over 70% of the portfolio by value. Year-on-year growth by either revenues or earnings has been seen in each of these companies and it is pleasing to note that eight of them are from the younger, growth portfolio since the VCT rule changes in 2015.
Portfolio Realisations during the period
The Company realised its investment in Proactive Group during the period, as detailed below:
Company | Business | Period of investment | Totalcashproceedsoverthelifeofthe investment/ Multipleovercost |
Proactive Group | Provider of media services and investor conferences | January 2018 to September 2021 | £1.63million 2.6 x cost |
The Company received £1.59 million in cash following the disposal of its investment in Proactive Group Holdings Inc., contributing to a realised gain over cost over the life of the investment of £1.00 million. Cash proceeds over the life of the investment of £1.63 million were received, against an original cost of £0.64 million. This represents a return for the Company of 2.6 times the original investment cost and an IRR of 33.0% in the under four years that this investment was held.
| |||
Loan stock repayments and other gains/(losses) during the period
During the period, the Company received £0.52 million from the partial realisation of MyTutor, generating a realised gain in the period of £0.26 million. This partial sale of the original 2017 shares generated a multiple of 3.7x compared to the cost of the equity sold. Additionally, proceeds of £0.46 million were received via loan repayments from Vian Marketing (trading as Red Paddle) and MPB Group. Finally, deferred consideration and realised gains totalling £0.01 million was received in respect of disposals in a previous year.
Portfolio income and yield
In the period under review, the Company received the following amounts in loan interest and dividend income:
Investment Portfolio Yield | 2021 £m | 2020 £m |
Interest received in the period | 0.30 | 0.45 |
Dividends received in the period | 0.06 | 0.49 |
Total portfolio income in the period1 | 0.36 | 0.94 |
Portfolio Value at 30 September | 50.53 | 28.70 |
Portfolio Income Yield (Income as a % of Portfolio value at 30 September) | 0.7% | 3.3% |
1 Total portfolio income in the period is generated solely from investee companies within the portfolio.
Further investments after the period-end
The Company made further investments into one existing portfolio company, totaling £0.89 million after the period-end, as detailed below:
Company | Business | Date of investment | Amount of further investment (£m) |
Preservica | Seller of proprietary digital archiving software | October/November 2021 | £0.89 million |
Preservica 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. This latest investment is to provide additional growth capital to scale and accelerate growth of the business. The business has seen annual recurring revenues nearly double over the last two financial years. | |||
Portfolio Realisations after the period-end
Company | Business | Period of investment | Totalcashproceedsoverthelifeofthe investment/ Multipleovercost |
Red Paddle | Design and manufacturer of stand-up paddleboards | July 2015 to November 2021 | £3.54 million 4.9x cost |
The Company sold its investment in Vian Marketing (trading as Red Paddle) to Myers Family Office for £2.96 million. Total proceeds received to date over the six-year life of the investment were £ 3.54 million compared to an original investment cost of £0.72 million, which is a multiple on cost of 4.9x and an IRR of 31.5%. Further proceeds of up to £0.29 million may be receivable in due course. | |||
Environmental, Social, Governance considerations ("ESG")
When seeking new investment opportunities, the Investment Adviser under Mobeus Equity Partners LLP operated with a list of exclusions which precluded it from investing in any businesses operating in areas perceived to be unsustainable or detrimental to wider society, or any businesses that have committed purposeful breaches of regulation or have engaged in unlawful activity. Each potential new investment was subject to a comprehensive due diligence process encompassing commercial, financial and ESG principles. This process helped in the formulation and agreement of strategic objectives at the stage of business planning and investment. The Investment Adviser has continued to work closely with each portfolio company board to support them in addressing their particular ESG challenges and opportunities, which are diverse across the entire portfolio.
Following the novation of the advisory agreement to Gresham House Asset Management Limited on 30 September 2021, a market leader that is well-resourced with knowledge and expertise in sustainability, the Investment Adviser hereby states its intention to align its current ESG procedures and protocols to the highest standards as set out and informed by Gresham House plc. In a changing world, the Investment Adviser believes that this approach will contribute towards the enhancement of Shareholder value going forward.
Outlook
The growth strategy implemented in 2015 is clearly showing signs of bearing fruit with many companies beginning to achieve significant scale and attract the interest of public markets and larger secondary investors. The portfolio generally is in a healthy position with many companies trading well throughout the lockdowns, and several at record levels. It continues to evolve, offering a balance of fast-growing and more stable investments at various stages of maturity and scale across a range of diverse market sectors. There is a significant exposure to businesses operating a direct-to-consumer business model which has contributed to strong trading performance during the period.
Concerns remain over value concentration in quoted assets which have proven to be more vulnerable to market forces and a source of additional volatility during the period.
Nevertheless, the Investment Adviser is confident about the future strength of the portfolio and its ability to cope with the challenges and opportunities associated with Brexit, the macro-economic outlook and any potential ongoing impact of COVID-19. The new investment pipeline is recovering to levels seen pre-COVID-19 and the prospects for profitable capital deployment are encouraging.
There remains much uncertainty around the wider impact of the pandemic on the economy going forward. However, the portfolio is in a robust shape and the investment activity levels are promising. Gresham is therefore cautiously optimistic for the future.
Gresham House Asset Management Limited
Investment Adviser
2 December 2021
Investment Portfolio Summary At 30 September 2021
| |||||||||
| Date of first investment Sector | Total Book cost at 30 September 2021 | Valuation at 31 March 2021 | Additions at cost |
| Disposals at opening valuation | Change in valuation for period | Valuation at 30 September 2021 | % of net assets by value |
Qualifying investments |
| £ | £ | £ |
| £ | £ | £ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Virgin Wines UK plc¹ | November 2013 | 30,541 | 6,864,072 | - |
| - | (861,857) | 6,002,215 | 7.8% |
Online wine retailer | Retailers |
|
|
|
|
|
|
|
|
Bella & Duke Limited | February 2020 | 2,062,146 | 2,334,829 | 611,045 |
| - | 1,984,931 | 4,930,805 | 6.4% |
A premium frozen raw dog food provider | Retailers |
|
|
|
|
|
|
|
|
My Tutorweb Limited (trading as MyTutor) | May 2017 | 1,846,886 | 2,033,227 | 524,434 |
| 259,455 | 2,448,602 | 4,746,808 | 6.2% |
Digital marketplace connecting school pupils seeking one to one | Industrial support services |
|
|
|
|
|
|
|
|
Preservica Limited | December 2015 | 1,538,226 | 2,689,711 | - |
| - | 1,978,903 | 4,668,614 | 6.1% |
Seller of proprietary digital archiving software | Software and computer services |
|
|
|
|
|
|
|
|
MPB Group Limited | June 2016 | 869,871 | 4,025,448 | - |
| 267,318 | 540,319 | 4,298,449 | 5.6% |
Online marketplace for photographic and video equipment | Retailers |
|
|
|
|
|
|
|
|
EOTH Limited (trading as Rab and Lowe Alpine) | October 2011 | 817,185 | 3,142,002 | - |
| - | 64,362 | 3,206,364 | 4.2% |
Branded outdoor equipment and clothing | Retailers |
|
|
|
|
|
|
|
|
End Ordinary Group Limited (trading as Buster and Punch) | March 2017 | 1,231,510 | 2,386,154 | - |
| - | 304,154 | 2,690,308 | 3.5% |
Industrial inspired lighting and interiors retailer | Retailers |
|
|
|
|
|
|
|
|
Vian Marketing Limited (trading as Red Paddle Co) | July 2015 | 497,581 | 1,250,675 | - |
| 188,106 | 1,505,821 | 2,568,390 | 3.3% |
Design, manufacture and sale of stand-up paddleboards and windsurfing sails | Leisure goods |
|
|
|
|
|
|
|
|
Data Discovery Solutions Limited (trading as Active Navigation) | November 2019 | 943,000 | 1,886,000 | - |
| - | - | 1,886,000 | 2.4% |
Provider of global market leading file analysis software for information governance, security and compliance | Software and computer services |
|
|
|
|
|
|
|
|
Media Business Insight Holdings Limited | January 2015 | 1,447,188 | 760,342 | - |
| - | 978,780 | 1,739,122 | 2.3% |
A publishing and events business focused on the creative production industries | Media |
|
|
|
|
|
|
|
|
Master Removers Group 2019 Limited (trading as Anthony Ward Thomas, Bishopsgate and Aussie Man & Van) | December 2014 | 251,763 | 1,105,897 | - |
| - | 436,894 | 1,542,791 | 2.0% |
A specialist logistics, storage and removals business | Industrial support services |
|
|
|
|
|
|
|
|
Manufacturing Services Investment Limited (trading as Wetsuit Outlet) | July 2017 | 1,412,992 | 1,411,876 | - |
| - | (195) | 1,411,681 | 1.8% |
Online retailer in the water sports market | Retailers |
|
|
|
|
|
|
|
|
Arkk Consulting Limited (trading as Arkk Solutions) | May 2019 | 1,299,865 | 1,355,617 | - |
| - | (6,663) | 1,348,954 | 1.8% |
Provider of services and software to enable organisations to remain compliant with regulatory reporting requirements | Software and computer services |
|
|
|
|
|
|
|
|
Connect Childcare Group Limited | December 2020 | 828,419 | 1,004,302 | - |
|
| (9,130) | 995,172 | 1.3% |
Nursery management software provider | Software and computer services |
|
|
|
|
|
|
|
|
Tharstern Group Limited | July 2014 | 789,815 | 812,315 | - |
| - | 93,836 | 906,151 | 1.2% |
Software based management information systems to the print sector | Software and computer services |
|
|
|
|
|
|
|
|
Vivacity Labs Limited | February 2021 | 876,541 | 876,541 | - |
|
| - | 876,541 | 1.1% |
Provider of artificial intelligence & urban traffic control systems | Technology, hardware & equipment |
|
|
|
|
|
|
|
|
Bleach London Holdings Limited | December 2019 | 539,682 | 789,520 | - |
| - | 35,134 | 824,654 | 1.1% |
Hair Colourants brand | Retailers |
|
|
|
|
|
|
|
|
Parsley Box Group plc | May 2019 | 520,549 | 1,937,524 | - |
| - | (1,291,683) | 645,841 | 0.8% |
Supplier of home delivered ambient ready meals targeting the over 60s. | Retailers |
|
|
|
|
|
|
|
|
Legatics Holdings Limited | June 2021 | 605,374 | - | 605,374 |
|
| - | 605,374 | 0.8% |
SaaS LegalTech software provider | Software and computer services |
|
|
|
|
|
|
|
|
Spanish Restaurant Group Limited (trading as Tapas Revolution) | January 2017 | 947,645 | 198,550 | 45,147 |
| - | 325,486 | 569,183 | 0.7% |
Spanish restaurant chain | Travel & leisure |
|
|
|
|
|
|
|
|
Rota Geek Limited | August 2018 | 733,200 | 553,833 | - |
| - | 10,126 | 563,959 | 0.7% |
Provider of cloud based enterprise software that uses data-driven technologies to help retail and leisure organisations schedule staff | Software and computer services |
|
|
|
|
|
|
|
|
Pets' Kitchen Limited (trading as Vet's Klinic) | June 2021 | 561,680 | - | 561,680 |
|
| - | 561,680 | 0.7% |
Veterinary clinics | Consumer services |
|
|
|
|
|
|
|
|
IPV Limited | November 2019 | 535,459 | 535,459 | - |
| - | - | 535,459 | 0.7% |
Provider of media asset software | Software and computer services |
|
|
|
|
|
|
|
|
Northern Bloc Ice Cream Limited | December 2020 | 303,000 | 317,369 | - |
| - | 7,258 | 324,627 | 0.4% |
Supplier of premium vegan ice cream | Food producers |
|
|
|
|
|
|
|
|
Caledonian Leisure Limited | March 2021 | 313,507 | 135,852 | 177,655 |
| - | - | 313,507 | 0.4% |
Provider of UK leisure and experience breaks | Travel & leisure |
|
|
|
|
|
|
|
|
CGI Creative Graphics International Limited | June 2014 | 999,568 | 336,016 | - |
| - | (34,034) | 301,982 | 0.4% |
Vinyl graphics to global automotive, recreation vehicle and aerospace markets | General industrials |
|
|
|
|
|
|
|
|
RDL Corporation Limited | October 2010 | 1,000,000 | 367,499 | - |
| - | (144,124) | 223,375 | 0.3% |
Recruitment consultants for the pharmaceutical, business intelligence and IT industries | Industrial support services |
|
|
|
|
|
|
|
|
Muller EV Limited (trading as Andersen EV) | June 2020 | 381,500 | 181,191 | 163,500 |
| - | (126,691) | 218,000 | 0.3% |
Provider of premium electric vehicle (EV) chargers | Technology, hardware & equipment |
|
|
|
|
|
|
|
|
Kudos Innovations Limited | November 2018 | 277,950 | 82,823 | - |
| - | 35,028 | 117,851 | 0.2% |
Online platform that provides and promotes academic research dissemination | Software and computer services |
|
|
|
|
|
|
|
|
Jablite Holdings Limited (In liquidation) | April 2015 | 281,398 | 37,110 | - |
| - | - | 37,110 | 0.0% |
Manufacturer of expanded polystyrene products | Construction and materials |
|
|
|
|
|
|
|
|
Veritek Global Holdings Limited | July 2013 | 967,780 | - | - |
| - | - | - | 0.0% |
Maintenance of imaging equipment | Industrial support services |
|
|
|
|
|
|
|
|
Racoon International Group Limited | December 2006 | 906,935 | - | - |
| - | - | - | 0.0% |
Supplier of hair extensions, hair care products and training | Personal goods |
|
|
|
|
|
|
|
|
BookingTek Limited | October 2016 | 450,283 | - | - |
| - | - | - | 0.0% |
Software for hotel groups | Software and computer services |
|
|
|
|
|
|
|
|
Oakheath Limited (in members' voluntary liquidation) | March 2018 | 384,720 | - | - |
| - | - | - | 0.0% |
Online platform that connects people seeking home care from experienced independent carers | Industrial support services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total qualifying investments |
| 27,453,759 | 39,411,754 | 2,688,835 |
| 714,879 | 8,275,257 | 49,660,967 | 64.5%2 |
|
|
|
|
|
|
|
|
|
|
| Date of first investment Sector | Total Book cost at 30 September 2021 | Valuation at 31 March 2021 | Additions at cost |
| Disposals at valuation | Change in valuation for period | Valuation at 30 September 2021 | % of net assets by value |
Non-qualifying investments |
|
|
|
|
|
|
|
|
|
Media Business Insight Limited | January 2015 | 561,884 | 517,789 | - |
| - | 44,095 | 561,884 | 0.7% |
A publishing and events business focused on the creative production industries | Media |
|
|
|
|
|
|
|
|
Manufacturing Services Investment Limited (trading as Wetsuit Outlet) | February 2014 | 304,000 | 304,000 | - |
| - | - | 304,000 | 0.4% |
Online retailer in the water sports market | Retailers |
|
|
|
|
|
|
|
|
Prefcap Limited (formerly 365 Agile Group plc) | March 2001 | 254,586 | - | - |
| - | - | - | 0.0% |
Development of energy saving devices for domestic use | Electronic & electrical equipment |
|
|
|
|
|
|
|
|
Racoon International Group Limited | December 2006 | 139,050 | - | - |
| - | - | - | 0.0% |
Supplier of hair extensions, hair care products and training | Personal goods |
|
|
|
|
|
|
|
|
Total non-qualifying investments |
| 1,259,520 | 821,789 | - |
| - | 44,095 | 865,884 | 1.1% |
|
|
|
|
|
|
|
|
|
|
Realised in period |
|
|
|
|
|
|
|
|
|
Proactive Group Holdings Inc | January 2018 | - | 1,598,518 | - |
| 1,598,518 | - | - | 0.0% |
Provider of media services and investor conferences for companies primarily listed on secondary public markets | General financial |
|
|
|
|
|
|
|
|
|
| - | 1,598,518 | - |
| 1,598,518 | - | - | - |
|
|
|
|
|
|
|
|
|
|
Total investment portfolio per note 9 |
| 28,713,279 | 41,832,061 | 2,688,835 |
| 2,313,397 | 8,319,352 | 50,526,851 | 65.6% |
Cash and current asset investments3 |
|
| 30,019,758 | - |
| - |
| 25,096,858 | 32.6% |
Total investments including cash and current asset investments |
| 28,713,279 | 71,851,819 | 2,688,835 |
| 2,313,397 | 8,319,352 | 75,623,709 | 98.2% |
Current assets |
|
| 2,218,906 |
|
|
|
| 1,578,341 | 2.1% |
Current liabilities |
|
| (171,857) |
|
|
|
| (218,212) | (0.3)% |
Totals |
| 28,713,279 |
| 2,688,835 |
| 2,313,397 |
|
|
|
Net assets at the period-end |
|
| 73,898,868 |
|
|
|
| 76,983,838 | 100.0% |
Total Investment Portfolio split by type |
|
|
|
|
|
|
|
|
|
MBO focused portfolio4 |
| 7,378,745 | 9,695,143 | - |
| - | 76,696 | 9,771,839 | 19.3% |
Growth focused portfolio4 |
| 21,334,534 | 32,136,918 | 2,688,835 |
| 2,313,397 | 8,242,656 | 40,755,012 | 80.7% |
Total Investment Portfolio |
| 28,713,279 | 41,832,061 | 2,688,835 |
| 2,313,397 | 8,319,352 | 50,526,851 | 100.0% |
|
|
|
|
|
|
|
|
|
|
1 The Company holds a beneficial equity interest in Virgin Wines UK plc via Rapunzel Newco Limited. | |||||||||
2 As at 30 September 2021, the Company held more than 80% of its total investments in qualifying holdings, and therefore complied with the VCT Qualifying Investment test. For the purposes of the VCT qualifying test, the Company is permitted to disregard disposals of investments for twelve months from the date of disposal. It also has up to three years to bring in new funds raised, before these need to be included in the qualifying investment test. | |||||||||
3 Disclosed as Current asset investments and Cash at bank within Current assets in the Balance Sheet. 4 The growth focused portfolio contains all investments made after the change in the VCT regulations in 2015 plus some investments that are growth in nature made before this date. The MBO focused portfolio contains some investments made prior to 2015 as part of the previous MBO strategy. | |||||||||
Statement of the Directors' Responsibilities
Responsibility statement
In accordance with Disclosure and Transparency Rule (DTR) 4.2.10, Ian Blackburn (Chairman), Adam Kingdon (Chairman of the Audit Committee and Nomination and Remuneration Committee), Sally Duckworth (Chairman of the Investment Committee), being the Directors of the Company confirm that to the best of their knowledge:
a) the unaudited 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 Interim 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 materially changed from those identified in the Annual Report and Financial Statements for the year ended 31 March 2021 ("the Annual Report") and are not expected to change ahead of the year-end.
The principal risks faced by the Company are:
· Political and economic risk;
· Investment and strategic risk;
· Loss of approval as a Venture Capital Trust;
· Regulatory risk;
· Financial and operating risk;
· Market risk;
· Asset liquidity risk;
· Market liquidity risk; and
· Cyber and data security risk.
A detailed explanation of the principal risks can be found in the Annual Report on pages 32 and 33 and in Note 15 on pages 69 to 76 of the Annual Report and Financial Statements for the year ended 31 March 2021, copies of which are available on the VCT's website at www.mig2vct.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 Interim Management Report. The Directors have satisfied themselves that the Company continues to maintain an adequate cash position. The majority of companies in the portfolio in the portfolio are well funded and the portfolio taken as a whole remains resilient and well diversified, although the impact of COVID-19 and Brexit may still impose demand upon the liquidity and trading prospects of some of these companies in the near-term. The major cash outflows of the Company (namely investments, buybacks and dividends) are within the Company's control. Finally, the Company intends to seek to raise new funds from investors in 2022 which will bolster its cash position.
The Board's assessment of liquidity risk and details of the Company's policies for managing its financial risks and capital are shown in Note 15 on pages 69 to 76 of the Annual Report and Financial Statements for the year ended 31 March 2021. Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the Interim 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:
Ian Blackburn
Chairman
2 December 2021
Unaudited Condensed Income Statement |
| ||||||
for the six months ended 30 September 2021 | |||||||
|
|
|
|
| |||
|
| Six months ended 30 September 2021 | |||||
|
|
|
| (unaudited) | |||
| Notes | Revenue | Capital | Total | |||
|
| £ | £ | £ | |||
|
|
|
|
| |||
Net investment portfolio gains | 9 | - | 8,591,265 | 8,591,265 | |||
Income | 4 | 358,111 | - | 358,111 | |||
Investment Adviser's fees | 5 | (201,415) | (604,244) | (805,659) | |||
Other expenses |
| (185,140) | - | (185,140) | |||
|
|
|
|
| |||
(Loss)/profit on ordinary activities before taxation |
| (28,444) | 7,987,021 | 7,958,577 | |||
|
|
|
|
| |||
Tax on (loss)/profit on ordinary activities | 6 | - | - | - | |||
|
|
|
|
| |||
(Loss)/profit and total comprehensive income |
| (28,444) | 7,987,021 | 7,958,577 | |||
|
|
|
|
| |||
Basic and diluted earnings per share |
|
|
|
| |||
Ordinary Shares | 7 | (0.04)p | 10.93p | 10.89p | |||
|
|
|
|
| |||
|
| Year ended 31 March 2021 | |||||
|
|
|
| (audited) | |||
| Notes | Revenue | Capital | Total | |||
|
| £ | £ | £ | |||
|
|
|
|
| |||
Net investment portfolio gains |
| - | 25,356,908 | 25,356,908 | |||
Income | 4 | 1,698,434 | - | 1,698,434 | |||
Investment Adviser's fees | 5 | ( 299,284) | ( 897,853) | ( 1,197,137) | |||
Other expenses |
| ( 339,113) | - | ( 339,113) | |||
|
|
|
|
| |||
(Loss)/profit on ordinary activities before taxation |
| 1,060,037 | 24,459,055 | 25,519,092 | |||
|
|
|
|
| |||
Tax on (loss)/profit on ordinary activities | 6 | (43,540) | 43,540 | - | |||
|
|
|
|
| |||
(Loss)/profit and total comprehensive income |
| 1,016,497 | 24,502,595 | 25,519,092 | |||
|
|
|
|
| |||
Basic and diluted earnings per share |
|
|
|
| |||
Ordinary Shares | 7 | 1.38p | 33.37p | 34.75p | |||
|
|
|
|
| |||
|
|
|
|
| |||
|
| Six months ended 30 September 2020 | |||||
|
|
|
| (unaudited) | |||
| Notes | Revenue | Capital | Total | |||
|
| £ | £ | £ | |||
|
|
|
|
| |||
Net investment portfolio gains |
| - | 9,436,434 | 9,436,434 | |||
Income | 4 | 964,240 | - | 964,240 | |||
Investment Adviser's fees | 5 | ( 143,161) | ( 429,481) | ( 572,642) | |||
Other expenses |
| ( 178,660) | - | ( 178,660) | |||
|
|
|
|
| |||
(Loss)/profit on ordinary activities before taxation |
| 642,419 | 9,006,953 | 9,649,372 | |||
|
|
|
|
| |||
Tax on (loss)/profit on ordinary activities | 6 | ( 29,393) | 29,393 | - | |||
|
|
|
|
| |||
(Loss)/profit and total comprehensive income |
| 613,026 | 9,036,346 | 9,649,372 | |||
|
|
|
|
| |||
Basic and diluted earnings per share |
|
|
|
| |||
Ordinary Shares | 7 | 0.83p | 12.31p | 13.14p | |||
|
|
|
|
| |||
|
|
|
|
| |||
The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the net investment portfolio gains (unrealised gains and net realised gains on investments) and the proportion of the Investment Adviser's fee and performance 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. | |||||||
| |||||||
The notes to the unaudited Financial Statements below form part of these Interim Financial Statements. | |||||||
Unaudited Condensed Balance Sheet |
|
|
|
| |||
as at 30 September 2021 |
|
|
|
|
|
|
|
|
|
| 30 September 2021 |
| 31 March 2021 |
| 30 September 2020 |
|
|
| (unaudited) |
| (audited) |
| (unaudited) |
| Notes |
| £ |
| £ |
| £ |
|
|
|
|
|
|
|
|
Fixed assets |
|
|
|
|
|
|
|
Investments at fair value | 9 |
| 50,526,851 |
| 41,832,061 |
| 28,697,219 |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Debtors and prepayments |
|
| 1,578,341 |
| 2,218,906 |
| 222,622 |
Current asset investments | 10 |
| 22,458,496 |
| 27,633,496 |
| 26,293,496 |
Cash at bank and in hand | 10 |
| 2,638,362 |
| 2,386,262 |
| 3,378,328 |
|
|
| 26,675,199 |
| 32,238,664 |
| 29,894,446 |
|
|
|
|
|
|
|
|
Creditors: amounts falling due within one year |
|
| (218,212) |
| (171,857) |
| (370,121) |
|
|
|
|
|
|
|
|
Net current assets |
|
| 26,456,987 |
| 32,066,807 |
| 29,524,325 |
|
|
|
|
|
|
|
|
Net assets |
|
| 76,983,838 |
| 73,898,868 |
| 58,221,544 |
|
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
|
|
Called up share capital |
|
| 727,179 |
| 732,303 |
| 734,694 |
Share premium reserve |
|
| 21,025,160 |
| 21,025,160 |
| 21,025,160 |
Capital redemption reserve |
|
| 14,155 |
| 9,031 |
| 6,640 |
Revaluation reserve |
|
| 23,743,150 |
| 16,598,524 |
| 3,864,996 |
Special distributable reserve |
|
| 18,440,033 |
| 19,524,067 |
| 20,170,687 |
Realised capital reserve |
|
| 11,365,434 |
| 13,397,234 |
| 10,210,289 |
Revenue reserve |
|
| 1,668,727 |
| 2,612,549 |
| 2,209,078 |
|
|
|
|
|
|
|
|
Equity shareholders' funds |
|
| 76,983,838 |
| 73,898,868 |
| 58,221,544 |
|
|
|
|
|
|
|
|
Basic and diluted net asset value per share | 11 |
| 105.87p |
| 100.91p |
| 79.25p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes to the unaudited Financial Statements below form part of these Interim Financial Statements. | |||||||
|
|
|
|
|
|
|
|
The financial information for the six months ended 30 September 2021 and 30 September 2020 has not been audited. | |||||||
Unaudited Condensed Statement of Changes in Equity |
|
|
|
| ||||
| Non-distributable reserves | Distributable reserves |
| |||||
| Called up | Share | Capital |
| Special | Realised | Revenue |
|
| share | premium | redemption | Revaluation | distributable | capital | reserve |
|
| capital | reserve | reserve | reserve | reserve | reserve |
| Total |
|
|
|
|
| (Note a) | (Note b) | (Note b) |
|
For the six months ended 30 September 2021 | £ | £ | £ | £ | £ | £ | £ | £ |
|
|
|
|
|
|
|
|
|
At 1 April 2021 | 732,303 | 21,025,160 | 9,031 | 16,598,524 | 19,524,067 | 13,397,234 | 2,612,549 | 73,898,868 |
Comprehensive income for the period |
|
|
|
|
|
|
|
|
Profit/(loss) for the period | - | - | - | 8,319,352 | - | (332,331) | (28,444) | 7,958,577 |
Total comprehensive income for the period | - | - | - | 8,319,352 | - | (332,331) | (28,444) | 7,958,577 |
|
|
|
|
|
|
|
|
|
Contributions by and distributions to owners |
|
|
|
|
|
|
|
|
Shares bought back (note c) | (5,124) | - | 5,124 | - | (479,790) | - | - | (479,790) |
Dividends paid | - | - | - | - | - | (3,478,439) | (915,378) | (4,393,817) |
Total contributions by and distributions to owners | (5,124) | - | 5,124 | - | (479,790) | (3,478,439) | (915,378) | (4,873,607) |
|
|
|
|
|
|
|
|
|
Other movements |
|
|
|
|
|
|
|
|
Realised losses transferred to special reserve (note a) | - | - | - | - | (604,244) | 604,244 | - | - |
Realisation of previously unrealised gains | - | - | - | (1,174,726) | - | 1,174,726 | - | - |
Total other movements | - | - | - | (1,174,726) | (604,244) | 1,778,970 | - | - |
|
|
|
|
|
|
|
|
|
At 30 September 2021 | 727,179 | 21,025,160 | 14,155 | 23,743,150 | 18,440,033 | 11,365,434 | 1,668,727 | 76,983,838 |
|
|
|
|
|
|
|
|
|
Notes |
|
|
|
|
|
|
|
|
a): The cancellation of the formerly named C Share Fund's share premium reserve (as approved at the Extraordinary General meeting held on 10 September 2008 and by the order of the Court dated 28 October 2009), together with the previous cancellation of the share premium reserve attributable to the former Ordinary Share Fund and C Shares, has provided the Company with a special distributable reserve. The purpose of this reserve is to fund market purchases of the Company's own shares as and when it is considered by the Board to be in the interests of the shareholders, and to write-off existing and future losses as the Company must take into account capital losses in determining distributable reserves. At 30 September 2021, the Company has a special reserve of £18,440,033, all of which relates to shares issued on or before 5 April 2014, or that arise from shares issued more than three years ago. Reserves originating from share issues are not distributable under VCT rules if they are within three years of the end of an accounting period in which the shares were issued. The total transfer of £604,244 from the realised capital reserve to the special distributable reserve above is the total of realised losses incurred by the Company in the period. | ||||||||
| ||||||||
b): The realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the Company. | ||||||||
|
|
|
|
|
|
|
|
|
c): During the period, the Company purchased 512,370 of its own shares at the prevailing market price for a total cost (including expenses) of £479,790, which were subsequently cancelled. The difference between the figure above of £479,790 and that per the unaudited Condensed Statement of Cash Flows of £478,755 is £1,035, being a stamp duty creditor at the period-end. | ||||||||
|
|
|
|
|
|
|
|
|
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 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 (as recorded in Note 9), 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 are transferred to this 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: | ||||||||
Revenue reserve |
|
|
|
|
|
|
|
|
Income and expenses that are revenue in nature are accounted for in this reserve including 25% of the investment adviser fee together with the related tax effect, as well as income dividends paid that are classified as revenue in nature. | ||||||||
|
|
|
|
|
|
|
|
|
| Non-distributable reserves | Distributable reserves |
| |||||
| Called up | Share | Capital |
| Special | Realised | Revenue |
|
| share | premium | redemption | Revaluation | distributable | capital | reserve |
|
| capital | reserve | reserve | reserve | reserve | reserve |
| Total |
For the six months ended 30 September 2020 | £ | £ | £ | £ | £ | £ | £ | £ |
|
|
|
|
|
|
|
|
|
At 1 April 2020 | 596,893 | 10,673,405 | 5,157 | (3,206,720) | 24,090,692 | 9,809,815 | 1,596,052 | 43,565,294 |
Comprehensive income for the period |
|
|
|
|
|
|
|
|
Profit for the period | - | - | - | 7,349,227 | - | 1,687,119 | 613,026 | 9,649,372 |
Total comprehensive income for the period | - | - | - | 7,349,227 | - | 1,687,119 | 613,026 | 9,649,372 |
|
|
|
|
|
|
|
|
|
Contributions by and distributions to owners |
|
|
|
|
|
|
|
|
Shares issued under Offers for Subscription | 139,284 | 10,622,489 | - | - | (230,746) | - | - | 10,531,027 |
Expenses of share offers |
| (270,734) | - | - | - | - | - | (270,734) |
Shares bought back | (1,483) | - | 1,483 | - | (100,174) | - | - | (100,174) |
Dividends paid | - | - | - | - | (2,944,709) | (2,208,532) | - | (5,153,241) |
Total contributions by and distributions to owners | 137,801 | 10,351,755 | 1,483 | - | (3,275,629) | (2,208,532) | - | 5,006,878 |
|
|
|
|
|
|
|
|
|
Other movements |
|
|
|
|
|
|
|
|
Realised losses transferred to special reserve | - | - | - | - | (644,376) | 644,376 | - | - |
Realisation of previously unrealised gains | - | - | - | (277,511) | - | 277,511 | - | - |
Total other movements | - | - | - | (277,511) | (644,376) | 921,887 | - | - |
|
|
|
|
|
|
|
|
|
At 30 September 2020 | 734,694 | 21,025,160 | 6,640 | 3,864,996 | 20,170,687 | 10,210,289 | 2,209,078 | 58,221,544 |
The notes to the unaudited Financial Statements below form part of these Interim Financial Statements. | ||||||||
Unaudited Condensed Statement of Cash Flows |
|
| |||||
|
|
|
|
|
|
|
|
For the six months ended 30 September 2021 |
|
| Six months ended |
| Year ended |
| Six months ended |
|
|
| 30 September 2021 |
| 31 March 2021 |
| 30 September 2020 |
| Notes |
| (unaudited) |
| (audited) |
| (unaudited) |
|
|
| £ |
| £ |
| £ |
Cash flows from operating activities |
|
|
|
|
|
|
|
Profit for the financial period |
|
| 7,958,577 |
| 25,519,092 |
| 9,649,372 |
Adjustments for: |
|
|
|
|
|
|
|
Net investment portfolio gains |
|
| (8,591,265) |
| (25,356,908) |
| (9,436,434) |
Decrease in debtors |
|
| 12,212 |
| 7,025 |
| (71,923) |
Increase/(decrease) in creditors and accruals |
|
| 45,733 |
| (18,957) |
| 13,123 |
Net cash (outflow)/inflow from operations |
|
| (574,743) |
| 150,252 |
| 154,138 |
Corporation tax paid |
|
| - |
| (134,947) |
| - |
Net cash (outflow)/inflow from operating activities |
|
| (574,743) |
| 15,305 |
| 154,138 |
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
Purchase of investments | 9 |
| (2,688,835) |
| (5,394,087) |
| (2,449,976) |
Disposal of investments | 9 |
| 3,213,250 |
| 8,838,927 |
| 5,182,900 |
Net cash inflow from investing activities |
|
| 524,415 |
| 3,444,840 |
| 2,732,924 |
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
Gross proceeds issued as part of Offer for subscription |
|
| - |
| 10,761,773 |
| 10,761,773 |
Issue costs and facilitation fees on Offer for subscription |
|
| - |
| (501,480) |
| (501,480) |
Equity dividends paid | 8 |
| (4,393,817) |
| (5,153,243) |
| (5,153,241) |
Purchase of own shares |
|
| (478,755) |
| (353,488) |
| (128,341) |
|
|
|
|
|
|
|
|
Net cash (outflow)/inflow no change from financing activities |
| (4,872,572) |
| 4,753,562 |
| 4,978,711 | |
|
|
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents |
|
| (4,922,900) |
| 8,213,707 |
| 7,865,773 |
Cash and cash equivalents at start of period |
|
| 30,019,758 |
| 21,806,051 |
| 21,806,051 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
| 25,096,858 |
| 30,019,758 |
| 29,671,824 |
|
|
|
|
|
|
|
|
Cash and cash equivalents comprise: |
|
|
|
|
|
|
|
Cash at bank and in hand | 10 |
| 2,638,362 |
| 2,386,262 |
| 3,378,328 |
Cash equivalents | 10 |
| 22,458,496 |
| 27,633,496 |
| 26,293,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes to the unaudited Financial Statements below form part of these Interim Financial Statements. | |||||||
Notes to the Unaudited Condensed Financial Statements |
|
|
| ||||||||||
|
|
|
|
|
|
|
|
| |||||
1. | Company information |
| |||||||||||
| Mobeus Income and Growth 2 VCT plc is a public limited company incorporated in England, registration number 03946235. The registered office is 5 New Street Square, London, EC4A 3TW. | ||||||||||||
|
|
|
|
|
|
|
| ||||||
2. | Basis of preparation |
| |||||||||||
|
|
|
|
|
|
|
| ||||||
| 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 April 2021) 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 within an outlined box at the top of Note 9 on investments. | ||||||||||||
|
|
|
|
|
|
|
| ||||||
4. | Income |
| |||||||||||
|
|
| Six months ended | Year ended | Six months ended |
|
|
| |||||
|
|
| 30 September 2021 | 31 March 2021 | 30 September 2020 |
|
|
| |||||
|
|
| (unaudited) | (audited) | (unaudited) |
|
|
| |||||
| Income from investments |
| £ | £ | £ |
|
|
| |||||
|
|
|
|
|
|
|
|
| |||||
| Dividends |
| 57,817 | 830,882 | 487,718 |
|
|
| |||||
| Money-market funds |
| 1,330 | 22,803 | 20,366 |
|
|
| |||||
| Loan stock interest |
| 298,375 | 795,761 | 412,151 |
|
|
| |||||
| Bank deposit interest |
| 589 | 1,477 | 639 |
|
|
| |||||
| Interest on preference dividends |
| - | 41,533 | 41,533 |
|
|
| |||||
| Other income |
| - | 5,978 | 1,833 |
|
|
| |||||
|
|
|
|
|
|
|
|
| |||||
| Total Income |
| 358,111 | 1,698,434 | 964,240 |
|
|
| |||||
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
| |||||
5. | Investment Adviser's fees and performance fees |
| |||||||||
| Investment Adviser's fees |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| 25% of the Investment Adviser's fees are charged to the revenue column of the Income Statement, while 75% is charged against the capital column of the Income Statement. This is in line with the Board's expected long-term split of returns from the investment portfolio of the Company. | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| 100% of any performance incentive fee payable for the year is charged against the capital column of the Income Statement. This is because although the incentive fee is linked to an annual dividend target, it is ultimately based upon the achievement of capital growth. | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Performance fees |
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Performance incentive agreement |
|
|
| |||||||
| New Ordinary and former C share fund shares |
|
|
| |||||||
| Basis of Calculation |
|
|
| |||||||
| The performance incentive fee payable is calculated as an amount equivalent to 20 per cent of the excess of a "Target rate" comprising:- | ||||||||||
| i) an annual dividend target (indexed each year for RPI), and | ||||||||||
| ii) a requirement that any cumulative shortfalls below the annual dividend target must be made up in later years. Any excess is not carried forward, whether a fee is payable for that year or not. | ||||||||||
| Payment of a fee is also conditional upon the average Net Asset Value ("NAV") per share for each such year equalling or exceeding the average "Base NAV" per share for the same year. Base NAV commenced at £1 per share when C fund shares were first issued in 2005, which is adjusted for subsequent shares issued and bought back. | ||||||||||
| Any performance fee will be payable annually. It will be reduced to the proportion which the number of "Incentive Fee Shares" represent of the total number of shares in issue at any calculation date. Incentive Fees Shares are the only shares upon which an incentive fee is payable. They will be the number of C fund shares in issue just before the Merger of the two former share classes on 10 September 2010, (which subsequently became Ordinary shares) plus Ordinary shares issued under new fundraisings since the Merger. This total is then reduced by an estimated proportion of the shares bought back by the Company since the Merger, that are attributable to the Incentive Fee Shares. | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| There has been no performance incentive fee accrued for the current period. | ||||||||||
|
|
|
|
| |||||||
|
|
| Six months ended 30 September 2021 | Year ended 31 March 2021 | Six months ended 30 September 2020 |
|
|
|
|
|
|
|
|
| (unaudited) | (audited) | (unaudited) |
|
|
|
|
|
|
|
|
| £ | £ | £ |
|
|
|
|
|
|
| Gresham House Asset Management Limited1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Investment Adviser's fees |
| 805,659 | 1,197,137 | 572,642 |
|
|
|
|
|
|
| Total |
| 805,659 | 1,197,137 | 572,642 |
|
|
|
|
|
|
| 1 - On 30 September 2021, Mobeus Equity Partners LLP ("Mobeus") sold its VCT fund and Investment management business to Gresham House Asset Management ("GHAM"). As a result, the Company's Investment advisory arrangements have been novated from Mobeus to GHAM. The entire core management, investment and operational teams involved with the Company all transferred to GHAM in connection with this transaction. | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
6. | Taxation | ||||||||||
|
|
|
|
| |||||||
| There is no tax charge for the period as the Company has deductible expenses in excess of taxable income. | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six months ended 30 September 2021 | Year ended 31 March 2021 | Six months ended 30 September 2020 | ||||||
|
|
| (unaudited) | (audited) | (unaudited) | ||||||
|
|
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
|
|
| £ | £ | £ | £ | £ | £ | £ | £ | £ |
| a) Analysis of tax charge: |
|
|
|
|
|
|
|
|
|
|
| UK Corporation tax on profits for the period |
| - | - | - | 43,540 | (43,540) | - | 29,393 | (29,393) | - |
| Total current tax charge |
| - | - | - | 43,540 | (43,540) | - | 29,393 | (29,393) | - |
| Corporation tax is based on a rate of 19% (2020: 19%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| b) Profit on ordinary activities before tax |
| (28,444) | 7,987,021 | 7,958,577 | 1,060,037 | 24,459,055 | 25,519,092 | 642,419 | 9,006,953 | 9,649,372 |
| Profit on ordinary activities multiplied by small company rate of corporation tax in the UK of 19% (2020: 19%) |
| (5,404) | 1,517,534 | 1,512,130 | 201,407 | 4,647,220 | 4,848,627 | 122,060 | 1,711,321 | 1,833,381 |
| Effect of: |
|
|
|
|
|
|
|
|
|
|
| UK dividends |
| (10,986) | - | (10,986) | (157,867) | - | (157,867) | (92,667) | - | (92,667) |
| Net investment portfolio gains not taxable/allowable |
| - | (1,632,340) | (1,632,340) | - | (4,817,813) | (4,817,813) | - | (1,792,922) | (1,792,922) |
| Unrelieved expenditure |
| 16,390 | 114,806 | 131,196 | - | 127,053 | 127,053 | - | 52,208 | 52,208 |
| Actual tax charge |
| - | - | - | 43,540 | (43,540) | 0 | 29,393 | (29,393) | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. | Basic and diluted earnings per share | ||||||||||
|
|
| Six months ended 30 September 2021 |
| Year ended 31 March 2021 |
| Six months ended 30 September 2020 |
|
|
|
|
|
|
| (unaudited) |
| (audited) |
| (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| £ |
| £ |
| £ |
|
|
|
|
| Total earnings after taxation: |
| 7,958,577 |
| 25,519,092 |
| 9,649,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted earnings per share (note a) |
| 10.89p |
| 34.75p |
| 13.14p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net revenue from ordinary activities after taxation |
| (28,444) |
| 1,016,497 |
| 613,026 |
|
|
|
|
| Basic and diluted revenue earnings per share (note b) |
| (0.04)p |
| 1.38p |
| 0.83p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net investment portfolio gains |
| 8,591,265 |
| 25,356,908 |
| 9,436,434 |
|
|
|
|
| Capital expenses (net of taxation) |
| (604,244) |
| (854,313) |
| (400,088) |
|
|
|
|
| Total capital return |
| 7,987,021 |
| 24,502,595 |
| 9,036,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted capital earnings per share (note c) |
| 10.93p |
| 33.37p |
| 12.31p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average number of shares in issue in the period | 73,090,758 |
| 73,424,532 |
| 73,448,240 |
|
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| |
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| Notes |
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| a) Basic and diluted earnings per share is total earnings after taxation divided by the weighted average number of shares in issue. | ||||||||||
| b) Basic and diluted revenue earnings per share is revenue earnings after taxation divided by the weighted average number of shares in issue. | ||||||||||
| c) Basic and diluted capital earnings per share is total capital earnings divided by the weighted average number of shares in issue. | ||||||||||
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8. | Dividends paid | ||||||||||
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| Dividend |
| Type | For year ended 31 March | Pence per share | Date Paid | Six months ended 30 September 2021 £ | Year ended 31 March 2021 £ | Six months ended 30 September 2020 £ |
|
|
| Interim |
| Capital | 2021 | 3.00p | 19/06/20 | - | 2,208,533 | 2,208,532 |
|
|
| Interim |
| Capital* | 2021 | 4.00p | 19/06/20 | - | 2,944,710 | 2,944,709 |
|
|
| Interim |
| Income | 2021 | 1.25p | 30/07/21 | 915,379 | - | - |
|
|
| Interim |
| Capital | 2021 | 4.75p | 30/07/21 | 3,478,438 | - | - |
|
|
|
|
|
|
|
|
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|
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|
|
| 4,393,817 | 5,153,243 | 5,153,241 |
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| *Paid out of the Company's special distributable reserve. |
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| ||||||||
After the period-end, the Company has declared a 12.00 pence per share divided which is payable on 7 January 2022 to Shareholders on the Register on 10 December 2021.
9. | Summary of movement on investments during the period | ||||||||
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| 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 (as updated by Special Valuation guidance issued in March 2020). 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. | ||||||||
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| 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 a 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 time 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. | ||||||||
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| Unquoted investments are stated at fair value by the Directors at each measurement date in accordance with appropriate valuation techniques, which are consistent with IPEV guidelines: | ||||||||
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| (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:- | ||||||||
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| 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 every subsequent measurement date 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: | ||||||||
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| 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, depreciation 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, scale and liquidity). | ||||||||
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| or:- | ||||||||
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| where a company's underperformance against plan indicates a diminution in the value of the investment, provision against cost is made, as appropriate. | ||||||||
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| (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. | ||||||||
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| (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. | ||||||||
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| 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. | ||||||||
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| All investments are initially recognised and subsequently measured at fair value. Changes in fair value are recognised in the Income Statement. | ||||||||
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| 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 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 and treated as a realised loss in the Income Statement. 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. | ||||||||
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| 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. | ||||||||
| Traded | Unquoted | Unquoted | Unquoted | Total |
| on AIM | Ordinary | Preference | Loan |
|
|
| shares | shares | stock |
|
| £ | £ | £ | £ | £ |
| Level 1 | Level 3 | Level 3 | Level 3 |
|
Cost at 31 March 2021 | 551,090 | 16,826,218 | 691,155 | 9,094,652 | 27,163,115 |
Unrealised gains/(losses) at 31 March 2021 | 8,250,506 | 9,983,516 | 63,770 | (1,699,268) | 16,598,524 |
Permanent impairment at 31 March 2021 | - | (1,790,358) | (170) | (139,050) | (1,929,578) |
Valuation at 31 March 2021 | 8,801,596 | 25,019,376 | 754,755 | 7,256,334 | 41,832,061 |
Purchases at cost | - | 2,448,115 | - | 240,720 | 2,688,835 |
Sale proceeds | - | (1,976,133) | - | (609,177) | (2,585,310) |
Reclassification at cost/valuation | - | 181,191 | - | (181,191) | - |
Net investment portfolio (losses)/gains - see note | (2,153,540) | 10,463,421 | 25,415 | 255,969 | 8,591,265 |
Valuation at 30 September 2021 | 6,648,056 | 36,135,970 | 780,170 | 6,962,655 | 50,526,851 |
Cost at 30 September 2021 | 551,090 | 18,795,508 | 691,155 | 8,675,526 | 28,713,279 |
Unrealised gains/(losses) at 30 September 2021 | 6,096,966 | 19,130,820 | 89,185 | (1,573,821) | 23,743,150 |
Permanent impairment at 30 September 2021 | - | (1,790,358) | (170) | (139,050) | (1,929,578) |
Valuation at 30 September 2021 | 6,648,056 | 36,135,970 | 780,170 | 6,962,655 | 50,526,851 |
|
|
|
|
|
|
Net unrealised gains/(losses) at 1 April 2021 | 8,250,506 | 8,193,158 | 63,600 | (1,838,318) | 14,668,946 |
Net movement in unrealised (depreciation)/appreciation in the period | (2,153,540) | 10,191,501 | 25,415 | 255,976 | 8,319,352 |
Reclassification of unrealised loss | - | (15,009) | - | 15,009 | - |
Realisation of previously unrealised gains | - | (1,029,188) | - | (145,538) | (1,174,726) |
Gains/(losses) on investments at 30 September 2021 | 6,096,966 | 17,355471 | 89,015 | (1,727,880) | 21,813,572 |
Note - Net investment portfolio gains of £8,591,265 reported in the Income Statement comprise net unrealised gains on investments of £8,319,352 and net realised gains on investments of £271,913.
| Reconciliation to Condensed Statement of Cash Flows | |||||||||||
| Sales proceeds above of £2,585,310 are less than that shown in the Condensed Statement of Cash Flows of £3,213,250 by £627,940. This amount is comprised of proceeds receivable of £2,073,716 recognised at the previous year end, subsequently received during the period partially offset by proceeds receivable of £1,445,776 that have recognised at the period-end, subsequently received after the period-end. | |||||||||||
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| ||||
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| ||||
| 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. | |||||||||||
|
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|
|
| ||||
| Level 3 unquoted equity and loan investments are valued in accordance with IPEV guidelines as follows: | |||||||||||
|
|
| as at |
| as at |
| as at |
| ||||
|
|
| 30 September 2021 (unaudited) |
| 31 March 2021 (audited) |
| 30 September 2020 (unaudited) |
| ||||
|
|
| £ |
| £ |
| £ |
| ||||
| Investment methodology |
|
|
|
|
|
|
| ||||
| Multiple of earnings, revenues or gross margin, as appropriate |
| 43,310,178 |
| 31,782,412 |
| 28,040,116 |
| ||||
| Estimated realisation proceeds |
| 37,110 |
| 37,110 |
| 37,110 |
| ||||
| Net asset value |
| - |
| 198,550 |
| 619,993 |
| ||||
| Recent investment price (reviewed for impairment) |
| 54,500 |
| - |
| - |
| ||||
| Recent investment price |
| 477,007 |
| 1,012,393 |
| - |
| ||||
|
|
| 43,878,795 |
| 33,030,465 |
| 28,697,219 |
| ||||
|
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|
|
|
|
|
|
| ||||
10. | Current asset investments and cash at bank |
| ||||||||||
|
|
| as at |
| as at |
| as at |
| ||||
|
|
| 30 September 2021 |
| 31 March 2021 |
| 30 September 2020 |
| ||||
|
|
| (unaudited) |
| (audited) |
| (unaudited) |
| ||||
|
|
| £ |
| £ |
| £ |
| ||||
| OEIC Money market funds |
| 22,458,496 |
| 27,633,496 |
| 26,293,496 |
| ||||
| Current asset investments and cash equivalents per Condensed Statements of Cashflows |
| 22,458,496 |
| 27,633,496 |
| 26,293,496 |
| ||||
| Cash at bank |
| 2,638,362 |
| 2,386,262 |
| 3,378,328 |
| ||||
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| ||||
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| ||||
11. | Net asset value per share |
| As at 30 September 2021 |
|
| As at 31 March 2021 |
| As at 30 September 2020 | ||||
|
|
| (unaudited) |
|
| (audited) |
| (unaudited) | ||||
|
|
|
|
|
|
|
|
| ||||
| Net assets |
| £76,983,838 |
|
| £73,898,868 |
| £58,221,544 | ||||
|
|
|
|
|
|
|
|
| ||||
| Number of shares in issue |
| 72,717,905 |
|
| 73,230,275 |
| 73,469,447 | ||||
|
|
|
|
|
|
|
|
| ||||
| Net asset value per share (pence) |
| 105.87 p |
|
| 100.91 p |
| 79.25 p | ||||
|
|
|
|
|
|
|
|
| ||||
12. | Post Balance Sheet Events | |||||||||||
| On 8 October 2021, a £0.08 million loan investment was made in Preservica Limited, an existing portfolio company.
On 26 November 2021, the entire holding of Vian Marketing Limited (trading as Red Paddle) was realised generating proceeds of £2.96 million.
On 30 November 2021, a follow-on equity and loan investment of £0.81 million was made into Preservica Limited, an existing portfolio company. | |||||||||||
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| |||||||||||
|
| |||||||||||
13. | Financial statements for the six months ended 30 September 2021 | |||||||||||
| The financial information set out in this half-year financial report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The information for the year ended 31 March 2021 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The auditors have 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. | |||||||||||
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| |||||
14. | Half-Year Report | |||||||||||
| Copies of this statement are being sent to all Shareholders. Further copies are available free of charge from the Investment Adviser at 80 Cheapside, London, EC2V 6EE, or can be downloaded via the Company's website at www.mig2vct.co.uk. | |||||||||||
|
| |||||||||||
Contact details for further enquiries: For enquiries concerning the investment portfolio of the Company in general, please contact the Investment Adviser, Gresham House Asset Management Limited. To contact the Chairman or any member of the Board, in the first instance please contact the Company Secretary, also at Gresham House Asset Management Limited, at: mobeusvcts@greshamhouse.com.
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.
| ||||||||||||
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