TIDMMIG
RNS Number : 8604F
Mobeus Income & Growth 2 VCT PLC
13 July 2023
MOBEUS INCOME & GROWTH 2 VCT PLC
LEI: 213800LY62XLI1B4VX35
ANNUAL FINANCIAL RESULTS OF THE COMPANY
FOR THE YEARED 31 MARCH 2023
Mobeus Income & Growth 2 VCT plc (the "Company") announces the final
results for the year ended 31 March 2023. These results were approved
by the Board of Directors on 12 July 2023.
You may, in due course, view the Annual Report & Financial Statements,
comprising the statutory accounts of the Company by visiting www.mig2vct.co.uk
.
FINANCIAL HIGHLIGHTS
For the year ended 31 March 2023 As at 31 March 2023:
Net assets: GBP70.43 million
Net asset value ("NAV") per share: 71.54 pence
* Net Asset Value ("NAV") total return(1) per share was
(12.3)%.
* Share Price total return(1) per share of (6.9)%.(3)
* Dividends paid and declared of 13.00 pence per share.
Cumulative dividends paid(1) since inception amount
to 147.00 pence per share.
* GBP3.32 million was invested into five new growth
capital investments and five existing portfolio
companies during the year.
* Net unrealised losses were GBP(9.14) million.
* Sale of investments generated GBP8.05 million of cash
proceeds and a net loss of GBP(0.28) million
(1) Definitions of key terms and alternative performance measures("APMs")
Key Performance Indicators ("KPIs") shown above and throughout are provided
in the Glossary of terms within the Annual Report & Financial Statements.
CHAIR'S STATEMENT
I am pleased to present the annual results of Mobeus Income & Growth
2 VCT plc for the year ended 31 March 2023.
Overview
The Company's financial year took place during a period of significant
political and economic disruption. A high point for many technology and
growth markets occurred at the end of 2021 before the impact of global
events including the Russian invasion of Ukraine, political turmoil in
the UK and across Europe as well as rising inflation and associated increase
in interest rates. Stock markets continue to be volatile and there has
been a substantial downward re-rating of growth stock valuations across
global markets.
Recently inflation has moderated, albeit remaining relatively high, and
the UK economy narrowly avoided recession. However, the IMF forecast
for 2023 warns of an ongoing threat of recession which would likely result
in additional challenges for your portfolio companies, particularly in
respect of input cost inflation and dampened customer demand. Nevertheless,
we believe your Company is well prepared for most scenarios with strong
liquidity available to support the portfolio and through extensive planning
and preparation by each of the portfolio companies' management teams
with the assistance of Gresham House.
The Company has continued to provide finance to new and existing investee
companies and delivered three notable exits during the year in the form
of Media Business Insight (MBI), Equip Outdoor Technologies (EOTH) and
Tharstern Group Limited (Tharstern). Looking forward we anticipate a
quieter exit environment in the current year.
The Board was pleased to learn of the commitment from the UK Government
to extend the VCT 'sunset clause' beyond the end date of 5 April 2025,
although Shareholders should note the VCT industry has seen no further
detail provided to date and any extension will most likely require parliamentary
approval. If the clause had not been extended, investor income tax relief
on new VCT subscriptions would not have been available.
Performance
NAV total return, expressed on a pence per share basis, was derived as
follows:
2023 2022
Year ended 31 March (pence per share) (pence per share)
------------------------------------------- ------------------ ------------------
Net realised and unrealised (losses)/gains
on the investment portfolio (9.60) 15.04
Income from the investment portfolio and
liquid assets 1.87 1.34
Share buybacks and adjustments (2.00) 0.89
------------------------------------------- ------------------ ------------------
Gross return (9.73) 17.27
Less: Investment Adviser's fees and other
expenses (2.10) (3.81)
------------------------------------------- ------------------ ------------------
Net return (11.83) 13.46
------------------------------------------- ------------------ ------------------
NAV total return per share (12.3)% 13.3%
------------------------------------------- ------------------ ------------------
The Company's NAV total return per share decreased by (12.3)% for the
year ended 31 March 2023 (2022: 13.3%), calculated as the closing NAV
per share of 71.54 pence plus 13.00 pence of dividends paid in the year,
divided by the opening NAV per share of 96.37 pence. The share price
total return was down (6.9)% (2022: 23.4%). The difference between the
share price and NAV total returns arises principally due to the timing
of NAV announcements which are usually made on a date following the date
to which they relate and is explained more fully under Performance in
the Strategic Report of the Annual Report. The negative NAV total return
for the year was principally the result of unrealised losses in the value
of investments in the portfolio, driven initially by lower benchmark
market comparables and, more recently, by the weaker trading performance
of investee companies as the impact of inflation and higher interest
rates on consumer spending and business investment began to bite.
In the Association of Investment Companies' analysis of Cumulative NAV
Total Returns at 31 March 2023, the Company was ranked 7(th) out of 36
Generalist VCTs over five years and 1(st) out of 31 Generalist VCTs over
ten years. Shareholders should note that the AIC's rankings are based
on the latest available published NAVs and therefore do not reflect NAV
per share movements up to 31 March 2023. For further details on the performance
of the Company, please refer to the Strategic Report within the Annual
Report.
Target Return
The Board's current target is to achieve an average NAV total return
of 8.0% per annum. Although this year's NAV total return decreased by
(12.3)% (2022: 13.3%) the average over five years of 11.3% per annum,
is well in excess of the target.
The Board reminds Shareholders that investment portfolio returns and
dividend payments should always be viewed over the longer term.
Dividends
The Board continues to be committed to providing an attractive dividend
stream to Shareholders. In respect of the year ended 31 March 2023, the
Company paid Shareholders two interim dividends totalling 13.00 pence
per share comprising 6.00 pence per share on 7 November 2022 and a further
dividend of 7.00 pence per share paid on 30 March 2023 to Shareholders
on the register on 30 September 2022 and 3 March 2023 respectively. To
date, cumulative dividends paid since inception total 147.00 pence per
share.
The Company has now met or exceeded the Board's dividend target of paying
at least 5.00 pence per share in respect of the last thirteen financial
years.
The continuing change in the portfolio to younger growth capital investments,
as the older, more mature companies with higher income yields are sold,
is likely to make it more difficult to maintain a consistently high level
of dividends from income and capital returns alone in any given year.
This year the Company experienced a reduction in income from portfolio
companies and investments but was able to exceed the dividend target
as it had sufficient distributable reserves from past realised profits.
Shareholders should also note that there may be circumstances where the
Company is required to pay dividends in order to maintain its regulatory
status as a VCT, for example, to stay above the minimum percentage of
assets required to be held in qualifying investments. It should also
be noted that the payment of dividends causes the Company's NAV per share
to reduce by a corresponding amount. The Board takes all of these variables
into account when setting the level of dividends and continues to monitor
the sustainability of the annual dividend target.
On 20 June 2023 by order of the Court, the share premium account and
capital redemption reserve of the Company was reduced (as approved at
the General Meeting of the Company held on 12 October 2022) and has been
transferred to 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,
make dividend payments and to write-off existing and future losses as
the Company must take into account capital losses in determining distributable
reserves.
Investment and portfolio performance
The portfolio valuation movements for the year were as follows: 2023 2022
GBPmn GBPmn
Opening Portfolio value 52.16 41.83
---------------------------- ------ ------
New and further investments 3.32 4.61
---------------------------- ------ ------
Disposal proceeds (8.05) (6.37)
---------------------------- ------ ------
Net realised (losses)/gains (0.28) 2.54
---------------------------- ------ ------
Valuation movements (9.14) 9.55
---------------------------- ------ ------
Portfolio value at 31 March 38.01 52.16
---------------------------- ------ ------
During the year, the Company invested a total of GBP3.32 million into
five new and five existing portfolio companies (2022: GBP4.61 million;
three and seven respectively). New investments totalling GBP1.88 million
were made into:
* Bidnamic - a marketing technology business;
* FocalPoint - a GPS enhancement software supplier;
* Orri - an intensive day care provider for adults with
eating disorders;
* Connect Earth - an environmental data provider; and
* Cognassist - education and neuro-inclusion solutions.
Additional funding of GBP1.44 million was provided across five existing
portfolio companies:
* Northern Bloc - a dairy and allergen-free ice cream
brand;
* Rotageek - a workforce management software system;
* Andersen EV - a provider of premium EV chargers;
* Vivacity - an AI and Urban Traffic Control business;
and
* Bleach London - a hair colourants brand.
Post the year-end, GBP0.39 million was invested into a new portfolio
company, Dayrize , a provider of a rapid sustainability impact assessment
tool.
Additionally, GBP0.30 million was further invested into Legatics, an
existing portfolio company. Further details of the new investments can
be found in the Investment Adviser's Report below.
The Company generated a total of GBP8.05 million in proceeds from full
and partial realisations alongside loan repayments and other capital
receipts in the year ended 31 March 2023 as detailed below.
In June 2022, the Company realised its investment in Media Business Insight
(MBI), a publishing and events business focussed on the production industries,
generating proceeds of GBP2.80 million (including deferred proceeds and
loan repayments made earlier in the year) resulting in a realised gain
in the year of GBP0.16 million. Returns received over the life of the
investment amounted to GBP4.50 million, a 2.2x multiple of cost and an
IRR of 13.8 %.
In November 2022 we were delighted by the sale of the equity in EOTH,
trading as Rab and Lowe Alpine, receiving GBP4.34 million including preference
share dividends on completion which generated a realised gain in the
year of GBP0.70 million. To date total proceeds received amount to GBP5.64
million providing a 6.9x multiple of cost and an IRR of 23.2%. The Company
has retained interest bearing loan stock to continue to generate future
income.
In March 2023, the sale of Tharstern completed generating a realised
gain of GBP0.35 million. Over the life of this investment a 2.6x return
and IRR of 15.0% was achieved.
Unfortunately in October 2022, Andersen EV, an electric charger provider,
was compelled to enter into administration as a result of a substantial
deterioration in its trading environment, which resulted in a realised
loss of GBP(0.65) million in the year. This was particularly disappointing
as the Company, alongside the other Mobeus VCTs, made a follow-on investment
into the company in May 2022. The company had secured some impressive
clients and funding was provided to drive product development in a premium
brand operating in the emerging electric car charging market. However,
over the summer months, a combination of global supply issues, inflationary
cost increases and the removal of Government consumer support for the
purchase of EV chargers quickly impacted its ability to continue trading
and so necessitated the appointment of administrators. On 22 December
2022, Parsley Box Group PLC delisted from the AIM market and its shares
were cancelled. It has subsequently re-registered as a private company.
Also in the year, Tapas Revolution, the Spanish restaurant chain, went
into administration. Under the HMRC Financial Health Test (more detail
below), the Company was unable to invest further into this portfolio
company and as a result it was necessary for an Administrator to be appointed.
It is likely that other company failures will be seen during the rest
of the financial year as we are unable to invest and assist some portfolio
companies further. Including Andersen EV above, a total of GBP1.49 million
has been recognised as a realised loss across three companies which are
experiencing significant trading issues.
The portfolio's valuation at the year-end demonstrates the impact of
slowing consumer and business spending on consumer facing portfolio companies,
in particular Virgin Wines. Virgin Wines is an AIM-listed investment,
which has also suffered from the negative sentiment of its sector, in
spite of broadly positive news flows from the company itself and relative
outperformance versus its peers. It contributed GBP2.68 million of the
unrealised portfolio reduction of GBP9.14 million. Other smaller valuation
decreases were registered by Buster & Punch and Wetsuit Outlet, which
were also marked down as a result of experiencing challenging trading
conditions.
The impact of the decline in consumer confidence on the portfolio companies
operating in the consumer sector has therefore contributed to the overall
realised and unrealised reduction in the value of the portfolio by GBP(9.42)
million in the year ended 31 March 2023 (2022: increase of GBP12.09 million),
or a fall of (18.1)% on a like-for-like basis compared to the value of
the portfolio at the start of the year.
During these uncertain times, the management of the portfolio is absolutely
critical and the Investment Adviser is, and has been, focused on deploying
its Talent Management team to support its investments. We continue to
expect follow-on investments to remain a significant feature of our portfolio
companies as they seek to achieve scale and move to profitability. Follow-on
investment requests are subject to the same scrutiny as new deals and
both rely on certain criteria being met, including the HMRC Financial
Health Test.
Shareholders should be aware that this test is an effective tightening
of the interpretation of HMRC policy and practice in a technical aspect
of the VCT financing rules, now resulting in the restriction of potential
follow-on investments to support certain companies, where more than half
their subscribed share capital has been lost.
In a small number of cases, this may result in the Company not being
able to make follow-on investments, even where a compelling business
case exists, which in turn could impact the prospects of the portfolio
company. The Board continues to monitor developments in the interpretation
of this area of legislation carefully.
Further details of the Company's investment activity and the performance
of the portfolio are contained in the Investment Adviser's Review and
the Investment Portfolio Summary within the Annual Report.
Liquidity and Fundraising
Cash and cash equivalents held by the Company as at 31 March 2023 amounted
to GBP32.51 million, or 46.2% of net assets.
In October 2022, on considering the future cash requirements of the Company
and the potential demand for the Company's shares following the successful
fundraise in January 2022, the Board approved a further fundraise for
the 2022/23 tax year. Having provided a period of time between the launch
of the prospectus and acceptance of applications, the Board was pleased
that the initial amount of GBP8 million (as well as an over-allotment
facility of a further GBP8 million), launched early in October 2022,
was fully subscribed by 8 November 2022. Shares were allotted in November
2022 and February 2023 and your Company extends a warm welcome to an
equal mix of both new and existing Shareholders.
The fundraising launched in October 2022 was to ensure that the Company
retained adequate levels of liquidity to take advantage of new investment
opportunities; fund further expansion of existing portfolio companies;
facilitate attractive Shareholders returns, including the payment of
dividends; and to buy back its shares from Shareholders who wish to sell.
Currently, the Board do not anticipate a fundraise in 2023.
Share Buybacks
During the year, the Company bought back and cancelled 1,464,956 of its
own shares (2022: 697,498), representing 1.8% of the shares in issue
at the beginning of the year (2022: 1.0%), at a total cost of GBP1.15
million, inclusive of expenses (2022: GBP 0.64 million). It is the Company's
policy to cancel all shares bought back in this way. The Board regularly
reviews its buyback policy and currently seeks to maintain the discount
at which the Company's shares trade at no more than 5% below the latest
published NAV.
Shareholder Communications and Annual General Meeting
May I remind you that the Company has its own website containing useful
information for Shareholders at:
www.mig2vct.co.uk .
The Investment Adviser held a virtual Shareholder Event on the afternoon
of 23 March 2023 with a live Q&A session which we hope you were able
to join. We are pleased that double the number of attendees joined the
meeting this year. A recording of the event is available via a link on
the Company's website.
Your Board is pleased to be able to hold the next Annual General Meeting
("AGM") of the Company at 11.00 am on Wednesday, 13 September 2023 at
the offices of Shakespeare Martineau, 6th Floor, 60 Gracechurch Street,
London, EC3V 0HR. A webcast will also be available at the same time for
those Shareholders who cannot attend in person. However, please note
that you will not be able to vote via this method and so are encouraged
to return your proxy form before the deadline of 11:00 am on Monday 11
September 2023. Information setting out how to join the meeting by virtual
means will be shown on the Company's website. For further details, please
see the Notice of the Meeting which can be found at the end of Annual
Report & Financial Statements.
Board Composition & Succession
Throughout the year the Board comprised three directors. Following the
retirement of Adam Kingdon in September 2022, whom we thank for his services
to the Company, we were delighted that Sarah Clark joined as a director
on 4 November 2023. Sarah brings new skills and depth of knowledge to
the Company and will be standing for election at the forthcoming AGM.
Sarah was also appointed as the Chair of the Investment Committee and
is a member of all other Company's Committees.
After considering and reviewing its composition, the Board agreed that
the directors have the breadth and depth of relevant knowledge and experience
plus the appropriate skill sets. The Board now consists of one male and
two female directors.
Fraud Warning
We are aware that Shareholders are 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 within the Annual Report.
Environmental, Social and Governance ("ESG")
The Board and the Investment Adviser believe that the consideration of
environmental, social and corporate governance ("ESG") factors throughout
the investment cycle will contribute towards enhanced Shareholder value.
Gresham House has a team which is focused on sustainability and the Board
views this as an opportunity to enhance the Company's existing protocols
and procedures through the adoption of the highest industry standards.
The future FCA reporting requirements consistent with the Task Force
on Climate-related Financial Disclosures, which commenced on 1 January
2021, do not currently apply to the Company but will be kept under review,
the Board being mindful of any recommended changes.
Consumer Duty
The Financial Conduct Authority (FCA) has introduced the concept of Consumer
Duty, the rules and principles of which come into effect in July 2023.
Consumer Duty is an advance on the existing concept of 'treating customers
fairly'. It sets higher and clearer standards of consumer protection
across financial services and requires all firms to put their customers
needs first.
As the Company is not regulated by the FCA it does not directly fall
into the scope of Consumer Duty. However, Gresham House as the Investment
Adviser alongside any IFAs or financial platforms used to distribute
future fundraising offers are subject to Consumer Duty.
It is incumbent on all parties to uphold the principles behind Consumer
Duty and to that end we are working with the Investment Adviser to review
the information we should provide to assist consumers and their advisers
to discharge their obligations under Consumer Duty.
Outlook
The geopolitical and macroeconomic background conditions are likely to
remain uncertain in the near future. Interest rates are set to remain
relatively high to combat inflation around the world. This background
will continue to provide trading challenges for our portfolio companies,
although historically these conditions have also provided an opportunity
for the Company to make high quality investments and build strategic
stakes in businesses with great potential. The issues affecting the banking
sector may also mean that debt markets continue to be constrained which
may, notwithstanding the recent successful sales of EOTH and Tharstern,
keep the exit environment subdued compared to recent years. However,
as the Company is not time-limited this is not expected to be a significant
issue. The combined impact of inflation, interest rates and restrictions
in Government spending are expected to continue to weigh down on UK consumer
and business confidence. Therefore, we anticipate that further market
stresses will become evident as the year progresses with all sectors
vulnerable. However, the Company has a reasonably large and diverse portfolio,
managed by a professional and capable investment team, which will mitigate
the challenges that lie ahead. Allied to our strong balance sheet, the
Board remains confident that it will be able to continue paying an attractive
dividend.
I would like to take this opportunity once again to thank all Shareholders
for your continued support and to extend a warm welcome to new Shareholders.
Ian Blackburn
Chair
12 July 2023
INVESTMENT ADVISER'S REVIEW
Portfolio Review
The continuing harsh economic conditions continue to create challenging
circumstances for portfolio companies. UK business has seen both demand
and operating margins come under pressure in the face of increases in
inflation, interest rates and the associated threat of recession, unprecedented
in recent years and not experienced by a generation of management teams.
Whilst markets have somewhat stabilised, the impact of this is now being
seen on consumer confidence and business investment.
Gresham House, as Investment Adviser views portfolio value change in
the first half of the financial year characterised as by declining market
multiples with relatively stable company level trading performance carried
over in part from the momentum gained during the prior financial year.
However, in the latter months of 2022 and into 2023, the situation has
reversed with trading performance beginning to suffer somewhat.
Although markets remain buoyant and less volatile, in large part this
is attributable to the weighting of tech giants such as Alphabet and
Meta who are not directly representative of the real UK growth economy.
Against this backdrop, the latest US data suggests growth rates have
more than halved to 1.1%. Whilst inflation is expected to be moderating
following the rises in base rates, it is still at a very high level and
has impacted economic growth expectations. There are also early signs
that supply chains are returning to normality, that the labour shortage
is easing and that there are pockets of positive market sentiment. The
outlook is therefore mixed, and the emphasis is thus on robust funding
structures and on being prepared for all eventualities.
The Company's investment values have been insulated partially from market
movements and lower revenue growth by the preferred investment structures
employed in many of the portfolio companies. This acts to moderate valuation
swings and the net result is a more modest decline in portfolio value.
The Gresham House non-executive directors who sit on each portfolio company
board have responded by working with their boards to ensure that appropriate
scenario planning has been done to achieve the best results during these
uncertain times. Furthermore, the direct impact high interest rates on
the Company's portfolio is negligible as most portfolio companies do
not have any significant third-party debt. There is also now a greater
focus on cash management and capital efficiency. With ample liquidity
following the recent fund raise, the Company is also well placed to support
portfolio companies with follow-on funding where it is appropriate and
can be done on attractive terms. Strong liquidity will also benefit the
attractive new investment environment for the Company which, in our view
is strong and we are seeing a number of interesting business propositions.
There are some specific highs in the portfolio such as Preservica which
continues to see strong trading and is out-performing budget. The partial
exit from EOTH was also an excellent result after a long running process
which had to negotiate numerous economic and geo-political hurdles and
shortly before the end of the year was the exit of Tharstern. By contrast,
there were also some significant falls. The largest was at Virgin Wines,
where market sentiment shifted heavily against the whole sector despite
Virgin Wines itself outperforming its peers. MyTutor was also impacted
by declining sector multiples combined with slower than anticipated growth
over the year and Tapas has entered administration since the year-end
with no expected recovery for the VCTs.
The portfolio's valuation changes in the year are summarised as follows:
Investment Portfolio Capital Movement 2023 2022
Increase in the value of unrealised investments GBPmn GBPmn
Decrease in the value of unrealised investments
---------------------------------------------------
0.67 14.91
(9.81) (5.36)
--------------------------------------------------- -------
Net (decrease)/increase in the value of unrealised
investments (9.14) 9.55
--------------------------------------------------- ------- -------
Realised gains 1.21 2.54
Realised losses (1.49) -
--------------------------------------------------- ------- -------
Net realised (losses)/gains in the year (0.28) 2.54
--------------------------------------------------- ------- -------
Net investment portfolio movement in the year (9.42) 12.09
--------------------------------------------------- ------- -------
The portfolio's movements in the year are summarised as follows:Opening portfolio value 2023 2022
New and further investments GBPmn GBPmn
Disposal proceeds
Net realised (losses)/gains
Valuations movements
-----------------------------
52.16 41.83
3.32 4.61
(8.05) (6.37)
(0.28) 2.54
(9.14) 9.55
----------------------------- -------
Portfolio value at 31 March 38.01 52.16
----------------------------- ------- -------
New investments during the year
A total of GBP1.88 million was invested into five new investments during
the year, as detailed below: Company Business Date of Investment Amount of new
investment
(GBPmn)
Bidnamic Marketing technology May 2022 0.43
------------------------ -------------------- -----------------------
Lads Store Limited, trading as "Bidnamic" (bidnamic.com) is a marketing
technology business that offers a platform for online retailers to
manage their search engine marketing spend. The technology was all
developed internally and uses bespoke machine learning algorithms
to automate the management and optimisation of online retailers' Google
shopping spend. The ARR of the business has grown substantially over
the last two years and this is projected to continue. The investment
round will be used further to enhance the product's capabilities and
drive continued ARR growth through expanding the sales & marketing
team and building a presence in North America.
GPS enhancement
FocalPoint software provider September 2022 0.42
------------------------ -------------------- -----------------------
Focal Point Positioning Limited (focalpointpositioning.com) is a deep
tech business with a growing IP and software portfolio. Its proprietary
technology applies advanced physics and machine learning dramatically
to improve the satellite-based location sensitivity, accuracy, and
security of devices such as smartphones, wearables and vehicles and
reduce costs.
Specialists in
eating disorder
Orri support September 2022 0.37
------------------------ -------------------- -----------------------
Orri Limited (orri-uk.com) is an intensive day care provider for adults
with eating disorders. Orri provides an alternative to expensive residential
in-patient treatment and lighter-touch outpatient services by providing
highly structured day and half day sessions either online or in-person
at its clinic on Hallam Street, London. Orri opened its current clinic
in London in February 2019 which provides a homely environment in
a converted 4-storey house but which is operating at capacity. The
plan sees a larger site being leased nearby with Hallam Street being
used to provide a step-down outpatient service.
Environmental data
Connect Earth provider March 2023 0.22
------------------------ -------------------- -----------------------
Founded in 2021, Connect Earth (connect.earth) is a London-based environmental
data company that democratises easy access to sustainability data.
With its carbon tracking API technology, Connect Earth supports financial
institutions in offering their customers transparent insights into
the climate impact of their daily spending and investment decisions.
Connect Earth's defensible and scalable product platform suite has
the potential to be a future market winner in the nascent but rapidly
growing carbon emission data market, for example, by enabling banks
to provide end retail and business customers with carbon footprint
insights of their spending. This funding round is designed to facilitate
the delivery of the technology and product roadmap to broaden the
commercial reach of a proven product.
Education and
neuro-inclusion
Cognassist solutions March 2023 0.44
------------------------ -------------------- -----------------------
Cognassist (cognassist.com) is an education and neuro-inclusion solutions
company that provides a Software-as-a-Service (SaaS) platform focused
on identifying and supporting individuals with hidden learning needs.
The business is underpinned by extensive scientific research and a
vast cognitive dataset. Founded in 2019 by Chris Quickfall, Cognassist
has scaled its underlying business within the education market, enabling
apprentices to unlock government funding and helping diverse minds
to thrive. This investment will empower Cognassist to continue its
growth within the education market and penetrate the enterprise market,
where demand for neuro-inclusive solutions to adequately support employees
is rapidly emerging.
Further investments during the year
A total of GBP1.44 million was invested into five existing portfolio
companies during the year, as detailed below: Company Business Date of Investment Amount of further
investment (GBPmn)
Dairy and
allergen-free
Northern Bloc ice cream producer April 2022 0.12
-------------------- ------------------- --------------------
Northern Bloc Ice Cream (northern-bloc.com) is an established food
brand in the emerging and rapidly growing vegan market. By focusing
on chef quality and natural ingredients, Northern Bloc has carved
out an early mover position in the dairy and allergen-free ice cream
sector. The company's focus on plant-based alternatives has strong
environmental credentials as well as it being the first ice cream
brand to move wholly into sustainable packaging. Following the initial
investment in December 2020, Northern Bloc has grown and strengthened
its prospects against a challenging market backdrop. This further
investment provides additional working capital and funds a new production
facility to increase its resilience, flexibility and margins in the
future.
Provider of premium
electric vehicle
Andersen EV (EV) chargers May 2022 0.27
-------------------- ------------------- --------------------
Muller EV Limited (trading as Andersen EV) (andersen-ev.com) is a
design-led manufacturer of premium electric vehicle 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. This follow-on funding
was to further support its premium brand and product positioning whilst
ensuring all new and existing products met the most recent and highest
safety and compliance standards. Unfortunately, external factors caused
its market and trading prospects to worsen rapidly, including substantially
reduced demand, global supply chain issues, inflation and the removal
of government consumer support for the purchase of EV chargers. The
company therefore entered administration in October 2022.
Workforce
management
Rotageek software June 2022 0.18
-------------------- ------------------- --------------------
RotaGeek (rotageek.com) is a provider of cloud-based enterprise software
to help larger retail, leisure and healthcare organisations to schedule
staff effectively. RotaGeek has proven its ability to solve the scheduling
issue for large retail clients effectively competing due to the strength
of its technologically advanced proposition. The company has made
significant commercial progress since the VCTs first investment nearly
doubling Annual Recurring Revenues (ARR). This investment aims to
boost ARR and enable the company to take advantage of further large
client opportunities.
Provider of
artificial
intelligence &
urban traffic
control
Vivacity systems July 2022 0.59
-------------------- -------------------- --------------------
Vivacity (vivacitylabs.com) develops camera sensors with on-board
video analytics software that enables real-time anonymised data gathering
of road transport system usage. It offers city transport authorities
the ability to manage their road infrastructure more effectively,
enabling more efficient monitoring of congestion and pollution levels
as well as planning for other issues, such as the changing nature
of road usage (e.g. the increasing number of cyclists). The technology
and software represent a significant leap forward for local planning
authorities which have traditionally relied upon manual data collection
methods. This new investment will help boost the company's revenues
through development of new functionality to enhance its product suite
which can also be installed into the existing asset base.
Hair colourants
Bleach brand August 2022 0.28
-------------------- -------------------- --------------------
Bleach London Holdings ("Bleach") (bleachlondon.com) is an established
brand which develops and markets a range of innovative haircare and
colouring products. Bleach is regarded as a leading authority in the
hair colourant market having opened one of the world's first salons
focused on colouring and subsequently launched its first range of
products in 2013. This further investment was part of a wider GBP5.5
million investment round alongside existing shareholders and a strategic
partner. The funds will be used to drive further expansion into the
strategically important North American market and to consolidate the
brand's position in the UK.
Portfolio valuation movements
Across the portfolio, comparable market multiples that are used as the
basis of valuation have declined over the year, some by over 30%, but
the levels at the year-end reflect a degree of stabilisation over the
final quarter. Together with several downward revisions to trading forecasts
in the latter half of the year, this has driven a general decline in
investee company values. As noted, the preference investment structures
used in many of the portfolio companies serve to moderate the impact
of such company value movements on VCT value. The need to protect and
develop value going forwards in such an uncertain environment underlines
the need for portfolio readiness and planning, robust funding and close
monitoring by the Gresham House team.
The main reductions within total valuation decreases of GBP(9.81) million,
were:
Virgin Wines
* GBP(2.68) million
MyTutor
* GBP(1.24) million
Wetsuit Outlet
* GBP(1.12) million
Buster & Punch
* GBP(1.05) million
Connect Childcare
* GBP(0.85) million
Virgin Wines has suffered from negative sentiment across its sector despite
outperforming its peers although more recently, it also experienced some
short term operational difficulties particularly in the last quarter
of 2022. MyTutor's growth has slowed post COVID coupled with a decline
in market multiples. Buster and Punch and Wetsuit Outlet are both consumer
facing businesses that have experienced challenging trading conditions
which resulted in profit downgrades. Connect Childcare has struggled
to grow revenues as rapidly as hoped and is managing its cash carefully.
The uplifts within the total valuation increase of GBP0.67 million were:
Master Remover
* GBP0.27 million
Preservica
* GBP0.22 million
Orri
* GBP0.18 million
Master Removers continues to trade well despite an uncertain housing
market across much of the period under review. Preservica is performing
well and increasing its recurring revenues. Finally, Orri has been valued
on a revenue multiple and the VCT has benefitted from an increase in
value due to the investment structuring.
Portfolio Realisations during the year
The Company completed three full or partial exits during the year, as
detailed below: Company Business Period of Total cash proceeds
investment over the life
of the investment
/ Multiple over
cost
MBI Publishing and January 2015 to GBP4.50 million
events business June 2022 2.2x cost
---------------------- -------------------- ----------------------
The Company realised its entire investment in MBI for GBP2.80 million
(realised gain in the year: GBP0.16 million) including deferred
proceeds received since completion. Total proceeds received over
the life of the investment were GBP4.50 million compared to an
original investment cost of GBP2.01 million, representing a multiple
on cost of 2.2x and an IRR of 13.8%.
Branded clothing October 2011 to GBP5.64 million
Equip (RAB and Lowe November 2022 6.9x cost
Alpine)
---------------------- -------------------- ----------------------
The Company realised its equity investment in EOTH for GBP3.67
million (realised gain in the year: GBP0.70 million) including
preference dividends. Total proceeds received over the life of
the investment were GBP5.64 million compared to an original investment
cost of GBP0.82 million, representing a multiple on cost of 6.9x
and an IRR of 23.2%. The Company has retained its interest yielding
loan stock investment. Once repaid, this should increase the multiple
on cost to 7.9x.
Software based July 2014 to GBP2.17 million
Tharstern management March 2023 2.6x cost
information
systems
---------------------- ------------------------ --------------------
The Company realised its investment in Tharstern Group for GBP1.55
million (realised gain of GBP0.35 million). Total proceeds received
over the life of the investment were GBP2.17 million compared to
an original cost of GBP0.84 million, representing a multiple on
cost of 2.6x and an IRR of 15.0%.
Also during the year, the Company received a loan repayment from Jablite
Holdings Limited.
Portfolio income and yield
In the year under review, the Company received the following amounts
in loan interest and dividend income: Investment Portfolio Yield 2022 2021
GBPmn GBPmn
Interest received in the year 0.50 0.79
Dividends received in the year 0.76 0.29
---------------------------------------------------------------------- ------- -------
Total portfolio income in the year(1) 1.26 1.08
---------------------------------------------------------------------- ------- -------
Portfolio value at 31 March 38.01 52.16
---------------------------------------------------------------------- ------- -------
Portfolio Income Yield (Income as a % of Portfolio value at 31 March) 3.3% 2.1%
(1) Total portfolio income for the year is generated solely from investee
companies within the portfolio.
New investment made after the year-end
The Company made one new investment of GBP0.39 million after the year-end,
as detailed below:
Company Business Date of investment Amount of further
investment (GBPmn)
Sustainability impact
Dayrize assessment tool provider May 2022 0.39
---------------------------- ---------------------- ----------------------
Founded in 2020, Amsterdam-based Dayrize has developed a rapid sustainability
impact assessment tool that delivers product-level insights for consumer
goods brands and retailers, enabling them to be leaders in sustainability.
Its proprietary software platform and methodology bring together an
array of data sources to provide a single holistic product-level sustainability
score that is comparable across product categories in under two seconds.
This funding round is to drive product development and develop its
market strategy to build on an opportunity to emerge as a market leader
in the industry.
Further investments made after the year-end
The Company made a further investment of GBP0.30 million into an existing
portfolio company after the year-end as detailed below:
Company Business Date of investment Amount of further
investment (GBPm)
Legatics SaaS LegalTech software July 2023 0.30
--------------------------- --------------------- --------------------
Legatics (legatics.com) transforms legal transactions by enabling
deal teams to collaborate and close deals in an interactive online
environment. Designed by lawyers to improve legacy working methods
and solve practical transactional issues, the legal transaction management
platform increases collaboration, efficiency and transparency. As
a result, Legatics has been used by around 1,500 companies, and has
been procured by more than half of the top global banking and finance
law firms, with collaborations having been hosted in over 60 countries.
This funding round will provide headroom to further accelerate growth
and to drive efficiencies to reach profitability.
Environmental, Social and Governance considerations
The Board and the Investment Adviser believe that the consideration of
environmental, social and corporate governance ("ESG") factors throughout
the investment cycle should contribute towards enhanced shareholder value.
The Investment Adviser has a team which is focused on sustainability
as well as the Investment Adviser's Sustainability Committee who provide
oversight and accountability for the Investment Adviser's approach to
sustainability across its operations and investment practices. This is
viewed as an opportunity to enhance the Company's existing protocols
and procedures through the adoption of the highest industry standards.
Each investment executive is responsible for setting and achieving their
own individual ESG objectives in support of the wider overarching ESG
goals of the Investment Adviser. The Investment Adviser's Private Equity
division has its own Sustainable Investment Policy, in which it commits
to:
* Ensuring its team understands the imperative for
effective ESG management and is equipped to carry
this out through management support and training.
* Conduct regular monitoring of ESG risks,
opportunities and performance in its investments.
* Incorporate ESG into its monitoring processes.
Outlook
Whilst the year under review has once again been marked with volatility
and uncertainty as a result of a number of factors affecting both the
global and UK economy, the portfolio has continued to trade well under
the circumstances. Rising costs and recessionary pressures will place
further strains on the portfolio however, the Investment Adviser with
its wealth of team experience will provide all additional help and advice
to portfolio company management to help weather this storm. In terms
of new investment, evidence shows that investing through the economic
cycle has the potential to yield strong returns and Gresham House is
seeing a number of opportunities, which although not without some risk,
have the potential to drive shareholder value.
Gresham House Asset Management Limited
Investment Adviser
12 July 2023
Annual General Meeting
The AGM will be held at 11.00 am on Wednesday, 13 September 2023 at the
offices of Shakespeare Martineau LLP, 6(th) floor, 60 Gracechurch Street,
London EC3V 0HR and will also be webcast for those Shareholders who are
unable to attend in person. Details of how to join the meeting by virtual
means will be shown on the Company's website. Shareholders joining virtually
should note you will not be able to vote at the meeting and therefore
you are encouraged to lodge your proxy form. For further details, please
see the Notice of the Meeting which can be found at the end of the Annual
Report & Financial Statements.
Further Information
The Annual Report and Accounts for the year ended 31 March 2023 will
be available shortly on Mobeus Income & Growth 2 VCT plc . It will also
be submitted shortly in full unedited text to the Financial Conduct Authority's
National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
in accordance with DTR 6.3.5(1A) of the Financial Conduct Authority's
Disclosure Guidance and Transparency Rules.
Contact
Gresham House Asset Management Limited
Company Secretary
mobeusvcts@greshamhouse.com
+44 20 7382 0999
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END
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