Annual Financial Report

RNS Number : 5592V

Mobeus Income & Growth 4 VCT PLC

06 April 2023

 

MOBEUS INCOME & GROWTH 4 VCT PLC

LEI:  213800IFNJ65R8AQW943

Annual Report & Financial Statements for the Year Ended 31 December 2022

Results Announcement

The Company has today published on its website Mobeus Income & Growth 4 VCT plc the Annual Report and Financial Statements for the year ended 31 December 2022.  The highlights Include:

As at 31 December 2022:

Net assets: £83.54 million

Net asset value ("NAV") per share: 80.05 pence

➤   Net asset value ("NAV") total return¹ per share was (15.5)%.

➤   Share price total return¹ per share was (8.4)%.

➤   Dividends paid and declared in respect of the financial year totalled 10.00 pence per share. Cumulative dividends paid to date since inception in 2004 stand at 153.20 pence per share.

➤   £3.78 million was invested into four new growth capital investments and six existing portfolio companies during the year.

➤   Net unrealised losses were £(15.45) million in the year.

➤   The Company realised investments totalling £8.70 million of cash proceeds and generated net realised gains in the year of £0.74 million.

¹ Definitions of key terms and alternative performance measures shown above and throughout the report are shown in the Glossary of Terms in the Annual Report

CHAIR'S STATEMENT

I present the Annual Report of Mobeus Income & Growth 4 VCT plc for the year ended 31 December 2022.

Overview

The high point for many technology and growth markets was seen towards the end of 2021 - after which they were impacted by global events such as the Russian invasion of Ukraine, the highest rates of inflation for over a decade and accompanying interest rate increases, political turmoil in the UK and across Europe and the increasing cost of living.  The recent UK Budget sought to stimulate the economy, but we can expect continuing challenges for portfolio companies particularly with respect to increased costs and subdued consumer demand.

The Mobeus VCTs' joint fundraise which was launched in January 2022 and reached its application capacity in less than 24 hours. Given the level of investor demand, and a continuing pipeline of investment opportunities, your Board agreed later in that year, that a further fundraise would be appropriate. This was issued across all four Mobeus VCTs in October 2022 and also reached its capacity in a short timeframe, securing £16 million for the Company (including the £5 million over-allotment facility) early in November 2022.  This outstanding level of support is a very encouraging demonstration of the confidence that investors have in the Company and your Board is delighted to welcome an equal mix of further investment from our valued existing Shareholders and also from new investors in the Company. These additional cash resources will enable the Company to take advantage of new and follow-on investment opportunities as previous experience has shown that investing through the cycle can create excellent returns over time.

It appears that higher inflation and the Russian war in Ukraine have now become daily news events.  Post the year-end, inflation remained stubbornly high although, against almost all predictions, the UK economy has so far avoided going into recession. 

Challenges for portfolio companies are expected to continue during 2023, with a combination of inflationary pressures and lower customer demand. Your Company is well prepared for most scenarios with its strong liquidity available to support the portfolio and from the extensive planning and preparation with each of the portfolio company's management teams by Gresham House. The Company has continued to provide finance to new and existing investee companies with two notable exit events during the year under review in the form of Media Business insight (MBI) and Equip Outdoor Technologies (EOTH). The recent equity disposal of EOTH in November contributing to a 6.9x return to date was a particular high point as we anticipate a quieter exit environment in 2023 than in previous years.

The Board was pleased to hear of the UK Government's commitment to extend the VCT 'sunset clause' beyond the end date of 5 April 2025. Without an extension, investor income tax relief on new VCT share subscriptions will expire after that date. Shareholders should note however that, to date, the VCT industry has seen no further detail on this subject and any extension of the date will probably require parliamentary approval.

Performance

For the year ended 31 December 2022, the Company experienced a negative NAV total return per share of (15.5)% (2021: +42.7%) and a negative share price total return of (8.4)% (2021: +50.4%).  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 later than 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 a result of the unrealised loss in the value of investments still held, partially offset by realised gains achieved above previous carrying values.

The reduction in net asset value resulted from falls in the valuation of the portfolio over the financial year. This has primarily been driven by lower benchmark market comparables and, more recently, by softening investee company trading performance.  As is usually the case, markets quickly factored in the expected impact of inflation and higher interest rates on consumer spending and business investment. The full extent of the impact of these on portfolio company trading will emerge over time.

At the end of the year under review the Company was ranked 4th over five years and 9th over ten years periods (out of 37 and 31 Generalist VCTs respectively) in the Association of Investment Companies' analysis of NAV Cumulative Total Return.  Shareholders should note that the AIC's rankings are based on the latest available published NAVs and therefore do not fully reflect the NAV per share decrease reported by the Company up to 31 December 2022. Nevertheless, it is pleasing that your Company has shown resilience over the medium and longer terms when measured against other sector participants. For further details on the performance of the Company, please refer to the Strategic Report of the Annual Report.

Dividends

The Board continues to be committed to providing an attractive dividend stream to Shareholders and was pleased to announce an interim dividend of 4.00 pence per share which was paid on 8 July 2022 to Shareholders on the register on 6 June 2022.  A second interim dividend of 6.00 pence per share, was paid on 7 November 2022 to Shareholders on the register on 23 September 2022 and together, this brings the total dividends paid in respect of the financial year ended 31 December 2022 to 10.00 pence per share. To date, cumulative dividends paid since inception total 153.20 pence per share.  The Company has now met or exceeded the Board's dividend target of paying at least 4.00 pence per share in respect of each financial year over the last ten years.

As Shareholders have been advised previously, the reorientation of the portfolio under the VCT rules to younger growth capital investments as well as the realisations of older, more mature companies that have formerly provided a good income yield, are likely to make dividends harder to achieve from income  alone in any given year. The Board aims to distribute realised profits (such as income and gains from realisations) achieved in a year as dividends but notes that a reduction in contracted loan interest income was seen during the year by the Company. The Board, therefore, continues to monitor the sustainability of the annual dividend target. Shareholders should also note that there may continue to be circumstances where the Company is required to pay dividends in order to maintain its regulatory status as a VCT, for example, to stay above the minimum percentage of assets required to be held in qualifying investments. Such dividends paid in excess of net income and capital gains achieved will cause the Company's NAV per share to reduce by a corresponding amount.

Dividend Investment Scheme

The Company's Dividend Investment Scheme ("DIS") provides Shareholders with the opportunity to reinvest their cash dividends into new shares in the Company at the latest published NAV per share. New VCT shares attract the same tax reliefs as shares purchased through an Offer for Subscription. As part of the 4.00 pence per share dividend paid on 8 July 2022, 586,156 Ordinary shares were allotted to participants of the DIS at a price of 98.96 pence per share. For the further 6.00 pence per share dividend paid on 7 November 2022, 1,129,699 Ordinary shares were allotted at a price of 80.50 pence per share to DIS members.

Shareholders wishing to take advantage of the scheme for any future dividends can join the DIS by completing a mandate form available on the Company's website, under the 'Dividends' heading, at: www.mig4vct.co.uk., or alternatively, existing DIS members can opt-out by contacting Link Group, using their details provided under Corporate Information of the Annual Report.

Investment portfolio

The portfolio movements across the year were as follows:

	2022	2021
	£m	£m
Opening portfolio value	65.58	41.68
New and further investments	3.78	6.23
Disposal proceeds	(8.70)	(12.23)
Net realised gains	0.74	4.19
Valuation movements	(15.45)	25.71
Net investment portfolio (losses)/gains	(14.71)	29.90
Portfolio value at 31 December	45.95	65.58

A number of investee companies have experienced a decline in consumer confidence with the resultant impact on trading during the recent challenging environment. There was a fall of £14.71 million in the overall value of the portfolio across the year to 31 December 2022 (2021: increase of £29.90 million), or a fall of 22.4% on a like-for-like basis compared to the value of the portfolio at the start of the year.  

Notably, a significant amount of the fall of £14.71 million relates to Virgin Wines which declined by £6.89 million. Virgin Wines is an AIM-listed investment, which has suffered from the negative sentiment of its sector, despite positive news flows and the relative outperformance versus its peers by the company itself. It is worth noting that in addition to the unrealised equity holding, the Company has received over 1.7x its original investment in realised returns to date. 

The negative NAV total return for the year principally comprised unrealised falls in the value of investments still held of £15.45 million, (primarily Virgin Wines, Buster and Punch and MyTutor) which were partially mitigated by an uplift in Tharstern together with the exit proceeds received from EOTH and MBI, which contributed to net realised gains of £0.74 million.

During the year, the Company invested a total of £3.78 million into four new and six existing portfolio companies (2021: £6.23 million; four new, nine existing).  New investments totalling £2.03 million were made into:

Proximity Insight:	retail technology software;
Bidnamic:	a marketing technology business;
FocalPoint:	a GPS enhancement software supplier; and
Orri:	an intensive day care provider for adults with eating disorders

Additional portfolio funding totalling £1.75 million was provided to six existing portfolio companies:

Caledonian Leisure:	a provider of UK leisure and experience breaks
Northern Bloc:	a dairy and allergen-free ice cream brand
Rotageek:	a workforce management software system
Andersen EV:	a provider of premium EV chargers
Vivacity:	an AI and Urban Traffic Control busines
Bleach London:	a hair colourants brand

The Company generated total proceeds of £8.70 million in the year to 31 December 2022 comprising £8.25 million from full or partial realisations as well as other capital receipts of £0.45 million. Further details are provided below:

In June 2022, the Company realised its investment in MBI generating proceeds of £3.98 million from the sale (including deferred proceeds and loan repayments made earlier in the year) resulting in a realised gain in the year of £0.42 million. This exit contributed to returns received over the life of the investment amounting to £6.11 million, which is a 2.2x multiple of cost and an IRR of 13.8%.

In October 2022, Andersen EV, the electric vehicle charger provider, entered into administration as a result of a substantial deterioration in its trading conditions which resulted in a realised loss of £0.44 million being recognised during the year. This was particularly disappointing as the Company made a follow-on investment into the company in May 2022 alongside the other Mobeus VCTs. The company had secured some impressive clients and funding was provided to drive product development in a premium brand which operated in the emerging electric car charging market. Over the summer months however, a combination of global supply issues, inflationary cost increases and the removal of Government consumer support for the purchase of EV chargers swiftly impacted the company's ability to continue trading and so necessitated the appointment of administrators. 

In a similarly disappointing development, in December 2022, following repeated and substantial falls in its share price, Parsley Box Group PLC delisted from the AIM market and the shares were cancelled. It has subsequently re-registered as a private company.

More positively, the end of the year brought an equity realisation of EOTH, trading as both RAB and Lowe Alpine, with amounts received on completion of £5.05 million including preference share dividends, generating a realised gain in the year of £0.36 million. Total proceeds received over the life of this investment are £6.56 million to date, a 6.9x multiple of cost and an IRR of 23.2%.  The Company has retained its interest yielding loan stock to continue to generate income in the future.

Also received in the year were deferred proceeds from Red Paddle and Vectair, both investments realised in a previous year generating further realised gains totalling £0.40 million.

During these challenging times, the management of the portfolio is undeniably critical, and the Investment Adviser has been, and is, focused on deploying its Talent Management team to support the investments.  Follow-on investments are expected to remain a significant feature of growth capital investee companies as they seek to achieve scale and move to profitability. Follow-on investment requests are always subject to the same scrutiny as new deals and both rely on certain criteria being met, including the HMRC Financial Health Test.

In respect of the Financial Health Test, Shareholders should be advised that a tightening by HMRC of policy and practice in a technical aspect of the VCT financing rules is now resulting in the restriction of potential follow-on investments to support certain portfolio companies, where more than half their subscribed share capital has been lost. In respect of some portfolio companies 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 these businesses.  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 in the Annual Report.

Since the year-end, the Company has invested a total of £0.75 million into two new investment companies, Connect Earth and Cognassist in March 2023. Also following the year-end, again in March 2023, the sale of the Company's investment in Tharstern Group Limited was completed achieving a 2.6x return against cost over the life of the investment.

Liquidity & Fundraising

Cash and cash equivalents held by the Company as at 31 December 2022 amounted to £37.71 million, or 45.1% of net assets.  The Board continues to prioritise the security and protection of the Company's capital by monitoring credit risk in respect of its cash and near cash resources.

In January 2022, the Company completed a fundraise of £7.5 million for the 2021/2022 tax year which was fully subscribed in less than 24 hours. This level of demand was very pleasing although the Board became aware that a number of investors were not able to subscribe before the fundraise closed and were therefore disappointed. Later in the year, on considering the future cash requirements of the Company and the potential demand for the Company's shares, the Board approved a 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 £11 million (including an over-allotment facility of a further £5 million), launched on 5 October 2022, was fully subscribed by 8 November 2022.  Shares were allotted on 16 November 2022 and on 6 February 2023 and your Company extends a warm welcome to both existing and new Shareholders.

The fundraising that was launched in October 2022 was to ensure that the Company retained adequate levels of liquidity to continue to take advantage of new investment opportunities, support the existing portfolio, and fund further expansion of the businesses in its investment portfolio where required. The funds will also assist the delivery of attractive returns for its Shareholders, including the payment of dividends over the medium term as well as to help facilitate share buybacks from those Shareholders who wished to sell shares.

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 in the Annual Report.

Share buy-backs

During the year, the Company bought back and cancelled 1,796,536 of its own shares (2021: 1,303,349), representing 2.2% of the shares in issue at the beginning of the year (2021: 1.6%), at a total cost of £1.46 million, inclusive of expenses (2021: £1.23 million). It is the Company's policy to cancel all shares bought back in this way. The Board reviews its buyback policy quarterly and currently seeks to maintain the discount at which the Company's shares trade at no more than 5% below the latest published NAV.

Shareholder Communications & Annual General Meeting

May I remind you that the Company has its own website which is available at: www.mig4vct.co.uk .

Following the well-received virtual Shareholder Event held on 25 February 2022, the Investment Adviser held another successful virtual Shareholder Event with a live Q&A session on 23 March 2023. Numbers either viewing or participating online were close to totals attending such events in person before the Covid pandemic, and a recording is available on the Company's website for those who were not able to see the event live.

Your Board is pleased to be able to hold the next Annual General Meeting ("AGM") of the Company at 2.30  pm on Wednesday, 24 May 2023 at the offices of Shoosmiths LLP, 1 Bow Churchyard, London EC4M 9DQ.  The Board is aware that a number of Shareholders hold shares in the Company and another Mobeus VCT, Mobeus Income & Growth VCT plc (MIG VCT). To aid Shareholder attendance at the AGMs of both companies, given the common financial year ends, the Boards of the companies have decided to hold both AGMs on the same day with a presentation from the companies' Investment Adviser taking place in between the two meetings, during which a light lunch will be available. The MIG VCT AGM will take place earlier on 24 May 2023, commencing at 1.00pm and will be followed by the joint Investment Adviser presentation at 1.30 pm. Shareholders are welcome to join us for the Investment Adviser presentation if not already attending the earlier MIG VCT AGM.

A webcast will also be available from 1.30 pm for those Shareholders who cannot attend in person. However, please note that you will not be able to vote at the AGM via this method and you are encouraged to return your proxy form before the deadline of 22 May 2023. Information setting out how to join the meeting by virtual means will be shown on the Company's website. For further details, please see the Notice of the Meeting which can be found at the end of the Annual Report & Financial Statements.

Votes Against Dis-application of Pre-emption Rights

At the General Meeting of the Company held on 12 October 2022, over 20% of the votes received were lodged against the composite resolution to approve the allotment of shares and disapply pre-emption rights to support the 2022/2023 fundraise. It appears that we did not make it sufficiently clear that the proposed dis-application of the pre-emption rights was in respect of the fundraise only. The resulting feedback received will be taken into consideration for future fundraises and communications.

The General Meeting resolution was in addition to the already approved dis-application of pre-emption rights given at the AGM held on 17 May 2022 because the funds being raised under the 2022/23 offer exceeded the previous authorities obtained and therefore additional shareholder authority was required as well as providing authority to allot the greater number of shares.

As required under the AIC Code of Corporate Governance Code, those Shareholders that voted against the resolution were contacted to ascertain their reasons. I thank those Shareholders who responded to my request for their reasons for voting against the resolution. It became clear that the key factor was Shareholders' concern about new shareholders being added to the Register of Members thereby diluting their holding and potential dividend income. By the issuance of shares to new investors, this:

· maximises the pool of potential VCT investors thereby increasing the probability that the full offer amount is raised allowing the Company:

· to continue to take advantage of new investment opportunities and to support existing portfolio companies as deemed appropriate; and

· seeks the delivery of attractive returns for its Shareholders, including the payment of dividends over the medium-term.

The Board is of the opinion that the benefit to the Company's Shareholders in having sufficient liquidity to meet its investment objectives and the potential to generate enhanced returns in the future, as well as the ability to make dividend payments, greatly outweighs any potential short-term dilutive impact of individual shareholder returns.

The allotments in November 2022 and February 2023 saw a roughly equal balance of existing and new investors and all existing Shareholders were able to subscribe for shares as the Offer remained open for applications from 17 October to 8 November 2022 when it became fully subscribed. A small number of applicants who applied thereafter were unable to be accommodated in the final allotment on 6 February 2023.

We will once again, at the Annual General Meeting of the Company, propose a resolution to dis-apply pre-emption rights although this authority is not expected to be utilised except in respect of the Dividend Investment Scheme.

Fraud Warning

Shareholders continue to be contacted in connection with sophisticated but fraudulent financial scams which purport to come from or to be authorised by the Company. This is often by a phone call or an email usually originating from outside the UK, claiming or appearing to be from a corporate finance firm offering to buy your shares at an inflated price.

The Board strongly recommends Shareholders take time to read the Company's Fraud warning section, including details of who to contact, contained within the Information for Shareholders section of the Annual Report.

Board Composition

At the start of the year under review, the Board comprised four directors prior to Helen Sinclair's retirement after the AGM in February 2023.  On 1 March 2022, Chris Burke was appointed as a member of both the Audit & Risk Committee and the Nomination & Remuneration Committees, he was also appointed as Chair of the Investment Committee. After considering and reviewing its composition at that time, the Board agreed that the recruitment of another Non-Executive Director was not necessary.

In the Half-Year Report dated 13 September 2022, I stated my intention to retire as a director and Chair of the Company following the conclusion of the Company's Annual General Meeting in May 2023. The Board intends to appoint Graham Paterson as Chair of the Company to succeed me.  An in-depth third party led recruitment process commenced at the latter end of the year to secure a Non-Executive Director to succeed Graham as Chair of the Audit & Risk and Nomination and Remuneration Committees following the AGM. Having given careful consideration to the diversity of skills, experience, gender and background of the wider Board, we were delighted that Lindsay Dodsworth agreed to join as a director and she was appointed on 1 January 2023.  Lindsay will stand for election at the forthcoming AGM.

The directors remain committed to increasing diversity of representation and will take this fully into account alongside the skills required to serve Shareholders well in the specialist VCT sector for any future appointments.

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 currently do not apply to the Company but will be kept under review, the Board being mindful of any recommended changes.

Consumer Duty

The Directors are cognisant of the Investment Adviser's obligations to comply with the FCA's Consumer Duty rules and principles introduced in 2022 and coming into force in 2023.

 Companies that are subject to Consumer Duty must ensure they are acting to deliver good outcomes and that this is reflected in their strategies, governance, leadership and policies. The Investment Adviser is currently undergoing a review of its existing practices in order to ensure these fulfil the Consumer Duty principles. The Company is not directly captured by Consumer Duty, however we are working together with the Investment Adviser to achieve the forthcoming obligations.

Outlook

Significant uncertainties lie ahead due to multiple geopolitical and economic factors, and this was exemplified by the recent rescue of Silicon Valley Bank (SVB") based in California which had a UK subsidiary. One of the VCT's portfolio companies had funds deposited with SVB in the UK but these were unaffected following SVB UK's acquisition by HSBC. The quantum of the investee's deposit was not material to the overall value of the portfolio. Nevertheless, across the whole VCT sector and beyond, the event has underpinned the importance of spreading liquidity risk. Notwithstanding the foregoing, challenging and uncertain times can give rise to opportunities for efficient investment into businesses with significant potential for the future. Further to the successful realisation of EOTH in November, and Tharstern in March of this year, the exit environment is likely to become more restrained. This is not seen as a significant issue given that the Company is not time-limited. The combined impact of high inflation, high interest rates and Government spending restrictions can be expected to impact both consumer and business confidence.  We therefore anticipate that further stresses will become evident across UK-based businesses over the forthcoming year. Your Company is invested in a diverse portfolio of businesses managed by a resourceful and professional investment team. Notwithstanding the challenges already described, the Company is well positioned to take advantage of investment opportunities to deliver attractive returns over the medium and longer term.

I would like to once again thank all our Shareholders for their continued support.

Jonathan Cartwright

Chair

5 April 2023

Investment Adviser's Review

Portfolio Review

In the year to 31 December 2022 many quoted market values have declined significantly and the current economic conditions continue to create challenging circumstances. UK business has seen both demand and operating margins come under pressure in the face of widely reported increases in inflation, interest rates and the associated threat of recession. The impact of this is now being seen on consumer confidence and business investment. 

In the early half of 2022 portfolio value change was therefore characterised by declining market multiples with relatively stable company level trading performance carried over in part by the momentum gained during 2021.  However, in the latter part of 2022 and into 2023, the situation has reversed.  Markets and multiples appear to be stabilising while value change has been driven by the challenging economic conditions which have started to feed through to portfolio company trading performance. The Company's investment values have been insulated partially from market movements by the defensive investment structures employed in many of the portfolio companies. These act to moderate valuation swings and the net result is a more modest decline in portfolio value.

Whilst inflation is moderating following the rises in base rates, it is still at a very high level and therefore a recession risk remains in the UK during 2023 - albeit recent comment suggests this may be shallower and shorter than originally feared.  There are also early signs that supply chains are returning to normality, that the labour market is easing and that there are pockets of positive market sentiment. In February 2023, the FTSE 100 index reached an all-time high, although this should be viewed with caution as many large companies included in that index generate substantial earnings overseas. The outlook is therefore mixed, and the emphasis is therefore on robust funding structures and on being prepared for all foreseeable eventualities.  The Gresham House non-executive directors who sit on each portfolio company board have responded by working with their boards to ensure that appropriate scenario planning has been done to achieve the best results during these uncertain times. There is also now a greater focus on cash management and capital efficiency. With ample liquidity following the recent fundraise, the Company is also well placed to support portfolio companies with follow-on funding where it is appropriate and can be done on attractive terms. 

There are some specific highs in the portfolio such as Preservica which continues to see strong trading and is out-performing budget.  The partial exit from EOTH was also an excellent result after a long running process which had to negotiate numerous economic and geo-political hurdles. By contrast, there were also some significant falls. The largest was at Virgin Wines, where market sentiment shifted heavily against the whole sector despite Virgin Wines itself outperforming its peers. MyTutor was also impacted by declining sector multiples combined with slower than anticipated growth over the year.

During the year, the Company made four new growth capital investments totalling £2.03 million and made follow-on investments into six portfolio companies totalling £1.75 million, a breakdown of these is included later in this Review.  The £2.03 million of new investments represent the Company's allocated investment share across all six VCTs managed or advised by Gresham House, including the two Baronsmead VCTs.

Two strong exits were achieved during the year from MBI and EOTH. On MBI, the Company received a total of £3.98 million in proceeds during the year generating a realised gain of £0.42 million. For EOTH the Company received a total of £4.27 million in proceeds during the year producing a realised gain of £0.36 million and the interest yielding loan stock was also retained.  These were both extremely successful investments which, over their lifetime, produced returns of 2.2x and 6.9x as a multiple of the original investment cost.

As well as these successes, it was disappointing that Andersen EV went into administration towards the end of the year despite securing some large clients such as Porsche and JLR.  Andersen encountered very difficult trading conditions with substantially reduced demand, supply chain issues, cost pressures and the removal of government consumer support for the purchase of EV chargers. A realised loss of £0.42 million was recognised during the financial year as a result.

The investment and divestment activity during the year has further increased the proportion of the portfolio comprised of investments made since the 2015 VCT rule change to 80.0% by value at the year-end (31 December 2021: 63.8%).

The portfolio valuation changes in the year are summarised as follows:

Investment Portfolio Capital Movement	2022	2021
	£m	£m
Increase in the value of unrealised investments	1.08	27.19
Decrease in the value of unrealised investments	(16.53)	(1.48)
Net (decrease)/increase in the value of unrealised investments	(15.45)	25.71
Realised gains	1.18	4.26
Realised losses	(0.44)	(0.07)
Net realised gains in the year	0.74	4.19
Net investment portfolio movement in the year	(14.71)	29.90

The portfolio movements in the year are summarised below: 

	2022 £m	2021 £m
Opening portfolio value	65.58	41.68
New and follow-on investments	3.78	6.23
Disposal proceeds	(8.70)	(12.23)
Net investment portfolio movement in the year	(14.71)	29.90
Portfolio value at 31 December	45.95	65.58

New Investments during the year

The Company made four new investments totalling £2.03 million during the year, as detailed below:

	Company	Business	Date of investment	Amount of new Investment (£m)
	Proximity Insight	Retail software	February 2022	0.61

Proximity Insight (proximityinsight.com) is a retail technology business that offers a 'Super-App' that is used by the customer-facing teams of brands and retailers to engage, inspire and transact with customers. Headquartered in London with offices in New York and Sydney, Proximity Insight has a global client base that includes over 20 brands, boutiques and department stores in fashion, beauty, jewellery, electronics and homewares. These clients use Proximity Insight's platform to integrate the lines between physical and digital retail, enhancing the customer experience and improving the lifetime value of their customers by upwards of 35%. The business grew annual recurring revenue by 117% to £2.2 million in 2021, and the investment will support Proximity Insight's continued product development and international growth.

	Bidnamic	Marketing technology business	May 2022	0.48

Lads Store Limited, trading as "Bidnamic" (bidnamic.com) is a marketing technology business that offers a Software-as-a-Service 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 retail customers' Google shopping spend. The ARR of the business has grown substantially over the last two years and this is projected to continue. The investment round will be used to further enhance the product's capabilities and drive continued ARR growth through expanding the sales & marketing team and building a presence in North America.

	FocalPoint	GPS enhancement software provider	September 2022	0.50

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 to dramatically improve the satellite-based location sensitivity, accuracy, and security of devices such as smartphones, wearables and vehicles and reduce costs.

Orri

Specialists in eating disorder support

September 2022

0.44

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 on Hallam Street, London in February 2019 which provides a homely environment in a converted 4-storey house but which is operating at capacity. The plan sees a larger site being leased nearby with Hallam Street being used to provide a step-down outpatient service.

Further investments during the year

A total of £1.75 million was invested into six existing portfolio companies during the year, as detailed below:

	Company	Business	Date of investment	Amount of further investment (£m)
	Caledonian Leisure	UK Leisure and experience breaks	January / February 2022	0.22

Caledonian Leisure works with accommodation providers, coach businesses and other experienced providers (such as entertainment destinations and theme parks) to deliver UK-based leisure and experience breaks to its customers. It comprises two brands, Caledonian Travel (caledoniantravel.com) and UK Breakaways (ukbreakaways.com). The domestic leisure and experience travel market was devastated by the COVID-19 pandemic, but the company was well-placed to expand as lockdown and travel restrictions eased. A series of planned investment tranches has helped the company prepare for and capitalise on the strong demand for UK staycation holidays.

Northern Bloc

Dairy and allergen-free 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.

Andersen EV

Premium EV chargers

May 2022

0.24

Muller EV Limited (trading as Andersen EV) (andersen-ev.com) was a design-led manufacturer of premium electric vehicle (EV) chargers. Incorporated in 2016, this business secured high profile partnerships with household brands, establishing an attractive niche position in charging points for the high-end EV market. This follow-on funding was to further support its premium brand and product positioning whilst ensuring all new and existing products met the most recent and highest safety and compliance standards. Unfortunately, external factors caused its market and trading prospects to worsen rapidly, including substantially reduced demand, global supply chain issues, inflation and the removal of government consumer support for the purchase of EV chargers. The company therefore entered administration before the year-end.

RotaGeek

Workforce management software

June 2022

0.22

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.

Vivacity

Provider of artificial intelligence & urban traffic control systems

July 2022

0.62

Vivacity (vivacitylabs.com) develops camera sensors with on-board video analytics software that enables real-time anonymised data gathering of road transport system usage. It offers city transport authorities the ability to manage their road infrastructure more effectively, enabling more efficient monitoring of congestion and pollution levels as well as planning for other issues, such as the changing nature of road usage (e.g. the increasing number of cyclists). The technology and software represent a significant leap forward for local planning authorities which have traditionally relied upon manual data collection methods. This new investment will help boost the company's revenues through development of new functionality to enhance its product suite which can also be installed into the existing asset base.

Bleach

Hair Colourants brand

August 2022

0.33

Bleach London Holdings ("Bleach") (bleachlondon.com) is an established brand which develops and markets a range of innovative haircare and colouring products. Bleach is regarded as a leading authority in the hair colourant market having opened one of the world's first salons focused on colouring and subsequently launched its first range of products in 2013. This further investment was part of a wider £5.5 million investment round alongside existing Shareholders and a strategic partner. The funds will be used to drive further expansion into the strategically important North American market and to consolidate the brand's position in the UK.

Portfolio valuation movements

Across the portfolio, comparable market multiples that are used as the basis of valuation have declined over the year, some by over 30%, but the levels at the year-end reflect a degree of stabilisation over the final quarter of 2022. 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 defensive 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 £(16.53) million, were:

· Virgin Wines	- £(6.89) million
· MyTutor	- £(1.73) million
· Buster and Punch	- £(1.30) million
· Wetsuit Outlet	- £(1.15) million
· Active Navigation	- £(1.01) million

Virgin Wines has suffered its sector's negative sentiment notwithstanding the outperformance of its peers. More recently, it also experienced some short term operational difficulties particularly in the last quarter of the 2022. MyTutor's growth has slowed post COVID coupled with a decline in market multiples. Buster and Punch and Wetsuit Outlet are both consumer facing businesses that have experienced challenging trading conditions which resulted in profit downgrades.  ActiveNav has developed a new business line which has gained significant traction and offers potential but the core business has grown more slowly than planned which has led to an overall reduction in its valuation.

The uplifts within the total valuation increase of £1.08 million were:

· Tharstern	- £0.44 million
· Bella & Duke	- £0.30 million
· Orri	- £0.22 million
· Preservica	- £0.12 million

Tharstern has continued to deliver strong trading performance. Bella & Duke has seen improvements in revenues, Preservica continues to build its high retention, long contract SaaS business, improving recurring revenues year on year. Orri is performing as planned and the valuation uplift simply reflects the first time recognition of the preferential investment structure.

Portfolio Realisations during the year

The Company realised two investments, one of which was a partial realisation, as detailed below:

	Company	Business	Period of investment		Total cash proceeds over the life of the investment/ Multiple over cost
	MBI	Publishing and events business		January 2015 to June 2022	£6.11 million 2.2x cost

The Company realised its whole investment in MBI for £3.98 million (realised gain in the year: £0.42 million) including deferred proceeds received since completion. Total proceeds received over the life of the investment were £6.11 million compared to an original investment cost of £2.72 million, representing a multiple on cost of 2.2x and an IRR of 13.8%.

	Company	Business	Period of investment		Total cash proceeds over the life of the investment/ Multiple over cost
	EOTH	Branded clothing (Rab and Lowe Alpine)		October 2011 to November 2022	£6.56 million 6.9x cost

The Company realised its equity investment in EOTH for £5.05 million (realised gain in the year: £0.36 million) including preference dividends. Total proceeds received to date over the life of the investment were £6.56 million compared to an original investment cost of £0.95 million, representing a multiple on cost of 6.9x and an IRR of 23.2%. The Company has retained its interest yielding loan stock investment. Once repaid, this should increase the multiple on cost to 7.9x .

Loan stock repayments and other gains/(losses) during the year

The Company also received loan repayments totalling £0.05 million from Jablite Holdings Limited.

In addition, deferred consideration totalling £0.40 million in realised gains was received in respect of investments realised in a previous year. Conversely, as discussed earlier, Muller EV (trading as Andersen EV) generated a realised loss in the year of £(0.44) million.

Portfolio income and yield

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

Investment Portfolio Yield	2022	2021
	£m	£m
Interest received in the year	0.71	0.98
Dividends received in the year	0.93	0.35
Total portfolio income in the year1	1.64	1.33
Portfolio Value at 31 December	45.95	65.58
Portfolio Income Yield (Income as a % of Portfolio value at 31 December)	3.6%	2.0%

¹  Total portfolio income in the year is generated solely from investee companies within the portfolio.

New investment made after the year-end

£0.75 million was invested into a new investment after the year-end, as detailed below:

	Company	Business	Date of investment	Amount of new investment (£m)
	Connect Earth	Environmental data provider	March 2023	0.25

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.

	Company	Business	Date of investment	Amount of new investment (£m)
	Cognassist	Education and neuro-inclusion software	March 2023	0.50

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.

Realisations after the year-end

	Company	Business	Period of investment	Total cash proceeds over the life of the investment/Multiple over cost:
	Tharstern	Software based management information systems	July 2014 to March 2023	£3.01 million / 2.6x cost

The Company realised its investment in Tharstern Group for £2.14 million. Total proceeds received over the life of the investment were £3.01 million compared to an original cost of £1.16 million, representing a multiple on cost of 2.6x and an IRR of 15.0%.

Environmental, Social and Governance considerations

The Board and the Investment Adviser believe that the consideration of environmental, social and corporate governance ("ESG") factors throughout the investment cycle should contribute towards enhanced Shareholder value.

The Investment Adviser has a team which is focused on sustainability as well as the Investment Adviser's Sustainability Committee who provide oversight and accountability for the Investment Adviser's approach to sustainability across its operations and investment practices.  This is viewed as an opportunity to enhance the Company's existing protocols and procedures through the adoption of the highest industry standards. Each investment executive is responsible for setting and achieving their own individual ESG objectives in support of the wider overarching ESG goals of the Investment Adviser.  The Investment Adviser's Private Equity division has its own Sustainable Investment Policy, in which it commits to:

•   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

With inflation, political uncertainty and the threat of recession impacting consumer confidence and business investment, the number of UK businesses experiencing financial stress is set to increase. This will impact all sectors and businesses to varying degrees and may present attractive opportunities for a selective investor with the advantage of being able to take a longer-term view such as your Company.  However, the economic backdrop will also impact our existing portfolio companies and would present a challenge to less experienced management teams and their advisers .  Markets are volatile and uncertain and business planning is acutely difficult.  As such, the experience of seasoned investment managers will be increasingly important in the coming year as they seek to support their portfolio management teams in navigating through some particularly challenging short-term trading conditions. In this respect, Gresham House feels well placed in having one of the largest and most experienced portfolio teams in the industry with an average of over [18] years relevant industry experience. The Company has ample liquidity to provide further support to its portfolio businesses through this period and is keen to make such investments where there is a commercial case to do so over the medium to long-term.

Gresham House Asset Management Limited

Investment Adviser

5 April 2023

Annual General Meeting

The AGM will be held on Wednesday, 24 May 2023 at the offices of Shoosmiths LLP, 1 Bow Churchyard, London EC4M 9DQ and will also be webcast for those Shareholders who are unable to attend in person. Details of how to join the meeting by virtual means will be shown on the Company's website. Shareholders joining virtually should note you will not be able to vote at the meeting and therefore you are encouraged to lodge your proxy form.  For further details, please see the Notice of the Meeting which can be found at the end of the Annual Report & Financial Statements.

Further Information

The Annual Report and Accounts for the year ended 31 December 2022 will be available shortly on Mobeus Income & Growth 4 VCT plc .

It will also be submitted shortly in full unedited text to the Financial Conduct Authority's National Storage Mechanism and will be available for inspection at data.fca.org.uk/#/nsm/nationalstoragemechanism 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

[e-mail]

[phone]

 

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