Annual Financial Report
The Income & Growth VCT plc
Annual Financial Results of the Company for the Year ended 30 September 2014
Financial Highlights
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Net asset value total return of 9.4% per share for the year. |
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Share price total return of 14.1% per share for the year. |
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Dividends totalling18.00 pence per share have been paid or are proposed in respect of the year. The proposed final dividend of 4.00 pence per share will bring cumulative dividends paid since inception to the current share class* to 62.50 pence per share. |
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This has been an exceptional year for realisations in which a total of £10.81 million was received as total cash proceeds, enhancing the level of dividends paid to shareholders. |
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Strong dealflow has resulted in £12.10 million being invested into new deals. |
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Liquidity has been further enhanced by a successful fundraising in early 2014 which raised £8.43 million (before costs) for the Company. A further fundraising of up to £10 million by the Company was launched in December 2014. |
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*The first allotment of the former 'S' Share class, now the current share class, took place on 6 February 2008. |
Five Year Performance Summary
The net asset value ("NAV") per share at 30 September 2014 was 114.60 pence
The table below shows the recent past performance of the Company's existing class of shares for each of the last five years.
|
|
Net assets |
NAV per share |
|
Cumulative dividends paid per share |
|
Cumulative NAV total return per share to shareholders |
Share price 1 |
|
Cumulative share price total return per share to shareholders |
|
|
(£m) |
(p) |
|
(p) |
|
(p) |
(p) |
|
(p) |
|
As at 30 September 2014 |
69.31 |
114.60 |
|
50.50 |
|
165.10 |
103.502 |
|
154.00 |
|
As at 30 September 2013 |
60.47 |
113.90 |
|
40.50 |
|
154.40 |
99.50 |
|
140.00 |
|
As at 30 September 2012 |
50.55 |
109.62 |
|
28.50 |
|
138.12 |
97.00 |
|
125.50 |
|
As at 30 September 2011 |
49.15 |
120.79 |
|
4.50 |
|
125.29 |
91.60 |
|
96.10 |
|
As at 30 September 2010 |
36.60 |
99.01 |
|
0.50 |
|
99.51 |
87.00 |
|
87.50 |
1 Source: London Stock Exchange (mid price basis)
2 The share price at 30 September 2014 has been adjusted to add back the dividend of 8.00 pence per share paid on 30 October 2014, as the listed share price was quoted ex this dividend at the year-end.
Dividends paid and proposed post year-end in respect of the year ended 30 September 2014
(not included in the above table)
A second interim dividend of 8.00 pence per share, comprising 2.00 pence from income and 6.00 pence from capital was paid to shareholders on 30 October 2014.
A final capital dividend of 4.00 pence per share will be recommended to shareholders at the Annual General Meeting of the Company to be held on 12 February 2015. If approved, the dividend will be paid on 20 March 2015 to shareholders on the register on 27 February 2015 and bring cumulative dividends paid per share since inception of the current share class to 62.50 pence.
Discount
The Board's intention is to continue with its existing buyback policy with the objective of maintaining the discount to NAV at which the shares trade at 10% or less. The discount for the Company's shares at 30 September 2014 was 9.0% (2013: 10.0%) based on the adjusted share price shown in the above table and the NAV at 30 June 2014 of 113.77 pence (adjusted to deduct the dividend of 6.00 pence per share paid on 3 July 2014).
Chairman's Statement
I am pleased to present to shareholders the Annual Report of the Company for the year ended 30 September 2014.
Overview
It has been another good year for the Company in which our investment strategy has delivered another strong performance. The year has been characterised by encouraging growth for a number of investee companies, several investments being realised at substantial gains over cost, and a high level of new investment. The size and number of recent realisations has enabled the Company to exceed its current dividend target for the third consecutive year. The Investment Adviser ("Adviser") continues to report a healthy pipeline of quality companies, the foremost among which have been converted into promising new investments during the year.
Performance
The Company's NAV total return per share rose by 9.4% during the year to 30 September 2014 (2013: 14.9%), after adjusting for 10.00 pence per share of dividends paid in the year. This further rise in NAV return over the year was attributable to two main factors. Firstly, there have been five substantial, profitable realisations, namely Alaric Systems, ATG Media (a partial sale), MachineWorks, Monsal and DiGiCo Global. Secondly, unrealised gains from rises in portfolio valuations have occurred, notably increases in the valuations of ASL Technology, EMaC, Focus Pharma and Youngman. The latter three investments, EMaC, Focus Pharma and Youngman, were realised following the year-end. A number of other portfolio companies have continued to make steady progress, which has been demonstrated by their increasing profits and by their loan stock repayments.
As a result of this year's performance, the cumulative NAV total return per share (being the closing net asset value plus total dividends paid to date since launch) rose during the year by 6.9% from 154.40 pence to 165.10 pence.
Using the benchmark of NAV total return, the VCT is ranked first over both five and ten years among generalist (including planned exit) VCTs used by the Association of Investment Companies ("AIC") (based on statistics prepared by Morningstar) to assess performance at 31 October 2014. This is a very pleasing indication of the consistency of the VCT's performance in the long-term as well as the strong performance in recent years.
Dividends
Your Directors are recommending a final capital dividend in respect of the year ended 30 September 2014 of 4.00 pence per share. The dividend will be proposed to shareholders at the Annual General Meeting of the Company to be held on 12 February 2015, for payment to shareholders on the register on 27 February 2015, on 20 March 2015. The Company's Dividend Investment Scheme ("the Scheme") will apply to this dividend.
Three dividends totalling 18.00 pence per share have been paid or are proposed in respect of the year ended 30 September 2014:
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Pence per share |
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Payment Date |
Type |
Total Dividend |
Capital |
Income |
|
3 July 2014 |
Interim |
6.00 |
5.00 |
1.00 |
|
30 October 2014 |
Interim |
8.00 |
6.00 |
2.00 |
|
20 March 2015* |
Final |
4.00 |
4.00 |
0.00 |
|
Total in respect of the year |
|
18.00 |
15.00 |
3.00 |
*Subject to approval at the Annual General Meeting to be held on 12 February 2015.
If approved by shareholders, the forthcoming final dividend will bring cumulative dividends paid per share since inception of the current share class to 62.50 pence per share.
The exceptional level of dividends paid from capital during and after the 2014 financial year-end is a result of the recent realisations that are referred to later and detailed in the Investment Review. The Board is committed to providing an attractive dividend stream to shareholders and this year set a revised target of paying at least 6.00 pence per share (previously 4.00 pence per share) in respect of each financial year.
Investment portfolio
For the year, the portfolio as a whole achieved a net increase of £2.71 million in realised gains net of transaction costs and £3.73 million in unrealised gains. Realised gains over the original cost of the investment were £7.68 million. The portfolio under management was valued at £39.83 million at the year-end representing 104.2% of cost and an increase of 19.6% in valuation over the year on a like-for-like basis.
During the year £12.10 million was invested into seven new companies. Four of these transactions were to support the MBOs of Virgin Wines, Entanet International, Creative Graphics International and Tharstern. A fifth new investment provided development capital to Bourn Bioscience. Finally, investments were made into two new acquisition vehicles (South West Services Investment and Manufacturing Services Investment). Following the partial disposal of ATG Media, the Company has £1.53 million of rolled over loan and equity investment in Turner Topco, the acquirer.
Following the year-end, the VCT invested £1.57 million into Leap New Co Limited (owner of the Anthony Ward Thomas and Bishopsgate businesses) and a further £0.69 into Aussie Man & Van Limited, two companies controlled by common shareholders, to support a corporate re-structuring. A further £0.95 million was also invested to support the buy and build strategy and bank refinancing of ASL Technology.
Cash proceeds totalling £10.81 million were received from 17 companies, that were either sold or which repaid loans. Of this total, £8.95 million was received as total cash proceeds from three substantial disposals of Alaric Systems, DiGiCo Global and ATG Media (partial) and those of MachineWorks, Monsal and Faversham House. The balance of £1.86 million was loan repayments from companies still held.
Following the year-end, the VCT has disposed of its investments in Focus Pharma, Youngman and EMaC, receiving further cash proceeds totalling £7.01 million and realising total gains over cost of £4.34 million from these three successful investments.
Full details of the investment activity during the year and a summary of the performance highlights can be found in the Investment Review below.
New Incentive fee arrangements
The Company has agreed revised terms for calculating any Performance Incentive Fees payable to Mobeus, which are effective from 1 October 2013. The new agreement amends and replaces the previous agreement (the terms of which will continue to apply to the former adviser, Foresight Group LLP until 10 March 2019). The changes in the agreement with Mobeus are designed to ensure that the arrangements for incentivising the Adviser remain in line with best market practice.
The principal terms are as follows. The payment to Mobeus is now 15% of any net gains on the realisation of investments for each year. A fee will only be payable if Cumulative NAV total return (the closing NAV per share for that year, plus total dividends paid per share since 1 October 2013 to that year-end), equals or exceeds a Target Return. The Target Return is the higher of two targets. These are firstly, 6% compound growth per annum (5% for 2014 only) or secondly, annual inflation plus 1% per annum, at any year-end, both applied to an opening base, being the NAV per share of 113.90 pence at 1 October 2013. Any incentive fee payable for the year under both agreements is excluded for the purpose of determining if the Target Return has been met. Once the fee is paid, Cumulative NAV total return is calculated after deducting any incentive fees paid or payable.
The Board believes the amendments strengthen the alignment with shareholders' long-term interests. This is because a fee is only paid when net profitable realisations have occurred, and when shareholders have benefited from good returns. The previous agreement did not require shareholders to have benefited from an overall return of 6% per annum. The substantial realised gains over cost this year, together with the Target Return condition having been met, mean that an incentive fee of £1,278,875 is due to Mobeus and a further £121,640 is due to Foresight for the year.
For further details, please see Note 3b to the Accounts.
Fundraising and Liquidity
The Company participated with the other three Mobeus advised VCTs in a successful joint fundraising that closed on 30 May 2014, having raised £8.43 million gross of issue costs (£8.19 million after costs).
The four Mobeus advised VCTs launched new offers for subscription for the 2014/15 tax year on 10 December 2014 (the "Offers"). For the first time this year, each of the VCTs is making a separate Offer to investors. This enables investors to choose which Mobeus VCTs they would like to invest in, and how much to place in each, subject to the Offer(s) of their choice remaining open. Details of the Offers including a copy of the Securities Note and an application form have been sent to all shareholders and are available on the Mobeus website: www.mobeusequity.co.uk.
Your Company is seeking to raise £10 million under its Offer. Annual fundraisings by the Company have provided it with a comfortable level of liquidity that has enhanced its ability to use the money raised in earlier fundraisings to continue to pursue its investment strategy. Monies raised will be used to fund other types of investment opportunities, as well as to meet the Company's running costs, fund dividend payments and support its share buyback policy. The increased assets will spread the Company's fixed running costs over a larger asset base.
Industry awards for the Adviser
We are pleased to report that the Adviser was named VCT Manager of the Year 2014 for the third consecutive year at the unquote" British Private Equity Awards 2014. The award recognised the continuing high level of consistency achieved by the Adviser during the year under consideration in maintaining high standards in all areas of its activity including deals, exits, portfolio management and fundraising.
Strategic Report
Subsequent to a change in legislation, the Company produced a Strategic Report for the first time last year. As I envisaged in my 2013 Chairman's Statement, we have reviewed further the format and presentation of this section and made further changes. Shareholders can find this Report below.
The Strategic Report aims to inform shareholders by providing them with a means to assess how well the Board has promoted the success of the Company during the year under review. It begins by setting out the Company's Objective, Investment Policy and Business Model. The Performance section then shows shareholders how, and to what extent, the Company has achieved its Objective during the year and over the longer term. It considers the Company's progress against a series of key performance indicators, which the Board applies to assess the Company's performance. An Investment Review follows, which includes key data on the largest investments in the portfolio and an analysis of the full investment portfolio. Finally, the Report provides context to this performance, disclosing what the Board regards as the key risks faced by the Company, how those risks are dealt with and the Company's other key policies. In summary, this Report should give shareholders an overview of their Company's progress in the year, supported by further detail that you can review, as you wish, in other sections of the Annual Report.
To avoid repetition, much of the detail that would previously have been included in the Chairman's Statement can now be found within the Strategic Report. I would be interested to receive shareholders' views on whether you find this new format helpful and informative, as well as your suggestions on any improvements you believe could be made.
Industry developments
The Finance Act 2014 ("the Finance Act") introduced two measures that affect VCTs which will apply to shares issued after 6 April 2014. First, shareholders who sell their existing shares within six months before or after the date of subscribing for shares in the same VCT will not retain income tax relief on their new investment.
Secondly, VCTs are now prevented, in respect of these shares, from returning capital to investors within three years of the end of the accounting period in which the VCT issued the shares. Distributions made from realised profits are not affected by this change. Your Board does not expect these return of capital measures to affect the Company's dividend policy or practice.
With effect from 22 July 2014, the Company has appointed itself as its own Alternative Investment Fund Manager ("AIFM") to comply with new legislation which implements the European Commission's Alternative Investment Fund Managers' Directive. This development has tightened the rules on alternative investments although, as a small AIFM, the Company is exempt from many of its principal requirements. Mobeus continues to provide investment advisory and administrative services to the Company under the current agreement, subject to one change involving the safekeeping of the documents of title to the Company's investments. Named individuals, who carry out company secretarial work for the Company, are now directly responsible to the Board, under its instruction, for accessing and dealing with these documents.
The Company and the Adviser have contributed to a consultation by HMRC on the impact of the VCT Scheme and the appropriateness of its rules as part of the European Union's review of the rules on State Aid. The process of the EU review and re-approval of the VCT scheme is scheduled to be completed shortly. We are hopeful that the outcome will not have any significant impact on the VCT industry.
Recent changes to the European Commission's Transparency Directive mean that the Company is no longer required to publish Interim Management Statements. However, the Board intends to continue doing so, to keep shareholders informed of the Company's progress.
Shareholder Communications
Following a successful workshop in January of this year, the Adviser will be holding a further shareholder event on Tuesday, 27 January 2015 at the Royal Institute of British Architects in central London. This annual event will include presentations on the Mobeus advised VCTs' investment activity and performance. There will be separate day-time and evening sessions. Invitations to this event were circulated to shareholders earlier in December with their copy of the Securities Note for the Offer for subscription.
Outlook
It is pleasing to report on this year of excellent performance and the completion of a significant number of transactions. The challenge for the Company will be to maintain this performance over the longer term and to sustain current investment levels. We aim to invest only in well-run, profitable companies, operating mainly in niche markets that we believe have the potential to grow and which can thrive across a range of economic conditions. Currently, the rate of dealflow continues to be encouraging. Many of our investee companies should continue to trade profitably and grow. This should produce further good returns for shareholders over the medium term.
Finally, I would like to take this opportunity to thank all shareholders for their continued support.
Colin Hook
Chairman
STRATEGIC REPORT
(EXTRACTED INFORMATION)
Introduction
The Directors are pleased to present the Strategic Report of the Company for the year ended 30 September 2014. The purpose of this Report is to inform shareholders and to help them to assess how the Directors have performed their duty to promote the success of the Company.
The Report has been prepared by the Directors in accordance with section 414A of the Companies Act 2006 ("the Act").
Company Objective
The Objective of the Company is to provide investors with an attractive return by maximising the stream of tax-free dividend distributions from the income and capital gains generated by a diverse and carefully selected portfolio of investments.
Summary of Investment Policy
The VCT's policy is to invest primarily in a diversified portfolio of UK unquoted companies. Investments are usually structured as part loan and part equity and in order to generate regular income from existing investments and capital gains from realisations.
Risk is further reduced by investing in a number of different businesses across different industry sectors. Investments are made selectively, primarily in MBO transactions in companies that are established and profitable. The VCT aims to invest in larger, more mature, unquoted companies through investing alongside three other VCTs advised by Mobeus with similar investment policies. This enables the VCT to participate in combined investments recommended by the Adviser of up to £5 million in each business per year.
The Company aims to maintain in excess of 70% of net funds raised in qualifying investments. Uninvested funds are held in a range of instruments of varying maturities, subject to the overriding criterion that the risk of loss of capital is minimised.
The full text of the Company's Investment Policy is set out later in this Strategic Report.
The Company and its business model
The Company's Investment Policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue & Customs ("HMRC") whilst maximising returns to shareholders from both income and capital. One of the rules to retain VCT status is that the Company remains a fully listed company on the London Stock Exchange, and thus must also comply with the listing rules governing such companies.
The Company is externally advised with a Board comprising non-executive directors. The Board has overall responsibility for the Company's affairs, including the determination of its Investment Policy. Investment advisory and operational support are outsourced to external service providers including the Adviser, Company Secretary and Administrator and Registrar, with the strategic and operational framework and key policies set and monitored by the Board. Investment and divestment proposals are originated, negotiated and recommended by the Adviser and are then subject to comment and approval by the Directors.
Private individuals invest in the Company to benefit from both income and capital returns generated by investment performance. By investing in a VCT they are eligible for up-front income tax relief (currently 30% of the amount subscribed for new shares by an investor), as well as tax-free dividends received from the Company. Investors are also not liable for any capital gains tax upon the eventual sale of the shares. Shares have to be held for a minimum of 5 years to retain the initial tax relief received.
Performance
The Board has identified six key performance indicators that it uses in its own assessment of the Company's progress. It is intended that these will provide shareholders with sufficient information to assess how the Company has performed against its Objective in the year to 30 September 2014, and over the longer term, through the application of its investment and other principal policies:
1. Annual and cumulative returns per share for the year
Total shareholder return per share for the year
The NAV and share price total returns per share for the year ended 30 September 2014 were 9.4% and 14.1% respectively, as shown below:
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Total return (p) |
NAV basis |
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Share price basis |
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(p) |
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|
(p) |
|
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Closing NAV per share (cum div) |
114.60 |
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Closing share price (cum div) |
103.501 |
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Plus: dividends paid in year |
10.002 |
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Plus: dividends paid in year |
10.002 |
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|
--------- |
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|
---------- |
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Total for year |
124.60 |
|
Total for year |
113.50 |
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Less: opening NAV per share |
113.90 |
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Less: opening share price |
99.50 |
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|
---------- |
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Return for year per share |
+10.70 |
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Return for year per share |
+14.00 |
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|
|
% return for year |
9.4% |
|
% return for year |
14.1% |
1The share price at the year-end was actually 95.50 pence per share because the share price was quoted excluding entitlement to the dividend of 8.00 pence per share paid on 30 October 2014. Accordingly, 8.00 pence has been added to the share price, to give a more accurate share price return for the year.
2Dividends paid in the year are 4.00 pence per share paid as a final dividend for the year ended 30 September 2013 and an interim dividend of 6.00 pence per share paid in respect of the year under review.
Cumulative total shareholder return per share (NAV basis)
The longer term trend of performance on this measure is shown in the table below:
|
Year End |
Net Asset Value (p) |
Cumulative dividends paid to date (p) |
Cumulative NAV total shareholder return (p)1 |
|
30/09/2008 |
94.59 |
0.00 |
94.59 |
|
30/09/2009 |
93.18 |
0.00 |
93.18 |
|
30/09/2010 |
99.01 |
0.50 |
99.51 |
|
30/09/2011 |
120.79 |
4.50 |
125.29 |
|
30/09/2012 |
109.62 |
28.50 |
138.12 |
|
30/09/2013 |
113.90 |
40.50 |
154.40 |
|
30/09/2014 |
114.60 |
50.501,2 |
165.101 |
1 Cumulative NAV total shareholder return is NAV plus cumulative dividends paid per share to the year-end. It therefore excludes the final dividend (below) which is proposed but not yet paid, and the second interim dividend of 8.00 pence per share, paid after the year-end on 30 October 2014. The second interim dividend of 8.00 pence per share increased cumulative dividends paid to date to 58.50 pence per share and reduced the NAV above by a corresponding 8.00 pence per share.
2 A final dividend of 4.00 pence per share will be recommended to shareholders at the Annual General Meeting to be held on 12 February 2015 and, if approved, will bring cumulative dividends paid since the inception of the current share class to 62.50 pence per share and reduce the NAV per share by a corresponding 4.00 pence.
Taking into account initial income tax relief, shareholders have seen an average internal rate of return of 15.3% (2013: 16.0%) per annum since the launch of the current share class. This is the annual discount rate that equates the net investment cost of 70 pence per share, at the date of the original investment, with the value of subsequent dividends received and the latest NAV per share.
Shareholder returns
The table below shows the amounts that shareholders who invested in the first allotment of each fundraising round have received to date in dividends, together with the year-end mid-market share price at 30 September 2014, compared with the amount invested (net of income tax relief already received). The year-end share price has been adjusted upwards by 8.00 pence per share, to include the dividend of 8.00 pence per share paid on 30 October 2014 as this dividend had already been deducted from the quoted share price at the year-end.
|
Year of fundraising
|
Net cash invested after income tax relief (p)
|
Cumulative dividends paid per share (p)
|
Mid-market share price (p)
|
Total shareholder return (share price basis)(p) |
|
2000/011 |
60.62 |
60.35 |
78.43 |
138.78 |
|
2007/08 |
70.00 |
50.50 |
103.50 |
154.00 |
|
2010/11 |
73.36 |
50.00 |
103.50 |
153.50 |
|
2012 |
74.48 |
22.00 |
103.50 |
125.50 |
|
2012/13 |
81.20 |
22.00 |
103.50 |
125.50 |
|
2013/14 |
82.47 |
10.00 |
103.50 |
113.50 |
The returns for shareholders are:
- Initial income tax relief received treated as a cash return at the time of the initial investment and deducted from the cash then invested. The amount returned was 20% of the initial investment for the tax year 2000/01, together with any deferral of any capital gains and 30% for the tax years 2006/07 onwards;
- Tax-free dividends received as further cash returns since that initial investment; and
- The closing mid-market share price.
1 Data for the first fundraising in 2000/01 above are for the original 'O' Share Fund, which merged into the 'S' Share Fund in March 2010 to form the current share class. The initial investment, dividends paid to shareholders who invested at this time, and the share price, have been adjusted to reflect that an 'O' Fund shareholder received 0.7578 shares in the current class of shares for each 'O' Fund share they owned, at the date of the merger.
Review of financial results for the year ended 30 September 2014
|
For the year |
30 September 2014 £(m) |
30 September 2013 £(m) |
|
Capital return |
4.32 |
6.72 |
|
Revenue return |
2.03 |
1.49 |
|
Total profit |
6.35 |
8.21 |
|
Over the last 5 years |
Revenue return (£m) |
Capital return (£m) |
Total profit |
|
30/09/2010 |
(0.05) |
2.43 |
2.38 |
|
30/09/2011 |
0.86 |
9.34 |
10.20 |
|
30/09/2012 |
0.99 |
4.79 |
5.78 |
|
30/09/2013 |
1.49 |
6.72 |
8.21 |
|
30/09/2014 |
2.03 |
4.32 |
6.35 |
The positive capital return of £4.32 million for the year is due to a healthy uplift in portfolio valuations of a net £3.73 million on investments held at the year-end and gains realised in the year from disposals of £2.71 million. Investment advisory fees charged to capital returns were £2.51 million, being investment advisory fees of £1.12 million and performance incentive fees of £1.39 million, before tax relief of £0.39 million.
The increase in the revenue return for the year of £0.54 million is mainly due to a rise in income of £0.71 million, from £2.49 million to £3.20 million, explained in the table below:
|
|
30 September 2014 |
30 September 2013 |
(%) Change |
Reason |
|
£'000 |
£'000 |
|||
|
Loan interest from investee companies |
2,335 |
1,929 |
+21.0% |
Due to new loan stock investments and settling of interest arrears upon the realisation of investments. |
|
|
|
|
|
|
|
Dividend income |
640 |
280 |
+128.6% |
A number of portfolio companies increased their ordinary and preference dividends. |
|
|
|
|
|
|
|
Return on cash |
210 |
278 |
-24.5% |
Lower returns on cash held |
|
|
|
|
|
|
|
Other Income |
18 |
1 |
n/a |
Interest on overdue preference dividends |
|
|
---------- |
---------- |
---------- |
|
|
Totals |
3,203 |
2,488 |
+28.7% |
|
In addition to capital returns from investee companies, the portfolio is structured to generate regular income from loan stocks and dividends from equity investments. A five year history of these is shown here, which is marked by the rise in loan stock interest, as larger sums have been held in these loan instruments, alongside the increase in the size of the Company.
|
|
Income from loan interest (£'000s) |
Income from dividends (£'000s) |
|
30/09/2010 |
442 |
201 |
|
30/09/2011 |
1,213 |
365 |
|
30/09/2012 |
1,541 |
306 |
|
30/09/2013 |
1,929 |
280 |
|
30/09/2014 |
2,335 |
640 |
2. The VCT's performance compared with its peer group
The Board places emphasis on benchmarking the Company's performance against its peer group of VCTs.
The statistics produced by the AIC for a group of 61 VCTs confirm that the Company's NAV total return per share was ranked first over both five and ten years at 30 September 2014.
Industry awards for the Company and the Investment Adviser
The performance of the Adviser was recognised in the unquote" British Private Equity Awards 2014, where Mobeus was named VCT House of the Year 2014 for the third consecutive year. These awards recognised the high level of consistency achieved by the Company and the Adviser during the year in maintaining high standards in all areas of its activity including deals, exits, portfolio management and fundraising.
3. Compliance with VCT legislation
In order to comply with VCT tax legislation, the Company must meet a number of tests set by HMRC as detailed under VCT Regulation within the Investment Policy. For the year ended 30 September 2014, the Company continued to meet these tests.
4. Costs
The Board monitors costs using the Ongoing Charges Ratio which is as set out in the table below.
|
|
2014 |
2013 |
|
Ongoing charges ratio |
2.7% |
2.8% |
|
Performance fee |
2.1% |
0.2% |
|
|
---------- |
---------- |
|
Ongoing charges plus accrued performance fee |
4.8% |
3.0% |
The Ongoing Charges Ratio has been calculated using the AIC recommended methodology. This figure shows shareholders the annual percentage reduction in shareholder returns as a result of recurring operational expenses, assuming markets remain static and the portfolio is not traded. Although the ongoing charges figure is based upon historical information, it provides shareholders with an indication of the likely level of costs that will be incurred in managing the fund in the future.
The Ongoing Charges Ratio replaces the Total Expense Ratio previously reported, although the latter will still form the basis of any expenses in excess of the expense cap, that would be borne by the Adviser. There was no breach of the expense cap for the year ended 30 September 2014 (2013: £nil).
The fall in the ratio (before performance fees) over the year reflects the benefit of spreading the element of costs that are fixed across a larger asset base.
Investment Adviser fees and other expenses
In line with the rise in net assets, adviser fees charged to both revenue and capital have increased from £1.29 million to £1.50 million and performance incentive fees have increased from £0.11 million to £1.39 million. This increase in the incentive fee reflects the exceptional level of profitable realisations achieved in the year. Running costs have risen slightly from £0.39 million to £0.41 million due to increases in professional, listing and registrar's fees.
Further details of these are contained in Note 3 and on pages 52-53 of the Annual Report.
In addition to its Investment Policy, the Board also monitors the key performance indicators arising from applying its Dividend and Share Buyback and Discount Policies. These indicators are respectively dividends paid in respect of each year and the discount to NAV at which shares are bought back by the Company.
5. Dividend policy
During the year, the Company increased its annual dividend target of paying a minimum of 4.00 pence per share to at least 6.00 pence per share in respect of each financial year. It has comfortably exceeded this revised target in each of its last three financial years, and its previous target for the last five financial years.
However, the ability of the Company to pay dividends in the future cannot be guaranteed and will be subject to performance and available cash and reserves.
|
|
Dividends paid or payable in respect of the financial year (pence per share) |
Cumulative dividends paid or payable in respect of the financial year (pence per share) |
|
30/09/2010 |
4.00 |
4.50 |
|
30/09/2011 |
4.00 |
8.50 |
|
30/09/2012 |
26.00 |
34.50 |
|
30/09/2013 |
10.00 |
44.50 |
|
30/09/2014 |
18.00 |
62.50 |
Dividends paid or payable per share in respect of the financial year ended 30 September 2014 were 18.00 pence, subject to shareholder approval of the proposed final dividend of 4.00 pence per share.
Cumulative dividends paid to date are now 58.50 pence per share. The proposed final dividend of 4.00 pence per share, if approved, will increase cumulative dividends paid per share to 62.50 pence.
6. Share buyback and discount policy
Subject to the Company having sufficient available funds and distributable reserves, it is the Board's current intention to pursue a buyback policy with the objective of maintaining the discount to the latest published NAV per share at which the shares trade at approximately 10%.
Continuing shareholders benefit from the difference between the NAV per share and the price at which the shares are bought back and cancelled.
The discount of approximately 10% has been maintained for much of the last four years, since the Board stated its intent to target such a discount level.
During the year ended 30 September 2014, shareholders holding 600,938 shares expressed their desire to sell their investments. The Company instructed its brokers, Panmure Gordon (UK) Limited ("Panmure Gordon"), to purchase these shares at prices representing discounts of approximately 10% to the previously announced NAV per share. The Company subsequently purchased these shares at prices of between 94.00 - 102.50 pence per share and cancelled them. The Company bought back 1.1% of the issued share capital of the Company at 1 October 2013 during the year.
Investment Review
The portfolio has performed strongly in the year. The number and value of divestments during the year has been exceptional, whilst at the same time the remaining and the new portfolio companies have generally performed well.
There has been strong dealflow, resulting in a high level of new investment activity, which has continued throughout the year. The Adviser believes the healthy level of dealflow reflects both improved business confidence and the continued perception that the UK banking industry remains unable to meet the funding needs of smaller businesses. This is producing a higher level of attractive investment opportunities, some of which we expect to complete during the current financial year.
The performance of investee companies in the portfolio as a whole has remained good. The valuation of the portfolio has increased by 19.6% during the year on a like-for-like basis as a result of the strong trading performance of a number of companies.
Investments remain diversified across a number of sectors primarily in support services, general retailers, media and technology.
New investment
A total of £12.10 million was invested in new deals during the year under review. This included substantial new investments to support the MBOs of Virgin Wines, Entanet, Creative Graphics International and Tharstern, and provide development capital to Bourn Bioscience.
Principal new investments in the year
|
Company |
Business |
Date of investment |
Amount of new investment (£m) |
|
Virgin Wines |
Online wine retailer |
November 2013 |
2.84* |
|
Virgin Wines is an online wine merchant. It is a Virgin Group Partner with the sole UK rights to use the Virgin brand to source and sell boutique, handcrafted wines from all over the world. The company's latest audited accounts for the year ended 28 June 2013 show annual sales of £34.47 million and profit before interest, tax and goodwill of £2.01 million. |
|||
|
Bourn Bioscience |
In Vitro fertilisation clinics |
February 2014 |
1.61 |
|
Bourn Bioscience owns and manages the Bourn Hall infertility clinics in the East of England. The investment will support the geographic expansion of this internationally renowned IVF clinic. The initial investment is supplemented by a commitment to invest significant follow-on finance as part of a buy and build strategy. The Company's latest audited accounts for the year ended 31 December 2013 show annual sales of £10.56 million and profit before interest, tax and goodwill of £0.51 million. |
|||
|
Entanet |
Wholesale provider of internet connectivity solutions |
February 2014 |
2.01* |
|
Entanet is one of the UK's leading independent wholesale voice and data communications providers. Headquartered in Telford and with over 80 staff, the company provides a diverse portfolio of business class data and voice services via a network of over 2,000 wholesale and reseller channel partners in the UK. The Company's latest audited accounts for the year ended 31 December 2013 show annual sales of £29.42 million and profit before interest, tax and goodwill of £2.78 million. |
|||
|
Creative Graphics International |
Producer of adhesive decorative graphics for vehicles |
June 2014 |
1.42 |
|
Creative Graphics International is a leading specialist provider of adhesive decorative graphics to the automotive, recreational vehicle and airline markets. It operates from two centres, in Bedford and South Africa. The Company's latest audited accounts for the year ended 30 November 2012 show annual sales of £12.64 million and profit before interest, tax and goodwill of £2.49 million. |
|||
|
Tharstern |
Software-based management information systems |
July 2014 |
1.54 |
|
Tharstern is a leading UK supplier of software-based management information systems to the print sector. The Company's latest audited accounts for the year ended 31 January 2014 show annual sales of £3.87 million and profit before interest, tax and goodwill of £0.80 million. |
|||
*The investments into Virgin Wines and Entanet each utilised £1 million from each of Culbone Trading and Ackling Management respectively, two of the Company's acquisition vehicles, which is included in the above figures. For further details please see the Investment Portfolio Summary.
The VCT also invested a further £2.68 million into two new acquisition vehicle investments in the year, namely South West Services Investment and Manufacturing Services Investment.
New investment post year-end
|
Company |
Business |
Date of investment |
Amount of new investment (£m) |
|
Ward Thomas |
Specialist logistics, storage and removals business |
December 2014 |
2.26 |
|
The VCT invested a total of £2.26 million into this brand-led specialist logistics, storage and removals business in December 2014. Separate investments were made into two companies controlled by common shareholders. £1.57 million was invested in Leap New Co Limited which owns the Anthony Ward Thomas and Bishopsgate businesses and a further £0.69 million was invested into Aussie Man & Van Limited. |
|||
The VCT completed a further investment into ASL Technology of £0.95 million, in December 2014, to provide capital to refinance the bank and support the company's buy and build strategy.
Realisations
The year has been marked by a number of sizeable, profitable realisations which have all generated attractive returns for the Company. The VCT completed the partial sale of ATG Media and the full sales of each of Alaric Systems, MachineWorks, Monsal, DiGiCo Global and Faversham House for total net cash proceeds of £8.40 million. As part of the ATG Media transaction, the Company also received a non-cash consideration of £1.53 million by way of loan stock and equity investments in Turner Topco Limited, the acquirer, retaining a 3.8% shareholding in the business.
Other realisations were £0.55 million including further consideration received following the sale of App-DNA Group in 2011. With loan repayments of £1.86 million, as explained further below, total net proceeds therefore amounted to £12.34 million.
|
Company |
Business |
Period of investment |
Total cash proceeds over the life of investment/ |
|
|
|
|
|
Multiple over cost |
|
|
Alaric Systems |
Software for retail credit card payment systems |
February 2002 - December 2013 |
£2.65 million |
|
|
4.44 times cost |
||||
|
The Company realised its investment in Alaric Systems through a sale to a subsidiary of NCR Corporation for cash proceeds of £2.54 million. The Company may become entitled to receive additional sale proceeds of up to £0.50 million over the period to December 2017. These are currently held in escrow. £0.25 million of this amount has been received in December 2014. |
||||
|
MachineWorks |
Software for CAM and machine tool vendors |
April 2006 - April 2014 |
£1.23 million |
|
|
4.15 times cost |
||||
|
MachineWorks' core software products are used by manufacturers of machine tool controllers to simulate real life manufacturing situations. The company was de-merged from the Company's original investment in VSI in March 2011 and was sold to Westec Holding Company Limited. The investment of £0.30 million has returned £1.23 million in cash over its life. |
||||
|
ATG Media |
Publisher and online auction platform operator |
October 2008 -present |
£3.75 million to date |
|
|
1.87 times cost to date |
||||
|
ATG Media has grown revenues and profits materially since initial investment in 2008. A partial sale of the company under a secondary MBO to a larger private equity house, ECI Partners, has realised net proceeds of £4.63 million, being cash of £3.10 million, with the balance being a new loan stock investment and a minority 3.8% equity stake, together valued at £1.56 million. The cash returns received to date have crystallised an annual return of 20%, making this a particularly successful investment. |
||||
|
Monsal |
Supplier of engineering services to the water and waste sectors |
December 2007 - June 2014 |
£0.96 million |
|
|
1.86 times cost |
||||
|
The sale of Monsal, a renewable energy consultancy, to the US conglomerate General Electric, realised £0.77 million. The 1.86x return on total original cost of £0.52 million represents a good return on an investment originally made in 2007 which required support from further funding rounds in 2009 and 2011. |
||||
|
DiGiCo Global |
Audio mixing desks |
July 2007 - July 2014 |
£3.61 million |
|
|
5.49 times cost |
||||
|
The VCT realised this investment through a sale to a new professional audio group backed by Electra Partners. The business has demonstrated strong and consistent growth since investment. Turnover has grown threefold from £8 million to £24 million over the period of the VCT's investment. This final sale follows a partial realisation in December 2011, through a secondary buyout by Living Bridge (formerly ISIS Equity Partners), followed a partial realisation in December 2011. |
||||
|
Faversham House |
Publishers, exhibition organiser and operator |
December 2010 - December 2013 |
£0.46 million |
|
|
0.93 times cost |
||||
|
Faversham's progress had fallen short of expectations, and in 2013 we took the opportunity to agree with management a phased realisation of our holding. In March 2013, the VCT sold part of its loan stock and its entire equity investment. The residual loan stock investment realised £0.17 million in the final calendar quarter of 2013. |
||||
Loan Stock Repayments
Loan stock repayments totalled £4.54 million for the year, including £2.68 million as part of the proceeds from the companies realised above. Positive cashflow at eight other companies contributed to the balance of £1.86 million. These proceeds are summarised below:-
|
Company |
Business |
Month |
Amount (£'000s) |
|
Country Baskets |
Artificial flowers, floral sundries and home décor products |
June 2014 |
625 |
|
Motorclean |
Vehicle cleaning and valeting services |
June/ September 2014 |
286 |
|
Blaze Signs |
Signs and sign maintenance |
October 2013 |
264 |
|
Westway |
Air conditioning systems |
January 2014 |
199 |
|
Focus Pharma |
Generic pharmaceuticals |
November 2013 |
163 |
|
Tessella |
Consultancy |
Quarterly |
138 |
|
Virgin Wines |
Online wine retailer |
July 2014 |
98 |
|
Newquay Helicopters |
Helicopter Services |
April 2014 |
83 |
|
Total |
|
|
1,856 |
Realisations post year-end
|
Company |
Business |
Period of investment |
Total proceeds over the life of investment (£m)/ |
||
|
Multiple over cost |
|||||
|
Focus Pharma |
Generic pharmaceutical products |
October 2007 - |
£1.93 million |
||
|
October 2014 |
3.74 times cost |
||||
|
The VCT realised its investment in Focus Pharma through a trade sale to Cinven-backed Amdipharm Mercury Group. Focus is engaged in the distribution of generic pharmaceuticals both for third parties, and on its own account, where it develops and licenses the drug for its own benefit. The business has demonstrated strong growth throughout the investment period with turnover increasing three-fold to just under £40 million per annum. The original investment of £0.51 million has returned cash of £1.93 million to date. |
|||||
|
Youngman |
Access towers and ladders |
October 2006 - |
£2.42 million |
||
|
October 2014 |
2.42 times cost |
||||
|
The VCT realised this investment through a sale to Werner Co (US). Based in Essex, Youngman, was established in the 1920s and today produces access equipment including specialist step and loft ladders, access and work platforms, and extension and combination ladders. The investment of £1.00 million has returned £2.42 million in cash over its life. |
|||||
|
EMaC |
Service plans for the motor trade |
October 2011 - |
£5.25 million |
||
|
December 2014 |
2.79 times cost |
||||
|
The VCT sold its investment in EMaC to Innovation Group plc. EMaC is one of the UK's leading providers and administrators of outsourced service plans to car manufacturers and franchised dealers in the motor trade. During the period of this investment, EMaC consistently outperformed expectations and increased turnover by 60% post investment. The original investment of £1.90 million has returned £5.25 million in cash to date. |
|||||
Adviser's investment outlook
This has been a significant year for the portfolio, both in terms of the number of new investments made and the returns earned from five major realisations. Two further major realisations have also been achieved in the new financial year to date.
We are pursuing a number of opportunities which we hope will materialise over the coming months into new investments for the Company. Dealflow remains healthy, reflecting our perception that the level of M&A activity in the small company sector continues to be buoyant. Our intention is to maximise the opportunities presented by these current favourable market conditions to guide new investment deals through to completion, to meet our aims of sustaining current investment levels and securing continued good returns to shareholders.
principal Investments in the Portfolio at 30 September 2014
|
Ingleby (1879) Limited (trading asEMaC) |
Virgin Wines Holding Company Limited |
Gro-Group Holdings Limited |
||||
|
www.emac.co.uk |
www.virginwines.co.uk |
www.gro.co.uk |
||||
|
|
|
|
|
|
|
|
|
Cost |
£1,487,000 |
Cost |
£2,746,000 |
Cost |
£2,341,000 |
|
|
|
|
|
|
|
|
|
|
Valuation |
£3,863,000 |
Valuation |
£2,746,000 |
Valuation |
£2,267,000 |
|
|
|
|
|
|
|
|
|
|
Basis of valuation |
Basis of valuation |
Basis of valuation |
||||
|
Earnings multiple |
Cost |
Earnings multiple |
|
|||
|
|
|
|
|
|
|
|
|
Equity % held |
|
Equity % held |
Equity % held |
|||
|
9.4% |
|
13.7% |
5.7% |
|||
|
|
|
|
|
|||
|
Income receivable in year |
Income receivable in year |
Income receivable in year |
||||
|
£155,884 |
|
£236,916 |
£181,777 |
|||
|
|
|
|
|
|||
|
Business |
|
Business |
Business |
|||
|
Provider of service plans for the motor trade |
Online wine retailer |
Manufacturer and distributor of baby sleep products |
||||
|
|
|
|
|
|||
|
Location |
Location |
Location |
||||
|
Crewe |
Norwich |
Ashburton, Devon |
||||
|
|
|
|
||||
|
Original transaction |
Original transaction |
Original transaction |
||||
|
Management buyout |
Management buyout |
Management buyout |
||||
|
|
|
|
|
|||
|
Audited financial information |
Audited financial information |
Audited financial information |
||||
|
|
|
|
|
|
|
|
|
Year ended |
31 December 2013 |
Year ended |
28 June 20131 |
Year ended |
30 June 20131 |
|
|
Turnover |
£7,379,000 |
Turnover |
£34,475,000 |
Turnover |
£11,444,000 |
|
|
Operating profit |
£2,804,000 |
Operating profit |
£2,010,000 |
Operating profit |
£775,000 |
|
|
Net assets |
£3,781,000 |
Net assets |
£4,952,000 |
Net assets |
£1,178,000 |
|
|
|
|
|
|
|
|
|
|
Period ended |
31 December 2012 |
Year ended |
28 June 20121 |
Year ended |
30 June 20121 |
|
|
Turnover |
£6,803,000 |
Turnover |
£37,390,000 |
Turnover |
£10,945,000 |
|
|
Operating profit |
£2,564,000 |
Operating profit |
£2,404,000 |
Operating profit |
£771,000 |
|
|
Net assets |
£2,772,000 |
Net assets |
£7,210,000 |
Net assets |
£1,085,000 |
|
|
|
|
1 The financial information quoted above relates to the operating subsidiary, Virgin Wine Online Limited and includes figures relating to the performance of this company prior to the MBO which completed in November 2013. |
1 The financial information quoted above is for Gro-Group Holdings Limited's only active subsidiary and includes figures prior to the MBO which completed in March 2013. |
|||
|
Movements during the year |
Movements during the year |
Movements during the year |
||||
|
None. |
MBO investment made in November 2013. A loan repayment of £98,000 has since been received. |
None. |
||||
|
Sold following the year-end. |
|
|||||
|
Fullfield Limited (trading as Motorclean) |
Tessella Holdings Limited |
Veritek Global Holdings Limited |
|||
|
www.motorclean.net |
www.tessella.com |
www.veritekglobal.com |
|||
|
|
|
|
|
|
|
|
Cost |
£2,119,000 |
Cost |
£1,507,000 |
Cost |
£2,290,000 |
|
|
|
|
|
|
|
|
Valuation |
£2,172,000 |
Valuation |
£2,120,000 |
Valuation |
£2,047,000 |
|
|
|
|
|
|
|
|
Basis of valuation |
Basis of valuation |
Basis of valuation |
|||
|
Earnings multiple |
Earnings multiple |
Earnings multiple |
|||
|
|
|
|
|
||
|
Equity % held |
|
Equity % held |
|
Equity % held |
|
|
13.2% |
|
7.5% |
|
14.6% |
|
|
|
|
|
|
|
|
|
Income receivable in year |
Income receivable in year |
Income receivable in year |
|||
|
£225,693 |
£163,129 |
£257,472 |
|||
|
|
|
|
|||
|
Business |
Business |
Business |
|||
|
Provider of vehicle cleaning and valet services |
Provider of science powered technology and consulting services |
Maintenance of imaging equipment |
|||
|
|
|
|
|||
|
Location |
Location |
Location |
|||
|
Laindon, Essex |
Abingdon, Oxfordshire |
Eastbourne, East Sussex |
|||
|
|
|
|
|||
|
Original transaction |
Original transaction |
Original transaction |
|||
|
Management buyout |
Management buyout |
Management buyout |
|||
|
|
|
|
|||
|
Audited financial information |
Audited financial information |
Audited financial information |
|||
|
|
|
|
|
|
|
|
Year ended |
31 March 2014 |
Year ended |
31 March 2014 |
Year ended |
31 March 2014 |
|
Turnover |
£38,155,000 |
Turnover |
£23,146,000 |
Turnover |
£14,443,000 |
|
Operating profit |
£2,554,000 |
Operating profit |
£3,652,000 |
Operating profit |
£249,000 |
|
Net assets |
£2,567,000 |
Net assets |
£4,213,000 |
Net assets |
£(804,000) |
|
|
|
|
|
|
|
|
Year ended |
31 March 2013 |
Year ended |
31 March 2013 |
Year ended |
31 March 20131 |
|
Turnover |
£24,537,000 |
Turnover |
£14,443,000 |
Turnover |
£24,684,000 |
|
Operating profit |
£1,234,000 |
Operating profit |
£2,064,000 |
Operating profit |
£1,506,000 |
|
Net assets |
£2,576,000 |
Net assets |
£4,306,000 |
Net assets |
£6,245,000 |
|
|
|
|
|||
|
|
|
1 The financial information quoted above is for Veritek Global Limited prior to the MBO which completed in July 2013. |
|||
|
Movements during the year |
Movements during the year |
Movements during the year |
|
Fullfield made loan repayments totalling £286,000. |
Tessella made quarterly loan stock repayments totalling £138,000. |
None. |
|
|
|
Entanet Holdings Limited |
ASL Technology Holdings Limited |
Idox plc |
||||||
|
www.enta.net |
www.aslh.co.uk |
www.idoxplc.com |
||||||
|
Cost |
£2,005,000 |
Cost |
£1,770,000 |
Cost |
£454,000 |
|||
|
|
|
|
||||||
|
Valuation |
£2,005,000 |
Valuation |
£1,915,000 |
Valuation |
£1,719,000 |
|||
|
|
|
|
||||||
|
Basis of valuation |
Basis of valuation |
Basis of valuation |
||||||
|
Cost |
Earnings multiple |
Bid price (AIM quoted) |
||||||
|
|
|
|
||||||
|
Equity % held |
Equity % held |
Equity % held |
||||||
|
14.0% |
9.6% |
1.2% |
||||||
|
|
|
|
||||||
|
Income receivable in year |
Income receivable in year |
Income receivable in year |
||||||
|
£135,875 |
£nil |
£16,000 |
||||||
|
|
|
|
||||||
|
Business |
Business |
Business |
||||||
|
Wholesale communications provider |
Printer and photocopier services |
Knowledge management products |
||||||
|
|
|
|
||||||
|
Location |
Location |
Location |
||||||
|
Telford, Shropshire |
Cambridge |
London |
||||||
|
|
|
|
||||||
|
Original transaction |
Original transaction |
Original transaction |
||||||
|
Management buyout |
Management buyout |
Development capital |
||||||
|
|
|
|
||||||
|
Audited financial information |
Audited financial information |
Audited financial information |
||||||
|
|
|
|
|
|
|
|||
|
Year ended |
31 December 20131 |
Year ended |
30 September 2013 |
Year ended |
31 October 2013 |
|||
|
Turnover |
£ 29,415,000 |
Turnover |
£14,484,000 |
Turnover |
£57,319,000 |
|||
|
Operating profit |
£ 2,782,000 |
Operating profit |
£1,296,000 |
Operating profit |
£13,972,000 |
|||
|
Net assets |
£ 2,332,000 |
Net assets |
£(1,216,000) |
Net assets |
£44,686,000 |
|||
|
|
|
|
|
|
|
|||
|
Year ended |
30 November 20121 |
Year ended |
30 September 2012 |
Year ended |
31 October 2012 |
|||
|
Turnover |
£25,853,000 |
Turnover |
£13,394,000 |
Turnover |
£55,382,000 |
|||
|
Operating profit |
£2,431,000 |
Operating profit |
£665,000 |
Operating profit |
£13,806,000 |
|||
|
Net assets |
£5,691,000 |
Net assets |
£204,000 |
Net assets |
£38,900,000 |
|||
|
|
||||||||
|
1 The financial information quoted above is for Entanet International Limited prior to the MBO which completed in February 2014. |
|
|
|
|
||||
|
Movements during the year |
Movements during the year |
Movements during the year |
||||||
|
MBO investment made in February 2014. |
None. |
None. |
||||||
|
Bourn Bioscience Limited |
Turner Topco Limited (trading as ATG Media) |
Tharstern Group Limited |
|||
|
www.bourn-hall-clinic.co.uk |
www.antiquestradegazette.com |
www.tharstern.com |
|||
|
Cost |
£1,610,000 |
Cost |
£1,529,000 |
Cost |
£1,543,000 |
|
|
|
|
|||
|
Valuation |
£1,610,000 |
Valuation |
£1,563,000 |
Valuation |
£1,543,000 |
|
|
|
|
|||
|
Basis of valuation |
Basis of valuation |
Basis of valuation |
|||
|
Cost |
Cost |
Cost |
|||
|
|
|
|
|||
|
Equity % held |
Equity % held |
Equity % held |
|||
|
10.9% |
3.8% |
16.2% |
|||
|
|
|
|
|||
|
Income receivable in year |
Income receivable in year |
Income receivable in year |
|||
|
£61,768 |
£167,296 |
£26,151 |
|||
|
|
|
|
|||
|
Business |
Business |
Business |
|||
|
In-vitro fertilisation clinics |
Publisher and on-line auction platform operator |
Software-based management information systems for the printing industry |
|||
|
|
|
|
|||
|
Location |
Location |
Location |
|||
|
Cambridge |
London |
Colne, Lancashire |
|||
|
|
|
|
|||
|
Original transaction |
Original transaction |
Original transaction |
|||
|
Development capital |
Secondary buyout |
Management buyout |
|||
|
|
|
|
|||
|
Audited financial information |
Audited financial information |
Audited financial information |
|||
|
|
|
|
|
|
|
|
Year ended |
31 December 2013 |
Year ended |
30 September 2013 |
Year ended |
31 January 2014 |
|
Turnover |
£10,561,000 |
Turnover |
£13,783,000 |
Turnover |
£3,871,000 |
|
Operating profit |
£506,000 |
Operating profit |
£3,161,000 |
Operating profit |
£799,000 |
|
Net assets |
£4,002,000 |
Net assets |
£5,764,000 |
Net assets |
£885,000 |
|
|
|
|
|
|
|
|
Year ended |
31 December 2012 |
Year ended |
30 September 2012 |
Year ended |
31 January 2013 |
|
Turnover |
£9,897,000 |
Turnover |
£10,990,000 |
Turnover |
£3,358,000 |
|
Operating profit |
£442,000 |
Operating profit |
£2,704,000 |
Operating profit |
£690,000 |
|
Net assets |
£3,806,000 |
Net assets |
£4,612,000 |
Net assets |
£770,000 |
|
|
|
|
|
|
|
|
Movements during the year |
Movements during the year |
Movements during the year |
|||
|
Investment made in February 2014. |
Secondary buyout of ATG Media in June 2014 |
Investment made in July 2014 |
|||
The remaining 28 investments in the portfolio (including two acquisition vehicles) had a current cost of £16.83 million and were valued at £14.26 million at 30 September 2014.
Further details of the investments in the portfolio may be found on the Mobeus website: www.mobeusequity.co.uk.
Operating profit is stated before charging amortisation of goodwill where appropriate for all investee companies.
INVESTMENT PORTFOLIO SUMMARY
for the year ended 30 September 2014
|
|
Total cost at 30-Sep-14 |
Total valuation at 30-Sep-13 |
Additional investments at cost |
Total valuation at 30-Sep-14 |
% of equity held |
2 3 |
% of portfolio by value |
|
|
|
|
|||||||
|
|
|
|||||||
|
|
£ |
£ |
£ |
£ |
|
|
|
|
|
Ingleby (1879) Limited 10 (trading as EMaC) |
1,486,848 |
2,452,407 |
- |
3,863,225 |
9.4% |
|
9.7% |
|
|
Provider of service plans for the motor trade |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Virgin Wines Holding Company Limited8 |
2,745,503 |
- |
2,843,557 |
2,745,503 |
13.7% |
|
7.0% |
|
|
Online wine retailer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gro-Group Holdings Limited |
2,341,286 |
2,341,286 |
- |
2,266,554 |
5.7% |
|
5.7% |
|
|
Baby sleep products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fullfield Limited (trading as Motorclean) |
2,119,100 |
2,887,812 |
- |
2,172,021 |
13.2% |
|
5.5% |
|
|
Vehicle cleaning and valet services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tessella Holdings Limited |
1,507,484 |
2,213,488 |
- |
2,119,707 |
7.5% |
|
5.3% |
|
|
Provider of science powered technology and consulting services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Veritek Global Holdings Limited (formerly Madacombe Trading Limited) |
2,289,859 |
2,289,859 |
- |
2,047,413 |
14.6% |
|
5.1% |
|
|
Maintenance of imaging equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entanet Holdings Limited (formerly Ackling Management Limited)9 |
2,005,371 |
- |
2,005,371 |
2,005,371 |
14.0% |
|
5.0% |
|
|
Wholesale communications provider |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASL Technology Holdings Limited |
1,769,790 |
1,088,213 |
- |
1,915,032 |
9.6% |
|
4.8% |
|
|
Printer and photocopier services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Idox plc 3 |
453,881 |
1,625,078 |
- |
1,718,833 |
1.2% |
|
4.3% |
|
|
Developer and supplier of knowledge management products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bourn Bioscience Limited |
1,610,379 |
- |
1,610,379 |
1,610,379 |
10.9% |
|
4.0% |
|
|
Management of in-vitro fertilisation clinics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turner Topco Limited (trading as ATG Media)7 |
1,529,075 |
- |
1,529,075 |
1,562,600 |
3.8% |
|
3.9% |
|
|
Publisher and online auction platform operator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tharstern Group Limited |
1,543,000 |
- |
1,543,000 |
1,543,000 |
16.3% |
|
3.9% |
|
|
Software based management information systems for the printing industry |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EOTH Limited (trading as Equip Outdoor Technologies) |
1,383,313 |
1,397,444 |
- |
1,527,347 |
2.5% |
|
3.8% |
|
|
Distributor of branded outdoor equipment and clothing including the Rab and Lowe Alpine brands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CGI Creative Graphics International Limited |
1,421,703 |
- |
1,421,703 |
1,421,703 |
8.4% |
|
3.6% |
|
|
Self-adhesive branding solutions for vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South West Services Investment Limited |
1,342,800 |
- |
1,342,800 |
1,342,800 |
16.8% |
|
3.4% |
|
|
Company seeking to acquire a business service company in the South West of England |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing Services Investment Limited |
1,336,800 |
- |
1,336,800 |
1,336,800 |
16.7% |
|
3.4% |
|
|
Company seeking to acquire businesses in the manufacturing sector |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Blaze Signs Holdings Limited |
418,281 |
1,249,579 |
- |
1,174,224 |
12.5% |
|
2.9% |
|
|
Manufacturer and installer of signs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Youngman Group Limited10 |
1,000,052 |
700,992 |
- |
1,093,204 |
8.5% |
|
2.7% |
|
|
Manufacturer of ladders and access towers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Focus Pharma Holdings Limited10 |
181,722 |
583,331 |
- |
1,024,030 |
2.1% |
|
2.6% |
|
|
Licensor and distributor of generic pharmaceuticals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RDL Corporation Limited |
1,441,667 |
667,316 |
- |
965,966 |
13.0% |
|
2.4% |
|
|
Recruitment consultants within the pharmaceutical, business intelligence and IT sectors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Westway Services Holdings (2010) Limited |
58,076 |
1,025,054 |
- |
862,960 |
4.7% |
|
2.2% |
|
|
Installation, service and maintenance of air conditioning systems |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aquasium Technology Limited 4 |
500,000 |
840,760 |
- |
823,147 |
16.7% |
|
2.1% |
|
|
Manufacturing and marketing of bespoke electron beam welding and vacuum furnace equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original Additions Topco Limited 6 |
25,696 |
537,948 |
- |
537,948 |
0.0% |
|
1.4% |
|
|
Sale of beauty products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BG Training Limited |
509,923 |
516,702 |
- |
485,328 |
25.5% |
|
1.2% |
|
|
Technical training business |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Omega Diagnostics Group plc |
280,026 |
338,329 |
30 |
408,346 |
2.2% |
|
1.0% |
|
|
In-vitro diagnostics for food intolerance, autoimmune diseases and infectious diseases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Plastic Surgeon Holdings Limited |
406,082 |
315,644 |
- |
403,581 |
6.1% |
|
1.0% |
|
|
Supplier of snagging and finishing services to the property sector |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CB Imports Group Limited (trading as Country Baskets) |
484,375 |
1,050,541 |
- |
395,312 |
5.8% |
|
1.0% |
|
|
Importer and distributor of artificial flowers, floral sundries and home décor products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vectair Holdings Limited |
53,400 |
198,098 |
- |
242,396 |
4.6% |
|
0.6% |
|
|
Designer and distributor of washroom products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newquay Helicopters (2013) Limited |
113,000 |
196,824 |
- |
113,000 |
5.0% |
|
0.3% |
|
|
Helicopter service operator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PXP Holdings Limited (trading as Pinewood Structures) |
965,371 |
45,195 |
- |
45,195 |
6.0% |
|
0.1% |
|
|
Designer, manufacturer and supplier of timber frames for buildings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LightWorks Software Limited |
20,471 |
106,937 |
- |
31,627 |
9.2% |
|
0.1% |
|
|
Provider of software for CAD and CAM vendors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corero Network Security plc 4 |
600,000 |
15,717 |
- |
19,646 |
0.1% |
|
0.0% |
|
|
Provider of e-business technologies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Racoon International Holdings Limited |
550,852 |
31,370 |
- |
1,000 |
7.7% |
|
0.0% |
|
|
Supplier of hair extensions, hair care products and training |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
alwaysOn Group Limited (formerly Data Continuity Group Limited) 4 |
165,661 |
29,632 |
2,316 |
- |
10.3% |
|
0.0% |
|
|
Design, supply and integration of data storage solutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oxonica Limited 4 |
2,524,527 |
- |
- |
- |
0.0% |
|
0.0% |
|
|
International nanomaterials group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NexxtDrive Limited 5 |
487,014 |
- |
- |
- |
4.5% |
|
0.0% |
|
|
Developer and exploiter of mechanical transmission technologies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aigis Blast Protection Limited 4 |
272,120 |
- |
- |
- |
3.1% |
|
- |
|
|
Specialist blast containment materials company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legion Group plc (in administration) |
150,000 |
- |
- |
- |
0.0% |
|
- |
|
|
Provider of manned guarding, mobile patrols and alarm response services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Biomer Technology Limited 5 |
137,170 |
- |
- |
- |
3.5% |
|
- |
|
|
Developer of biomaterials for medical devices |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Watchgate Limited |
1,000 |
- |
- |
- |
33.3% |
|
- |
|
|
Holding company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposed in year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATG Media Holdings Limited7 |
- |
3,686,911 |
- |
- |
- |
|
- |
|
|
Publisher and online auction platform operator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DiGiCo Global Limited |
- |
776,204 |
- |
- |
- |
|
- |
|
|
Designer and manufacturer of digital audio mixing desks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Faversham House Holdings Limited |
- |
144,859 |
- |
- |
- |
|
- |
|
|
Publisher, exhibition organiser and operator of websites for the environmental, visual communications and building services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MachineWorks Software Limited |
- |
574,339 |
- |
- |
- |
|
- |
|
|
Provider of software for CAD and CAM vendors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monsal Holdings Limited |
- |
28,297 |
- |
- |
- |
|
- |
|
|
Supplier of engineering services to the water and waste sectors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alaric Systems Limited 4 |
- |
2,064,071 |
- |
- |
- |
|
- |
|
|
Software developer and provider of support services for retail credit card payment systems |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Iglu.com Holidays Limited (further consideration received) |
- |
- |
- |
- |
- |
|
- |
|
|
Online cruise and ski holiday travel agent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ackling Management Limited9 |
- |
1,000,000 |
- |
- |
- |
|
- |
|
|
Acquisition vehicle used to support the MBO of Entanet Holdings Limited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Culbone Trading Limited8 |
- |
1,000,000 |
|
- |
- |
|
- |
|
|
Acquisition vehicle used to support the MBO of Virgin Wines Holding Company Limited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sarantel Group plc 4 |
- |
- |
- |
- |
- |
|
- |
|
|
Developer and manufacturer of antennae for mobile phones and other wireless devices |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
App-DNA Group Limited (further consideration received) |
- |
- |
- |
- |
- |
|
- |
|
|
Provider of software repackaging services |
|
|
|
|
|
|
|
|
|
Total |
38,232,678 |
34,020,237 |
13,635,031 |
39,825,198 |
|
|
100.0% |
|
|
Notes |
|
|
|
|
|
|
|
|
|
1 The percentage of equity held, and the amounts co-invested, in these companies by funds managed by Mobeus Equity Partners LLP are disclosed in Note 10 to the financial statements. |
|
|||||||
|
2 The percentage of equity held for these companies may be subject to further dilution of an additional 1% or more if, for example, management of the investee company exercises share options. |
|
|||||||
|
3 Investment formerly managed by Nova Capital Management Limited until 31 August 2007. |
|
|||||||
|
4 Investment formerly managed by Foresight Group LLP up to various dates ending on or before 10 March 2009. |
|
|||||||
|
5 Investment formerly managed by Nova Capital Management Limited until 31 August 2007 and by Foresight Group until various dates ending on or before 10 March 2009. |
|
|||||||
|
6 As part of the consideration on the disposal of Amaldis (2008) Limited, £537,948 of Original Additions Topco Limited loan stock was issued to the Company. |
|
|||||||
|
7 Shares and loan stock in Turner Topco Limited arose as proceeds from the part realisation of ATG Media Holdings Limited. |
|
|||||||
|
8 £1,000,000 of this investment into Virgin Wines Holding Company Limited was provided by Culbone Trading Limited, one of the Company's acquisition vehicles. |
|
|||||||
|
9 £1,000,000 of this investment into Ackling Management Limited (trading as Entanet International Limited) had been invested in this company, which was formerly an acquisition vehicle, in a previous period. |
|
|||||||
|
10 Sold following the year-end. |
|
|||||||
Key policies
The Board has put in place the following policies to be applied to meet the Company's overall Objective and to cover specific areas of the Company's business.
Investment policy
The Company's policy is to invest primarily in a diverse portfolio of UK unquoted companies. Investments are generally structured as part loan and part equity in order to receive regular income and to generate capital gains from trade sales and flotations of investee companies.
Investments are made selectively across a number of sectors, primarily in management buyout transactions (MBOs) i.e. to support incumbent management teams in acquiring the business they manage but do not yet own. Investments are principally made in companies that are established and profitable.
The Company has a small legacy portfolio of investments in companies from the period prior to 30 September 2008, when it was a multi-manager VCT. This includes investments in early stage and technology companies and in companies quoted on the AiM market.
The Company's cash and liquid resources are held in a range of instruments of varying maturities, subject to the overriding criterion that the risk of loss of capital be minimised..
VCT regulation
The Investment Policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue & Customs ("HMRC").
Amongst other conditions, the Company may not invest more than 15% of its investments in a single company and must have at least 70% by value of its investments throughout the period in shares or securities comprised in VCT qualifying holdings of which a minimum overall of 30% by value (70% for funds raised after 6 April 2011) must be in ordinary shares which carry no preferential rights (save as may be permitted under VCT rules). In addition, although the VCT can invest less than 30% (70% for funds raised after 6 April 2011) of an investment in a specific company in ordinary shares it must have at least 10% by value of its total investments in each VCT qualifying company in ordinary shares which carry no preferential rights (save as may be permitted under VCT rules).
The companies in which investments are made must have no more than £15 million of gross assets at the time of investment and £16 million immediately following the investment to be classed as a VCT qualifying holding.
Asset Mix
The Company initially holds its funds in a portfolio of interest bearing investments and deposits. The investment portfolio of qualifying investments is built up over a three year period with the aim of investing and maintaining at least 70% of net funds raised in qualifying investments.
Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses across different industry sectors. To reduce the risk of high exposure to equities, each qualifying investment is structured to achieve the optimum balance between loan stock and equity to provide protection against downside risk alongside the best potential overall returns.
Co-investment
The Company aims to invest in larger, more mature unquoted companies through investing alongside other VCTs which all have a similar investment policy and are also advised by Mobeus Equity Partners LLP.
Borrowing
The Company's Articles permit borrowing of up to 10% of the adjusted capital and reserves (as defined therein). However, it has never borrowed and the Board has currently no plans to undertake any borrowing.
Management
The Board has overall responsibility for the Company's affairs including the determination of its Investment Policy. Investment and divestment proposals are originated, negotiated and recommended by the Adviser and are then subject to review and approval by the Directors.
Other Key Policies
Cash available for investment and liquidity
The Company's cash and liquid resources are held in a range of instruments of varying maturities including liquid, low risk Money Market Funds and bank deposits, subject to the overriding criterion that the risk of loss of capital be minimised. The Company has participated in the Mobeus VCTs' annual fundraisings since 2010 in order to maintain a sufficient level of funds that can be deployed in meeting the day-to-day expenses of the Company, dividend distributions and purchases of the Company's own shares. This enables money raised prior to 6 April 2012 to continue to be allocated for future MBO investment.
Diversity
The Directors have considered diversity in relation to the composition of the Board and have concluded that its membership is diverse in relation to gender and breadth of experience. The Board comprises currently two men and one woman. The Company does not have any senior managers or employees. The Board has made a commitment to consider diversity in making future appointments.
Further policies
In addition to the Investment Policy above and the policies on payment of dividends and share buybacks which are discussed earlier in this Strategic Report, the Company has adopted a number of additional policies relating to:
· Human rights
· Anti-bribery
· Environmental and social responsibility
· Global greenhouse gas emissions
· Whistleblowing
and these are set out in the Directors' Report.
Principal risks
The Directors acknowledge the Board's responsibilities for the Company's internal control systems and have instigated systems and procedures for identifying, evaluating and managing the significant risks faced by the Company. This includes a key risk management review which takes place at each quarterly Board meeting. Further details of these are contained in the Corporate Governance section in the Annual Report. The principal risks identified by the Board are set out below.
|
Risk |
Possible consequence |
How the Board manages risk |
|
|
|
|
|
Investment and strategic risk |
Investment in unquoted small companies involves a higher degree of risk than investment in fully listed companies. Smaller companies often have limited product lines, markets or financial resources and may be dependent for their management on a smaller number of key individuals. |
· The Board regularly reviews the Company's investment strategy. |
|
· Careful selection and review of the investment portfolio on a regular basis. |
||
|
|
|
|
|
Risk of loss of approval as a Venture Capital Trust |
A breach of the VCT tax rules may lead to the Company losing its approval as a VCT, which would result in qualifying shareholders who have not held their shares for the designated period having to repay the income tax relief they obtained and future dividends paid by the Company would be subject to tax. The Company would also lose its exemption from corporation tax on capital gains. |
· The Company's VCT qualifying status is continually reviewed by the Adviser. |
|
· The Board receives regular reports from its VCT Status Adviser who has been retained by the Board to monitor the VCT's compliance with the VCT tax rules (specifically s 274 of the ITA). |
||
|
|
|
|
|
Regulatory risk |
The Company is required to meet its legal and regulatory obligations as a VCT, a listed company and its own Alternative Investment Fund Manager. Failure to comply might result in suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report or loss of the Company's status as a VCT. |
· Regulatory and legislative developments are kept under review by the Board. |
|
Counterparty risk |
A counterparty may fail to discharge an obligation or commitment that it has entered into with the Company. |
· The Board regularly reviews and agrees policies for managing these risks. Further details can be found in the discussion on 'credit risk' in Note 19 in the Annual Report and Accounts. |
|
Economic risk |
Events such as an economic recession or movements in interest rates could affect trading conditions for smaller companies and consequently the value of the Company's qualifying investments. |
· The Board monitors (1) the portfolio as a whole to ensure that the Company invests in a diversified portfolio of companies and (2) developments in the macro-economic environment such as movements in interest rates. |
|
|
|
|
|
Financial and operating risk |
Failure of the systems at any of the third party service providers that the Company has contracted with could lead to inaccurate reporting or monitoring. Inadequate controls could lead to the misappropriation or insecurity of assets. |
· The Board carries out an annual review of the Internal controls in place, reviews the risks facing the Company at each quarterly Board meeting and receives reports by exception. |
|
· It reviews the performance of the service providers annually. |
||
|
Market risk |
Movements in the UK Stock Market indices will inevitably impact on the valuations of the VCT's investments. |
· The Board receives quarterly valuation reports from the Adviser. |
|
· The Adviser alerts the Board about any adverse movements. |
||
|
Asset liquidity risk |
The Company's investments may be difficult to realise. |
· The Board receives reports from the Adviser and reviews the portfolio at each quarterly board meeting. It carefully monitors investments where a particular risk has been identified. |
|
|
|
|
|
Market liquidity risk |
Shareholders may find it difficult to sell their shares at a price which is close to the net asset value. |
· The Board has a share buyback policy which seeks to mitigate market liquidity risk for shareholders. This policy is reviewed at each quarterly Board Meeting. |
Future prospects
For a discussion of the Company's future prospects, please see the Chairman's Statement.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year and the Directors have elected to prepare the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for the Company for that period.
In preparing these Financial Statements, the Directors are required to:
|
- |
select suitable accounting policies and then apply them consistently; |
|
|
|
|
- |
make judgements and accounting estimates that are reasonable and prudent; |
|
|
|
|
- |
state whether the Financial Statements have been prepared in accordance with United Kingdom accounting standards subject to any material departures disclosed and explained in the Financial Statements; |
|
|
|
|
- |
prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; |
|
|
|
|
- |
prepare a Strategic Report, a Directors' Report and Directors' Remuneration Report which comply with the requirements of the Companies Act 2006. |
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial Statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the Financial Statements contained therein.
Directors' responsibilities pursuant to Disclosure and Transparency Rule 4 of the UK Listing Authority
The Directors confirm to the best of their knowledge that:
|
(a) |
The Financial Statements have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice and give a true and fair view of the assets, liabilities, financial position and the profit of the Company. |
|
|
|
|
(b) |
The Annual Report includes a fair review of the development and performance of the business and the financial position of the Company, together with a description of the principal risks and uncertainties that it faces. |
Having taken advice from the Audit Committee, the Board considers the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
Neither the Company nor the Directors accept any liability to any person in relation to the Annual Report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A and schedule 10A of the Financial Services and Markets Act 2000.
For and on behalf of the Board:
Colin Hook
Chairman
FINANCIAL STATEMENTS
INCOME STATEMENT
for the year ended 30 September 2014
|
|
|
|
Year ended 30 September 2014 |
|
Year ended 30 September 2013 |
||||||
|
|
Notes |
|
Revenue |
Capital |
|
Total |
|
Revenue |
Capital |
|
Total |
|
|
|
|
£ |
£ |
|
£ |
|
£ |
£ |
|
£ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealised gains on investments |
7 |
|
- |
3,730,169 |
|
3,730,169 |
|
- |
5,900,080 |
|
5,900,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains on realisation of investments |
7 |
|
- |
2,713,796 |
|
2,713,796 |
|
- |
1,093,304 |
|
1,093,304 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income |
2 |
|
3,203,322 |
- |
|
3,203,322 |
|
2,488,388 |
533,750 |
|
3,022,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Adviser's fees |
3a |
|
(374,025) |
(1,122,076) |
|
(1,496,101) |
|
(321,777) |
(965,335) |
|
(1,287,112) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Advisers' performance fees |
3b |
|
- |
(1,392,454) |
|
(1,392,454) |
|
- |
(106,778) |
|
(106,778) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses |
|
|
(411,517) |
- |
|
(411,517) |
|
(412,241) |
- |
|
(412,241) |
|
Profit on ordinary activities before taxation |
|
|
2,417,780 |
3,929,435 |
|
6,347,215 |
|
1,754,370 |
6,455,021 |
|
8,209,391 |
|
Tax on profit on ordinary activities |
4 |
|
(393,153) |
393,153 |
|
- |
|
(267,890) |
267,890 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit on ordinary activities after taxation for the financial year |
|
|
2,024,627 |
4,322,588 |
|
6,347,215 |
|
1,486,480 |
6,722,911 |
|
8,209,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per ordinary share: |
5 |
|
3.55p |
7.58p |
|
11.13p |
|
2.98p |
13.45p |
|
16.43p |
All the items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. The total column is the Profit and Loss Account of the Company. There were no other recognised gains and losses in the year.
Other than the revaluation movements arising in investments held at fair value through profit and loss, there were no differences between the profit as stated above and at historical cost.
BALANCE SHEET
as at 30 September 2014
Company number: 4069483
|
|
|
as at 30 September 2014 |
|
as at 30 September 2013 |
|
|
|
|
|
|
|
|
Notes |
|
|
|
|
|
|
£ |
|
£ |
|
Fixed assets |
|
|
|
|
|
Investments at fair value |
7 |
39,825,198 |
|
34,020,237 |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
Debtors and prepayments |
|
1,328,682 |
|
1,384,798 |
|
Current investments |
|
18,914,849 |
|
22,799,201 |
|
Cash at bank |
|
11,387,997 |
|
3,095,005 |
|
|
|
--------- |
|
--------- |
|
Total current assets |
|
31,631,528 |
|
27,279,004 |
|
|
|
|
|
|
|
Creditors: amounts falling due within one year |
|
(1,959,183) |
|
(830,369) |
|
|
|
--------- |
|
--------- |
|
Net current assets |
|
29,672,345 |
|
26,448,635 |
|
|
|
|
|
|
|
Creditors: amounts falling due after one year |
3b |
(191,138) |
|
- |
|
|
|
|
|
|
|
Net assets |
|
69,306,405 |
|
60,468,872 |
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
Called up share capital |
|
604,769 |
|
530,882 |
|
Share premium account |
8 |
5,662,818 |
|
15,634,572 |
|
Capital redemption reserve |
8 |
3,750 |
|
287,932 |
|
Capital reserve - unrealised |
8 |
7,662,673 |
|
8,902,232 |
|
Special reserve |
8 |
29,576,755 |
|
13,193,594 |
|
Profit and loss account |
8 |
25,795,640 |
|
21,919,660 |
|
|
|
|
|
|
|
Equity shareholders' funds |
|
69,306,405 |
|
60,468,872 |
|
|
|
|
|
|
|
Basic and diluted net asset value per share |
9 |
|
|
|
|
Ordinary shares |
|
114.60p |
|
113.90p |
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the year ended 30 September 2014
|
|
Year ended |
|
Year ended |
|
|
|
30 September 2014 |
|
30 September 2013 |
|
|
|
|
£ |
|
£ |
|
|
|
|
|
|
|
Opening shareholders' funds |
|
60,468,872 |
|
50,551,985 |
|
|
|
|
|
|
|
Net share capital bought back in the year |
8 |
(596,384) |
|
(9,898,671) |
|
Net share capital subscribed for in the year |
8 |
8,921,832 |
|
17,647,874 |
|
Profit for the year |
|
6,347,215 |
|
8,209,391 |
|
Dividends paid in the year |
6 |
(5,835,130) |
|
(6,041,707) |
|
|
|
|
|
|
|
Closing shareholders' funds |
|
69,306,405 |
|
60,468,872 |
CASH FLOW STATEMENT
For the year ended 30 September 2014
|
|
|
Year ended |
|
Year ended |
|
|
|
30 September 2014 |
|
30 September 2013 |
|
|
|
£ |
|
£ |
|
Operating activities |
|
|
|
|
|
Investment income received |
|
3,239,745 |
|
2,747,369 |
|
|
|
|
|
|
|
Other income |
|
4,702 |
|
469 |
|
Investment advisers fees paid |
|
(1,496,101) |
|
(1,287,112) |
|
Investment advisers' performance fees paid |
|
(59,672) |
|
(3,050,234) |
|
Other cash payments |
|
(431,583) |
|
(310,007) |
|
|
|
|
|
|
|
Net cash inflow/(outflow) from operating activities |
|
1,257,091 |
|
(1,899,515) |
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
Acquisition of investments |
7 |
(10,106,043) |
|
(2,788,442) |
|
Disposal of investments |
7 |
10,759,471 |
|
6,559,171 |
|
|
|
|
|
|
|
Net cash inflow from investing activities |
|
653,428 |
|
3,770,729 |
|
|
|
|
|
|
|
Equity Dividends |
|
|
|
|
|
Payment of equity dividends |
|
(5,827,327) |
|
(6,049,507) |
|
|
|
|
|
|
|
Net cash (outflow)/inflow before liquid resource management and financing |
|
(3,916,808) |
|
(4,178,293) |
|
|
|
|
|
|
|
Management of liquid resources |
|
|
|
|
|
Decrease/(increase) in monies held pending investment |
|
3,884,352 |
|
(5,275,761) |
|
|
|
|
|
|
|
Financing |
|
|
|
|
|
Shares issued as part of joint fundraising offer for subscription and dividend investment scheme |
|
8,921,832 |
|
8,802,776 |
|
|
|
|
|
|
|
Purchase of own shares |
8 |
(596,384) |
|
(970,797) |
|
|
|
|
|
|
|
Shares issued as part of the enhanced buyback facility |
|
- |
|
250,000 |
|
|
|
|
|
|
|
Shares bought back as part of enhanced buyback facility (including expenses) |
|
- |
|
(394,360) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash inflow from financing |
|
8,325,448 |
|
7,687,619 |
|
|
|
|
|
|
|
Increase/(decrease) in cash for the year |
|
8,292,992 |
|
(1,766,435) |
|
|
|
|
|
|
Notes
|
1 |
Accounting policies |
|||
|
|
A summary of the principal accounting policies, all of which have been applied consistently throughout the year, is set out below: |
|||
|
|
|
|||
|
|
a) |
Basis of accounting |
||
|
|
|
The accounts have been prepared under United Kingdom Generally Accepted Accounting Practice (UK GAAP) and the Statement of Recommended Practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ("the SORP") issued by the Association of Investment Companies in January 2009. The financial statements are prepared under the historical cost convention except for the measurement of certain financial instruments at fair value, in accordance with FRS26. |
||
|
|
|
|
||
|
|
b) |
Presentation of the Income Statement |
||
|
|
|
In order to better reflect the activities of a VCT and in accordance with the SORP, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of the profit attributable to equity shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in section 274 Income Tax Act 2007. |
||
|
|
|
|
||
|
|
c) |
Investments |
||
|
|
|
All investments held by the Company are classified as "fair value through profit and loss", and are valued in accordance with the International Private Equity and Venture Capital Valuation ("IPEVCV") guidelines, as updated in September 2009. This classification is followed as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income. |
||
|
|
|
|
||
|
|
|
For investments actively traded on organised financial markets, fair value is generally determined by reference to Stock Exchange market quoted bid prices at the close of business on the balance sheet date. Purchases and sales of quoted investments are recognised on the trade date where a contract of sale exists whose terms require delivery within a time frame determined by the relevant market. Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional. |
||
|
|
|
|
||
|
|
|
Unquoted investments are stated at fair value by the Directors in accordance with the following rules, which are consistent with the IPEVCV guidelines: |
||
|
|
|
|
||
|
|
|
All investments are held at the price of a recent investment for an appropriate period where there is considered to have been no change in fair value. Where such a basis is no longer considered appropriate, the following factors will be considered: |
||
|
|
|
|
||
|
|
|
i) |
Where a value is indicated by a material arms-length transaction by an independent third party in the shares of a company, this value will be used. |
|
|
|
|
|
|
|
|
|
|
ii) |
In the absence of i), and depending upon both the subsequent trading performance and investment structure of an investee company, the valuation basis will usually move to either:- |
|
|
|
|
|
|
|
|
|
|
|
a) |
an earnings multiple basis. The shares may be valued by applying a suitable price-earnings ratio to that company's historic, current or forecast post-tax earnings before interest and amortisation (the ratio used being based on a comparable sector but the resulting value being adjusted to reflect points of difference identified by the Investment Manager compared to the sector including, inter alia, a lack of marketability). |
|
|
|
|
|
|
|
|
|
|
b) |
where a company's underperformance against plan indicates a diminution in the value of the investment, provision against cost is made, as appropriate. Where the value of an investment has fallen permanently below cost, the loss is treated as a permanent impairment and as a realised loss, even though the investment is still held. The Board assesses the portfolio for such investments and, after agreement with the Adviser, will agree the values that represent the extent to which an investment loss has become realised. This is based upon an assessment of objective evidence of that investment's future prospects, to determine whether there is potential for the investment to recover in value. |
|
|
|
|
|
|
|
|
|
iii) |
|
Premiums on loan stock investments are accrued at fair value when the Company receives the right to the premium and when considered recoverable. |
|
|
|
|
|
|
|
|
|
iv) |
|
Where an earnings multiple or cost less impairment basis is not appropriate and overriding factors apply, discounted cash flow or net asset valuation bases may be applied. |
|
|
|
|
|
|
|
|
d) |
Cash and liquid resources |
||
|
|
|
Cash, for the purposes of the cash flow statement, comprises cash in hand and deposits repayable on demand. Liquid resources are current asset investments which are realisable without curtailing or disrupting the business and are readily convertible into known amounts of cash at their carrying values. Liquid resources also comprise term deposits of less than one year (other than cash) and investments in money market managed funds. |
||
|
|
|
|
||
|
|
e) |
Income |
||
|
|
|
Dividends receivable on quoted equity shares are brought into account on the ex-dividend date. Dividends receivable on unquoted equity shares are brought into account when the Company's right to receive payment is established and there is no reasonable doubt that payment will be received. |
||
|
|
|
|
||
|
|
f) |
Capital reserves |
||
|
|
|
i) |
Realised (included within the Profit and Loss Account reserve) |
|
|
|
|
|
The following are accounted for in this reserve: |
|
|
|
|
|
|
|
|
|
|
|
· |
Gains and losses on realisation of investments; |
|
|
|
|
· |
Permanent diminution in value of investments; |
|
|
|
|
· |
Transaction costs incurred in the acquisition of investments; and |
|
|
|
|
· |
75% of management fee expense, together with the related tax effect to this reserve in accordance with the policies. |
|
|
|
|
· |
100% of performance incentive fees.
|
|
|
|
ii) |
Revaluation reserve (Unrealised capital reserve) |
|
|
|
|
|
Increases and decreases in the valuation of investments held at the year-end are accounted for in this reserve, except to the extent that the diminution is deemed permanent. |
|
|
|
|
|
|
|
|
|
|
|
In accordance with stating all investments at fair value through profit and loss, all such movements through both revaluation and realised capital reserves are now shown within the Income Statement for the year. |
|
|
|
|
|
|
|
|
|
|
iii) |
Special distributable reserve |
|
|
|
|
|
The cost of share buy-backs are charged to this reserve. In addition, any realised losses on the sale of investments, and 75% of the management fee expense, 100% of performance incentive fees and the related tax effect, are transferred from the Profit and Loss Account reserve to this reserve. |
|
|
|
|
|
|
|
|
|
g) |
Dividends |
||
|
|
|
Dividends payable are recognised as distributions in the financial statements when the Company's liability to make payment has been established. This liability is established for interim dividends when they are paid, and for final dividends when they are approved by the shareholders, usually at the Company's Annual General Meeting. |
||
|
|
|
|
|
|
|
|
h) |
Expenses |
||
|
|
|
All expenses are accounted for on an accruals basis. |
||
|
|
|
|
||
|
|
|
25% of the Investment Adviser's fees are charged to the revenue column of the Income Statement, while 75% is charged against the capital column of the Income Statement. This is in line with the Board's expected long-term split of returns from the investment portfolio of the Company. |
||
|
|
|
|
||
|
|
|
100% of any performance incentive fee payable for the period is charged against the capital column of the Income Statement, as it is based upon the achievement of capital growth. See note 3b for further details. |
||
|
|
|
|
||
|
|
|
Expenses are charged wholly to revenue, with the exception of expenses incidental to the acquisition or disposal of an investment, which are written off to the capital column of the Income Statement or deducted from the disposal proceeds as appropriate. |
||
|
|
|
|
||
|
|
i) |
Taxation |
||
|
|
|
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the Company's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in the tax assessments in periods different from those in which they are recognised in the financial statements. |
||
|
|
|
|
||
|
|
|
Deferred tax is measured at the average tax rates that are expected to apply in the years in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantially enacted at the balance sheet date. Deferred tax is measured on a non-discounted basis. |
||
|
|
|
|
||
|
|
|
A deferred tax asset is recognised only to the extent that it is more likely than not that future taxable profits will be available against which the asset can be utilised. |
||
|
|
|
|
||
|
|
|
Any tax relief obtained in respect of management fees allocated to capital is reflected in the capital reserve - realised and a corresponding amount is charged against revenue. The tax relief is the amount by which corporation tax payable is reduced as a result of these capital expenses. |
||
|
2 |
Income |
|
|
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
|
£ |
£ |
|
|
Income from investments |
|
|
|
|
- from equities |
640,450 |
813,927 |
|
|
- from OEIC funds |
48,387 |
48,954 |
|
|
- from loan stock |
2,335,077 |
1,929,482 |
|
|
- from bank deposits |
162,037 |
229,306 |
|
|
- from interest on preference share dividend arrears |
12,668 |
- |
|
|
|
|
|
|
|
|
3,198,619 |
3,021,669 |
|
|
|
|
|
|
|
Other income |
4,703 |
469 |
|
|
|
|
|
|
|
Total income |
3,203,322 |
3,022,138 |
|
|
|
|
|
|
|
|
|
|
|
|
Total income comprises |
|
|
|
|
Revenue dividends received |
688,837 |
329,131 |
|
|
Capital dividends received |
- |
533,750 |
|
|
Interest |
2,509,782 |
2,158,788 |
|
|
Other income |
4,703 |
469 |
|
|
|
|
|
|
|
Total Income |
3,203,322 |
3,022,138 |
|
|
|
|
|
|
|
|
|
|
|
|
Income from investments comprises |
|
|
|
|
Listed UK securities |
16,000 |
29,168 |
|
|
Listed overseas securities |
48,387 |
48,954 |
|
|
Unlisted UK securities |
2,972,195 |
2,714,241 |
|
|
|
|
|
|
|
Total Income from investments |
3,036,582 |
2,792,363 |
|
|
|
|
|
|
|
|
||
|
|
Total loan stock interest due but not recognised in the year was £270,298 (2013: £294,421). |
||
|
3 |
Investment Adviser's and performance fees |
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
(a) |
Investment Adviser's fees |
|
|
|
|
|||
|
|
|
Revenue |
Capital |
Total |
|
Revenue |
Capital |
Total |
|
|
|
2014 |
2014 |
2014 |
|
2013 |
2013 |
2013 |
|
|
|
£ |
£ |
£ |
|
£ |
£ |
£ |
|
|
Mobeus Equity Partners LLP |
374,025 |
1,122,076 |
1,496,101 |
|
321,777 |
965,335 |
1,287,112 |
|
|
|
|
|
|
|
|
|
|
|
|
Under the terms of a revised investment management agreement dated 29 March 2010, Mobeus Equity Partners LLP ("Mobeus") provides investment advisory, administrative and company secretarial services to the Company, for a fee of 2.4% per annum of closing net assets, calculated on a quarterly basis by reference to the net assets at the end of the preceding quarter. One sixth of this fee is subject to minimum and maximum limits of £150,000 (2013: £150,000) and £170,000 (2013: £170,000) per annum respectively. |
|||||||
|
|
The investment adviser fees disclosed above are stated after applying a cap on expenses excluding IFA trail commission and exceptional items set at 3.25% of closing net assets at the year-end. In accordance with the investment management, agreement any excess expenses are wholly borne by the Investment Adviser. The excess expenses during the year attributable to the Investment adviser amounted to £nil (2013: £nil). |
|||||||
|
|
|
|||||||
|
(b) |
Investment Adviser's performance fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
|
2014 |
2014 |
2014 |
2013 |
2013 |
2013 |
|
|
|
Portfolio |
£ |
£ |
£ |
£ |
£ |
£ |
|
|
|
Mobeus Equity Partners LLP |
- |
1,087,737 |
1,087,737 |
- |
38,811 |
38,811 |
|
|
|
Mobeus Equity Partners LLP - due > 1 year |
- |
191,138 |
191,138 |
- |
- |
- |
|
|
|
Mobeus Equity Partners LLP/ Foresight Group LLP |
- |
(8,061) |
(8,061) |
- |
67,967 |
67,967 |
|
|
|
Foresight Group LLP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
1,392,454 |
1,392,454 |
- |
106,778 |
106,778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Under a Deed of Termination and Variation relating to Performance Incentive Agreements dated 29 March 2010, the Investment Adviser's Incentive Agreement for the former 'O' Share Fund was continued, while the former 'S' Share Fund's Incentive Agreement was terminated. Under the terms of the pre-merger 'O' Share Fund Incentive Agreement, each of the ongoing Investment Adviser, Mobeus Equity Partners LLP and a former Investment Adviser, Foresight Group LLP ("Foresight") are entitled to a performance fee equal to 20% of the excess of the value of any realisation of an investment made after 30 June 2007, over the value of that investment in an Investment Adviser's portfolio at that date ("the Embedded Value"), which value is itself uplifted at the rate of 6% per annum subject to a High Watermark test. |
|
||||||
|
|
Under the above agreement, the Investment Adviser (Mobeus) was entitled to an incentive fee for the year ended 30 September 2012 of £491,811 (on the Mobeus portfolio) (2013: £491,811). This sum of £491,811 was invoiced on 30 September 2014, and settled shortly after the year-end. No fee was payable upon the Mobeus portfolio for the year ended 30 September 2013. £59,672 was paid on the ex- Foresight portfolio for the year ended 30 September 2013, and was shared between Mobeus and Foresight. This was revised down from the figure accrued at 30 September 2013 of £67,733, by £8,061. |
|
||||||
|
|
On 30 September 2014, a new incentive fee agreement was signed between the Board and Mobeus, with effect from 1 October 2013, to amend and replace the previous agreement. The previous agreement remains in force, but only with the former adviser, Foresight, to whom, for the year ended 30 September 2014, £121,640 is payable. The agreement is due to expire on 10 March 2019. Mobeus waived their right to their portion of the fee, under the previous agreement. |
|
||||||
|
|
Any payment under the new incentive agreement is now 15% of net realised gains for each year, payable in cash. It is payable only if Cumulative Net Asset Value (NAV) total return per share (being the closing NAV at a year-end plus cumulative dividends paid to that year-end, since 1 October 2013) equals or exceeds a "Target Return". The Target Return is the greater of two targets, being either: |
|
||||||
|
|
i) compound growth of 6% per annum (but 5% per annum for the year ended 30 September 2014 only), before deducting any incentive fee payable (for the year of calculation only) under both this amended agreement and the existing incentive agreement with Foresight in Cumulative NAV total return per share; or. |
|
||||||
|
|
ii) the cumulative percentage change in the Consumer Prices Index since 1 October 2013 to the relevant financial year-end, the resultant figure then being multiplied by (100+A)/100, where A is the number of full 12 month periods (or part thereof ) that have passed between 1 October 2013 and the relevant financial year-end. |
|
||||||
|
|
Both measures of Target Return are applied to the same opening base, being NAV per share as at 30 September 2013 of 113.90 pence. The objective of this Target Return is to enable shareholders to benefit from a cumulative NAV return of at least 6% per annum (5% in the financial year ended 30 September 2014), before any incentive fee is payable. Once a payment has been made, cumulative NAV total return is calculated after deducting past years' incentive fees paid and payable. |
|
||||||
|
|
The Target Return for the year ended 30 September 2014 was a 5% uplift on the opening net asset value of 113.90 pence, being 119.60 pence. As Cumulative Total NAV return is 124.24 pence per share, the Target Return has been met and a fee is payable. |
|
||||||
|
|
Under this amended agreement, any fee payments to Mobeus are subject to an annual cap of an amount equal to 2% of the net assets of I&G VCT as at the immediately preceding year-end. This cap will include any fee payable to Foresight under the old agreement, although any such payment to Foresight is not capped. Any excess over the 2% remains payable to Mobeus in the following year(s), subject to the 2% annual cap in such subsequent year(s) and after any payment in respect of such subsequent year(s). |
|
||||||
|
|
As a result of the new incentive fee agreement, £1,278,875 is payable to Mobeus for the year ended 30 September 2014. The 2% cap, referred to above, means that £191,138 of this is not payable until the following year. This is disclosed as a creditor falling due after one year, on the balance sheet. |
|
||||||
|
|
Under the terms of the Mobeus advised VCTs' linked Offer for Subscription launched on 28 November 2013, Mobeus is entitled to fees of 3.25% of the investment amount received from investors. This amount totalled £1,096,156 across all four VCTs involved in the Offer, out of which all costs associated with the Offer were met, excluding any payments to advisers facilitated under the terms of the Offer. |
|
||||||
|
|
Under the terms of an Offer for Subscription with the other Mobeus advised VCTs launched on 10 December 2014, Mobeus are entitled to fees of 3.25% of the investment amount received from investors. Based upon a fully subscribed offer of £39 million across all four VCTs, this would equal £1,267,500, out of which all the costs associated with the Offer are met, excluding any payments to advisers facilitated under the terms of the Offer. |
|
||||||
|
4 |
Tax on ordinary activities |
|
|
|
|
|
|
|
|
|
2014 Revenue |
2014 Capital |
2014 Total |
2013 Revenue |
2013 Capital |
2013 Total |
|
|
|
£ |
£ |
£ |
£ |
£ |
£ |
|
|
a) Analysis of tax charge: |
|
|
|
|
|
|
|
|
UK Corporation tax on profits/(losses) for the year |
393,153 |
(393,153) |
- |
267,890 |
(267,890) |
- |
|
|
|
|
|
|
|
|
|
|
|
Total current tax charge/(credit) |
393,153 |
(393,153) |
- |
267,890 |
(267,890) |
- |
|
|
|
|
|
|
|
|
|
|
|
Corporation tax is based on a rate of 22% (2013: 20%) |
||||||
|
|
b) Profit on ordinary activities before tax |
2,417,780 |
3,929,435 |
6,347,215 |
1,754,370 |
6,455,021 |
8,209,391 |
|
|
Profit on ordinary activities multiplied by main company rate of corporation tax in the UK of 20% (2013: small company rate: 20%) |
531,911 |
864,476 |
1,396,387 |
350,874 |
1,291,004 |
1,641,878 |
|
|
Effect of: |
|
|
|
|
|
|
|
|
UK dividends |
(140,899) |
- |
(140,899) |
(56,035) |
(106,750) |
(162,785) |
|
|
Unrealised gains not taxable |
- |
(820,637) (1,123,501) |
(820,637) (1,123,501) |
- |
(1,180,016) |
(1,180,016) |
|
|
Realised gains not taxable |
- |
(597,035) |
(597,035) |
- |
(218,661) |
(218,661) |
|
|
Disallowable expenses |
2,141 |
- |
2,141 |
- |
- |
- |
|
|
Unrelieved expenditure |
- |
160,043 |
160,043 |
- |
- |
- |
|
|
Impact of marginal rate |
- |
- |
- |
53,467 |
(53,467) |
- |
|
|
Losses brought forward |
- |
- |
- |
(80,416) |
- |
(80,416) |
|
|
|
|
|
|
|
|
|
|
|
Actual current tax charge |
393,153 |
(393,153) |
- |
267,890 |
(267,890) |
- |
|
|
|
|
|
|
|
|
|
|
|
Tax relief relating to investment management fees is allocated between revenue and capital where such relief can be utilised. |
||||||
|
|
No asset or liability has been recognised for deferred tax in relation to capital gains or losses on revaluing investments as the Company is exempt from corporation tax in relation to capital gains or losses as a result of qualifying as a Venture Capital Trust. |
||||||
|
|
There is no potential liability to deferred tax (2013: nil). There is an unrecognised deferred tax asset of £1,326,000 (2013: £1,060,000). |
||||||
|
5 |
Basic and diluted earnings per share |
|
|
|
|
|
|
2014 |
2013 |
|
|
|
|
£ |
£ |
|
|
|
Total earnings after taxation: |
6,347,215 |
8,209,391 |
|
|
|
Basic and diluted earnings per share (Note a) |
11.13p |
16.43p |
|
|
|
|
|
|
|
|
|
Revenue profit from ordinary activities after taxation |
2,024,627 |
1,486,480 |
|
|
|
Basic and diluted revenue earnings per share (Note b) |
3.55p |
2.98p |
|
|
|
|
|
|
|
|
|
Net unrealised capital gains on investments |
3,730,169 |
5,900,080 |
|
|
|
Net realised capital gains on investments |
2,713,796 |
1,093,304 |
|
|
|
Capital dividend |
- |
533,750 |
|
|
|
Capitalised Investment Adviser fees less taxation |
(728,923) |
(697,445) |
|
|
|
Investment Adviser' performance fees |
(1,392,454) |
(106,778) |
|
|
|
|
|
--------- |
|
|
|
Total capital return |
4,322,588 |
6,722,911 |
|
|
|
Basic and diluted capital earnings per share (Note c) |
7.58p |
13.45p |
|
|
|
|
|
|
|
|
|
Weighted average number of shares in issue in the year |
57,022,101 |
49,959,629 |
|
|
|
|
|
|
|
|
|
Notes |
|||
|
|
Note a) |
Basic earnings per share is total earnings after taxation divided by the weighted average number of shares in issue. |
||
|
|
Note b) |
Revenue earnings per share is the revenue profit after taxation divided by the weighted average number of shares in issue. |
||
|
|
Note c) |
Capital earnings per share is the total capital gain after taxation divided by the weighted average number of shares in issue. |
||
|
6 |
Dividends paid and payable |
2014 Revenue |
2014 Capital |
2014 Total |
2013 Revenue |
2013 Capital |
2013 Total |
||
|
|
Dividends on ordinary equity shares |
£ |
£ |
£ |
£ |
£ |
£ |
||
|
|
Interim - year ended 30 September 2013 - nil p (2012: 3p income and 3p capital) |
|
|
|
|
|
|
||
|
|
- |
- |
- |
- |
- |
- |
|||
|
|
Final - year ended 30 September 2013: - 1.25p revenue and 2.75p capital paid on 12 March 2014 (2012 - nil p) |
695,725 |
1,530,655 |
2,226,380 |
1,431,155 |
1,431,155 |
2,862,310 |
||
|
|
Interim - year ended 30 September 2014 - 1p income and 2p capital paid on 3 July 2014 (2013: 1p income and 5p capital) |
601,458 |
3,007,292 |
3,608,750 |
529,900 |
2,649,497 |
3,179,397 |
||
|
|
|
|
|
|
|
|
|
||
|
|
Total paid in year |
1,297,183 |
4,537,947 |
5,835,130* |
1,961,055 |
4,080,652 |
6,041,707 |
||
|
|
|||||||||
|
*- Of these amounts £727,916 (30 September 2013: £710,241) was re-invested in new shares, issued as part of the Company's Dividend Investment Scheme. The amount of £5,835,130 above is £7,803 more than the amount of £5,827,327 shown in the Cash Flow Statement. £7,803 was received back in the year, on shares subject to a share buyback in the previous year.
|
|||||||||
|
|
Amounts paid as a second interim distribution to equity holders after the year-end |
||||||||
|
|
|
||||||||
|
|
|
2014 Revenue |
2014 Capital |
2014 Total |
2013 Revenue |
2013 Capital |
2013 Total |
||
|
|
|
£ |
£ |
£ |
£ |
£ |
£ |
||
|
|
Second interim dividend for the year ended 30 September 2014 of 2.00p (income) (2013: nilp); 6.00p (capital) (2013:nilp) per ordinary share) on 30 October 2014 |
1,210,439 |
3,631,316 |
4,841,755 |
- |
- |
- |
||
|
|
|
|
|
|
|
|
|
||
|
|
Proposed distribution to equity holders at the year-end |
||||||||
|
|
Final dividend for the year ended 30 September 2014 of nilp (income) (2013:1.25p); 4.00p (capital) (2013: 2.75p) per ordinary share |
- |
2,445,174 |
2,445,174 |
695,725 |
1,530,655 |
2,226,380 |
||
|
|
|
||||||||
|
|
Any proposed final dividend is subject to approval by shareholders at the Annual General Meeting of the Company to be held on 12 February 2015. This dividend and the second interim dividend paid on 30 October 2014 have not been included as a liability in these financial statements. |
||||||||
|
|
|
||||||||
|
|
Set out below are the total income dividends payable in respect of the financial year, which is the basis on which the requirements of Section 259 of the Income Tax Act 2007 are considered. |
||||||||
|
|
|
||||||||
|
|
2014 |
2013 |
|
||||||
|
|
£ |
£ |
|
||||||
|
Revenue available by way of dividends for the year |
2,024,627 |
1,486,480 |
|
||||||
|
Interim income dividend for the year - 1p (2013:1p) |
601,458 |
529,900 |
|
||||||
|
|
|
|
|
||||||
|
Second interim income dividend for the year - 2p (2013: 1.25p) paid on 30 October 2014 |
1,209,539 |
663,603 |
|
||||||
|
Total income dividends for the year |
1,810,997 |
1,193,503 |
|
||||||
|
7 |
Summary of movement on investments during the year |
|
|
|
||
|
|
|
Traded on AiM |
Unquoted ordinary shares |
Preference shares |
Qualifying Loans |
Total |
|
|
|
£ |
£ |
£ |
£ |
£ |
|
|
|
|
|
|
|
|
|
|
Cost at 30 September 2013 |
3,215,129 |
10,760,871 |
50,318 |
19,673,215 |
33,699,533 |
|
|
Realised losses on investments still held |
(2,376,252) |
(4,516,905) |
(787) |
(227,462) |
(7,121,406) |
|
|
Unrealised (losses)/gains |
1,140,247 |
5,172,610 |
(14,568) |
1,143,821 |
7,422,110 |
|
|
Valuation at 30 September 2013 |
1,979,124 |
11,416,576 |
34,963 |
20,589,574 |
34,020,237 |
|
|
|
|
|
|
|
|
|
|
Purchases at cost |
30 |
2,774,400 |
1,795 |
8,858,806 |
11,635,031 |
|
|
Sales - proceeds |
(2,024) |
(7,961,602) |
(1,111) |
(4,540,624) |
(12,505,379) |
|
|
Reclassification |
- |
(133,100) |
1,838 |
(131,262) |
- |
|
|
Realised gains |
2,024 |
2,578,411 |
- |
300,687 |
2,881,140 |
|
|
Unrealised gains |
167,671 |
2,454,197 |
11,270 |
1,161,031 |
3,794,169 |
|
|
Valuation at 30 September 2014 |
2,146,825 |
11,128,882 |
48,755 |
26,500,736 |
39,825,198 |
|
|
Cost at 30 September 2014 |
1,333,907 |
12,312,832 |
52,840 |
24,533,099 |
38,232,678 |
|
|
Realised losses on investments still held |
(500,000) |
(4,516,904) |
(787) |
(227,462) |
(5,245,153) |
|
|
Unrealised gains/(losses) at 30 September 2014 |
1,312,918 |
3,332,954 |
(3,298) |
2,195,099 |
6,837,673 |
|
|
Valuation at 31 March 2014 |
2,146,825 |
11,128,882 |
48,755 |
26,500,736 |
39,825,198 |
|
|
|
|
|
|
|
|
|
|
Transaction costs on the purchase and disposal of investments of £167,344 were incurred in the year. These are excluded from realised gains shown above of £2,881,140, but were deducted in arriving at gains on realisation of investments in the Income Statement of £2,713,796. Also, unrealised gains above of £3,794,169 differ from that shown in the Income Statement of £3,730,169. The difference of £64,000 is a net reduction for the year in the estimated fair value of contingent consideration held at the balance sheet date of £825,000 (2013: £889,000), included within other debtors in Note 10. This reduction is because consideration of £492,579 was received in the year, against which a further increase of £428,879 in the value of remaining contingent consideration has been made. This £825,000 contingent consideration also explains all of the difference between unrealised gains/(losses) at 30 September 2014 above of £6,837,673 and that shown on note 15 of £7,662,673. |
|||||
Reconciliation of cash movements in investment transactions
The difference between disposals in the investments note above of £12,505,379 and the disposals figure per the Cash Flow Statement of £10,759,471 is £1,745,908. This relates to transaction costs of £167,344, proceeds of £1,529,075 received in the form of equity and loan stock as part of the partial realisation of ATG Media Holdings Limited and retention amounts due to the Company of £49,489, also due from the ATG Media Holdings Limited transaction.
The difference between investment additions above of £11,635,031 and that per the Cash Flow Statement of £10,106,043 is £1,528,988, being £1,529,075 of equity and loan stock proceeds from ATG Media Holdings Limited as referred to above and £87 relating to investments not completed by the year-end.
Provisions and write-offs against unlisted investments
The amounts provided below cost at the end of the year or written-off against unlisted investments were as follows:
|
|
Total Provisions at end of year |
Net write-offs in year1 |
|
|
£ |
£ |
|
Financial Year |
|
|
|
2014 |
6,381,156 |
(1,876,253)2 |
|
2013 |
10,475,290 |
2,001,476 |
|
2012 |
11,991,733 |
313,850 |
|
2011 |
11,206,678 |
1,881,554 |
|
2010 |
11,575,422 |
2,524,527 |
|
2009 |
10,537,427 |
300,000 |
|
2008 |
8,588,728 |
1,439,350 |
Details of the movements in unrealised gains and losses in the year are disclosed within the Investment Portfolio Summary.
Major movements in investments
ATG Media Holdings Limited was partially realised during the year realising net cash proceeds of £3,099,315, and new equity instruments and loan stock with a value totalling £1,529,075 at the date of sale. The carrying value at 30 September 2013 was £3,686,911. Machineworks Software Limited was realised in the year for net proceeds of £734,282, realising a net gain in the year of £159,943. DiGiCo Global Limited was realised in the year for net proceeds of £1,139,517, realising a net gain in the year of £390,932. Monsal Holdings Limited was realised in the year for net proceeds of £673,792, realising a net gain in the year of £661,536. Alaric Systems Limited was realised in the year for net proceeds of £2,542,018, realising a net gain in the year of £477,947.
Net unrealised gains of £3,730,169 include valuation uplifts of £1,410,818 relating to Ingleby (1879) Limited (trading as EMaC), and £603,242 relating to Focus Pharma Holdings Limited and valuation reductions of £429,426 for RDL Corporation Limited and £75,310 for Lightworks Software Limited.
1These relate to where the value of an investment has fallen permanently below cost and is treated as a realised loss, even though the investment is still held.
2During the year, the Company has written back £1,876,253 of such permanent impairments on assets now disposed of.
|
8 |
Movement in share capital and reserves |
|
|
||||||
|
|
|
|
|
||||||
|
|
|
Called up share capital |
Capital premium account |
Capital redemption reserve |
Capital reserve (unrealised)(non-distributable) |
Special distributable reserve * |
Profit and loss account* |
||
|
|
|
£ |
£ |
£ |
£ |
£ |
£ |
||
|
|
|
|
|
|
|
|
|
||
|
|
At 30 September 2013 |
530,882 |
15,634,572 |
287,932 |
8,902,232 |
13,193,594 |
21,919,660 |
||
|
|
Shares bought back (note b) |
(6,010) |
- |
6,010 |
- |
(596,384) |
- |
||
|
|
Shares issued under Linked Offer for Subscription |
72,610 |
8,124,794 |
- |
- |
(3,488) |
- |
||
|
|
Dividends re-invested into new shares |
7,287 |
720,629 |
- |
- |
- |
- |
||
|
|
Cancellation of Share Premium account (note c) |
- |
(18,817,177) |
(290,192) |
- |
19,107,369 |
- |
||
|
|
Dividends paid |
- |
- |
- |
- |
- |
(5,835,130) |
||
|
|
Transfer between reserves (note d) |
- |
- |
- |
- |
(2,124,336) |
2,124,336 |
||
|
|
Other expenses net of taxation |
- |
- |
- |
- |
- |
(2,121,377) |
||
|
|
Net unrealised gains on investments |
- |
- |
- |
3,730,169 |
- |
- |
||
|
|
Gains on disposal of investments (net of transaction costs) |
- |
- |
- |
- |
- |
2,713,796 |
||
|
|
Realisation of previously unrealised gains |
- |
- |
- |
(4,969,728) |
- |
4,969,728 |
||
|
|
Profit for the year |
- |
- |
- |
- |
- |
2,024,627 |
||
|
|
As at 30 September 2014 |
604,769 |
5,662,818 |
3,750 |
7,662,673 |
29,576,755 |
25,795,640 |
||
|
|
*Distributable reserves total £55,372,395 (2013: £35,113,254). The special reserve has been treated as distributable in determining the amounts available for distribution. |
||||||||
|
|
Note a - the realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the Company shown in the Balance Sheet. |
||||||||
|
|
Note b -The shareholders authorised the Company to purchase its own shares pursuant to section 701 of the Companies Act 2006 at the Annual General Meeting held on 12 February 2014. The authority was limited to a maximum number of 7,950,000 shares (this being approximately 14.99% of the issued share capital at the date of the notice of the meeting). This authority will, unless previously revoked or renewed, expire on the conclusion of the Annual General Meeting of the Company to be held on 12 February 2015. The minimum price which may be paid for a share is 1 penny per share, the nominal value thereof. The maximum price that may be paid for a share is an amount that is not more than 5% above the average of the middle market quotations of the shares as derived from the Daily Official List of the London Stock Exchange for the five business days preceding such purchase. The authorities provide that the Company may make a contract or contracts to purchase its own shares prior to the expiry of the authority which may be executed in whole or part after the expiry of such authority, and may purchase its shares in pursuance of any such contract. A resolution to renew these authorities will be proposed at the Annual General Meeting to be held on 12 February 2015. |
||||||||
|
|
Note c - The cancellation of £18,817,177 from the Share Premium Account and £290,192 from the Capital Redemption Reserve (as approved at the General Meeting on 22 February 2013 and by the court order dated 12 March 2014 has increased the Company's special reserve out of which it can fund buybacks of shares as and when it is considered by the Board to be in the interests of the shareholders, and to absorb any existing and future realised losses. As a result, the Company has a special reserve of £29,576,755, of which £29,576,755 relates to reserves from shares issued on or before 5 April 2014. |
||||||||
|
|
Note d - The transfer of £2,124,336 to the special reserve from the realised capital reserve above is the total of realised losses incurred by the Company this year. |
||||||||
|
9 |
Net asset value per share |
||
|
|
|
||
|
|
|
2014 |
2013 |
|
|
|
£ |
£ |
|
|
Net assets |
£69,306,405 |
£60,468,872 |
|
|
Number of shares in issue |
60,476,940 |
53,088,219 |
|
|
|
||
|
|
Basic and diluted net asset value per share |
114.60 p |
113.90 p |
|
|
|
||
|
10 |
Post balance sheet events |
||
|
|
On 1 October 2014, the entire holding of Focus Pharma Holdings Limited was realised through a sale to Amdipharm Mercury for net capital proceeds of £1,024,030. This amount has been reflected in the year-end valuation of this investment. |
||
|
On 3 October 2014, Fullfield Limited (trading as Motorclean) repaid loan stock of £57,273. |
|||
|
On 27 October 2014, the Company completed the sale of its investment in Youngman Group Limited to Werner Co (US) for net capital proceeds on completion of £1,623,782. |
|||
|
On 3 December 2014, the Company completed the sale of its investment in Ingleby (1879) Limited (trading as EMaC) to Innovation Group for net proceeds on completion of £4,365,700. |
|||
|
|
On 9 December 2014, the company invested £1,566,000 into Leap New Co Limited (trading as Ward Thomas) and £689,040 into Aussie Man & Van Limited. |
||
|
|
On 9 December 2014, the company invested a further amount of £952,316 into ASL Technology Holdings Limited. |
||
|
|
|
||
|
11 |
Statutory information |
||
|
|
The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 30 September 2014 but is derived from those accounts. Statutory accounts will be delivered to the Registrar of Companies after the Annual General Meeting. The auditors have reported on these accounts and their report was unqualified and did not contain a statement under section 498(2) of the Companies Act 2006. |
||
|
|
|
||
|
12 |
Annual Report |
||
|
|
The Annual Report will be published on the Company's website at www.incomeandgrowthvct.co.uk shortly and following the adoption of electronic communications by the Company, shareholders will shortly receive notification from the Company on how to download a pdf of the Report from the website. Shareholders and members of the public, who wish to receive a hard copy of the Annual Report, may request a copy by writing to the Company Secretary, Mobeus Equity Partners LLP, 30 Haymarket (4th floor), London SW1Y 4EX or by email: iandg@mobeusequity.co.uk. |
||
|
|
|
||
|
13 |
Annual General Meeting |
||
|
|
The Annual General Meeting of the Company will be held at 11.00 am on Thursday, 12 February 2015 at 33 St James's Square, London, SW1Y 4JS. |
||
Contact details for further enquiries:
Robert Brittain of Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by e-mail to i&g@mobeusequity.co.uk.
Mark Wignall or Mike Walker at Mobeus Equity Partners LLP (the Investment Adviser) on 020 7024 7600 or by e-mail to info@mobeusequity.co.uk.
DISCLAIMER
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
This information is provided by RNS
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