Annual Financial Report for 31 December 2020
MOBEUS INCOME & GROWTH VCT PLC LEI: 213800HKOSEVWS7YPH79
ANNUAL FINANCIAL RESULTS OF THE COMPANY FOR THE YEAR ENDED 31 DECEMBER 2020
Mobeus Income & Growth VCT plc (the "Company") announces the final results for the year ended 31 December 2020. These results were approved by the Board of Directors on 30 March 2021.
You may, in due course, view the Annual Report & Financial Statements, comprising the statutory accounts of the Company by visiting www.migvct.co.uk.
FINANCIAL HIGHLIGHTS
As at 31 December 2020: Net assets: £84.69 million Net asset value ("NAV") per share: 67.03 pence
- Net asset value ("NAV") total return1 per share was 19.3%2. - Share price total return1 per share was 13.7%. - Dividends declared and paid in respect of the financial year totalled 11.00 pence per share. Cumulative dividends paid since inception in 2004 stand at 139.80 pence per share. - £5.43 million was invested into three new growth capital investments and four existing portfolio companies during the year. - £10.47 million of unrealised gains were achieved in the year from strong portfolio performance. - The Company realised investments totalling £20.80 million of cash proceeds and generated net realised gains in the year of £4.34 million.
1 - Definitions of key terms and alternative performance measures shown above and throughout this report are provided in the Glossary of Terms within the Annual Report & Financial Statements. 2 - Further details on the NAV total return are shown in the Performance section of the Strategic Report within the Annual Report & Financial Statements.
PERFORMANCE SUMMARY
Cumulative NAV Total return1 performance over the last 3, 5 and 10 years is 37%, 36% and 92% respectively.
The table below shows the recent past performance of the Company's existing class of shares for each of the last five years.
1 Definitions of key terms and alternative performance measures shown above and throughout this report are shown in the Glossary of Terms in the Annual Report. 2 Source: Source: Panmure Gordon & Co (mid-market price). The Share price derives from the last published NAV at 30 September, adjusted for any dividends paid in the following quarter, resulting in an adjusted NAV of 60.69 pence per share at 31 December 2020. Applying a c.5% discount to this figure, which is the basis on which the Company was willing to repurchase shares at that date, gives the share price of 57.50 pence per share. 3 The share price at 31 December 2019 has been adjusted for a 4.00 pence dividend paid after the year-end on 8 January 2020 which was ex-div at 31 December 2019.
CHAIRMAN'S STATEMENT
I am pleased to present the annual results of Mobeus Income & Growth VCT plc for the year ended 31 December 2020.
Overview This year has been a very good one for Shareholder returns overall, despite the unprecedented and significant challenges resulting from the COVID-19 outbreak. Your Company's NAV total return per share for the year was 19.3%, a very pleasing result.
Before the pandemic, the Company's year began with a successful fundraising ensuring the Company continues to be well-funded. The good performance achieved in 2019 initially continued with strong portfolio progress as well as two well-timed and profitable realisations in February.
In March, substantial uncertainty and instability resulted from the COVID-19 pandemic and the UK Government's lockdown measures. A significant decline in consumer and business confidence followed with public markets falling sharply. The impact was an immediate reduction in portfolio values at the March quarter end - the low point of the year. These adjustments were only partly market related and mainly in response to the Investment Adviser's assessment of COVID-19's potential impact on investee companies and specific market segments.
However, greater clarity emerged as the year progressed and, for most of the investee companies, the environment was less volatile and uncertain than was initially assumed in March.
Over time, favourable trading conditions emerged for a number of the technology-related companies in the portfolio, and also those companies operating with direct to consumer business models. The valuation of the portfolio subsequently recovered strongly and progressed further during the latter half of the year.
Whilst the current lockdown and potential for further restrictions may impact the portfolio going forward, your Board is pleased with how well so many portfolio companies have been able to take advantage of the opportunities that have arisen and with the overall performance achieved.
Despite restrictions imposed on the ability of entrepreneurs to fund-raise due to COVID-19, the Company has remained an active investor during the year. Investments were made into three new portfolio companies, four existing portfolio companies and profitable realisations were achieved of five portfolio companies. One of these exits, Auction Technology Group, generated the Company's highest absolute profit in its history.
Details on this investment activity and the portfolio valuation movements are discussed in the Investment Portfolio section of my Statement as well as in the Investment Adviser's Review below.
The Investment Adviser continues to report a healthy pipeline of investment opportunities along with strong trading performance by most of the portfolio companies.
Performance The Company's NAV total return per share for the year was 19.3% (being the closing NAV of 67.03 pence plus 15.00 pence of dividends paid in the year, made up of 4.00 pence declared for 2019 and 11.00 pence declared for 2020, divided by the opening NAV of 68.78 pence) (2019: 13.6%). The share price total return for the year was 13.7% (2019: 20.5%), compared to the NAV return of 19.3%. The difference arises because the share price relates to the latest NAV at 30 September 2020. This is explained more fully in the Strategic Report of the Annual Report, under Performance.
The positive NAV total return for the year was primarily due to:
I. Substantial net unrealised gains in portfolio valuations; II. Significant realised gains on disposals; and III. A strong revenue return.
The Board believes that the Company's performance has demonstrated both strong resilience and further progress during this volatile year. The valuations at the year-end reflect that many of the investee companies have become beneficiaries of consumer behaviour changes as lockdown accelerated the shift to online business. The Adviser believes many of these changes have become structural.
The Company's revenue return increased to £3.47 million during the year (2019: £1.74 million). This was mainly due to significant investment income received on the disposal of Auction Technology Group as well as higher dividend income, but partially offset by deferral of loan interest payments to support portfolio companies impacted by COVID-19.
Dividends A further interim dividend for the year to 31 December 2019 of 4.00 pence per share was paid on 8 January 2020. Dividends declared and paid in respect of the year ended 31 December 2020 total 11.00 pence (2019: 10.00 pence) per share, comprising 6.00 pence per share paid on 7 May 2020 and 5.00 pence per share paid on 17 December 2020.
The cumulative dividends paid since inception in 2004 are 139.80 pence (2019: 128.80 pence) per share.
The Company's ongoing target of paying a dividend of at least 4.00 pence per share in respect of each financial year has been achieved and often exceeded. Whilst the Board still believes this dividend target is attainable, it should be noted that the continued movement of the portfolio to a larger share of younger growth capital investments could lead to increased volatility, which may affect the return in any given year.
To the extent that dividends are paid other than out of income or from gains on investments, for instance out of special distributable reserves, Shareholders should note this may result in a reduction in NAV over the period.
A full dividend history is contained in the Performance Data appendix at the end of the Annual Report and on the Company's website: www. mobeus.co.uk/investor-area/
Investment portfolio The portfolio was valued at £51.14 million (2019: £51.70 million) at the year-end representing 124.1% of cost (2019: 116.9%). The overall value has increased by £14.81 million (2019: £9.14 million), or 28.7% (2019: 19.0%) on a like-for-like basis, compared to the start of the year. This increase was comprised of a net unrealised uplift in portfolio valuations of £10.47 million and £4.34 million in net realised gains over the year.
COVID-19 and lockdown restrictions have been the dominant influence on the portfolio and its valuations for most of the year. The Board liaised closely with the Investment Adviser during this unprecedented time, to ensure that pragmatic steps were taken to enable each portfolio company to weather the crisis as best it could in the hope of subsequently resuming a growth in value. All investee companies were alerted to, and some utilised, the available government support packages. The Company initially provided loan interest payment holidays to some portfolio companies, generating vital cash headroom over the subsequent period.
Although some portfolio companies remain disadvantaged by the COVID-19 pandemic, it was evident in the second half of the year that a number had actually been beneficiaries of the associated moved to online/digital solutions.
The Company has now completed 22 new growth capital investments totalling £27.58 million since the change in the VCT rules introduced in 2015. At the year-end 65.3% (2019: 45.2%) of the portfolio was held in younger growth capital investments, while 34.7% (2019: 54.8%) of the value of the investment portfolio was held in more mature investments made before the rules changed.
During the year, £5.43 million was invested in three new investments and four existing portfolio companies (analysed in the Investment Adviser's Review below and explained within Note 8 to the Financial Statements).
The new investments, at a cost of £1.86 million, were:
· Andersen EV, Electric vehicle chargers: £0.27 million · Northern Bloc, Vegan and plant-based ice cream producer: £0.42 million · Connect Childcare, Nursery management software provider: £1.17 million
These businesses may present opportunities for further investment in the future as they may require additional capital to achieve their plans to expand.
In addition, four follow-on investments totalling £3.57 million were made into:
· Rota Geek, Workforce management software: £0.57 million · MyTutor, Digital education marketplace: £0.84 million · Buster & Punch, Lighting and interiors brand: £1.41 million · Preservica, Digital archiving software: £0.75 million
We expect follow-on investments to continue to be a feature of the growth capital investments as they seek to achieve scale.
Cash proceeds totalling £20.80 million for the year were received from portfolio companies that were either sold, repaid loans or settled other capital proceeds. Of this total, £20.15 million was received as cash proceeds from the sales of Biosite, Auction Technology Group, Access IS, Blaze Signs and Vectair Holdings.
Proceeds of £0.65 million were also received from loan repayments and other capital proceeds.
The portfolio achieved a net increase in unrealised valuations of £10.47 million for the year on investments still held, with substantial increases from Virgin Wines, MPB Group and Parsley Box partially offset by modest valuation falls at Tapas Revolution, CGI Creative Graphics and Media Business Insight.
After the year-end, new and further investments were made into the following companies:
New investments:
· Vivacity, Artificial intelligence & urban traffic control system: £1.16 million · Caledonian Leisure, UK leisure and experience breaks: £0.18 million
Further investments:
· Parsley Box, Ambient ready meals for the over 60s: £0.33 million · Arkk Consulting, Regulatory reporting software: £0.62 million · Bleach, Branded hair treatments: £0.14 million · Tapas Revolution, Spanish restaurant chain in the casual dining sector: £0.14 million
The flotation of Virgin Wines on the AIM market took place on 2 March 2021, at a Placing Price per share that increased the value of the Company's investment in Virgin Wines by £5.86 million. This increase reflects a premium generated by the strong support received from investors in the public offer. In isolation, this has resulted in a 4.64 pence uplift in NAV per share compared to the 31 December 2020 NAV per share contained within this Annual Report. As part of this transaction, the Company received repayment of its remaining loan stock, leaving Virgin Wines ungeared. The Board and Investment Adviser remain strong supporters of Virgin Wines and the Company has retained its entire equity holding.
The flotation on the AIM market of another portfolio company, Parsley Box, is expected to take place on 31 March 2021. Subject to Admission to trading, the Placement Price of £2.00 per share will increase the year-end value of the Company's investment by £2.11 million. Again, in isolation, this will result in a further 1.67 pence uplift in NAV per share compared to the 31 December 2020 NAV per share contained within this Annual Report.
Further details on these portfolio movements are contained in the Investment Adviser's Review in the Annual Report.
Review of longer-term performance The Board also regularly reviews the Company's total (income and capital) return performance on both a NAV and Share Price basis compared to its peer group. Based on the statistics prepared by Morningstar at 31 December 2020 over the last five years, the Company was ranked 2nd on a NAV total return basis and 1st on a Share Price total return basis out of 41 generalist VCTs, both assuming dividends are reinvested (source: AIC). Additionally, the Company was ranked 1st on a NAV total return basis and 4th on a Share Price total return basis, out of 30 generalist VCTs, assuming dividends are reinvested, over the last ten years. Shareholders should note that these figures are based on the last available published data at 30 September 2020 and do not therefore reflect the increased NAV per share in the fourth quarter, disclosed in this Report.
Shareholders who invested in 2004 at the launch of the Company have seen a NAV cumulative total return of 206.83 pence per share compared with their initial investment cost of 100 pence per share, or a net cost of 60 pence per share (after initial income tax relief of 40 pence of their investment). As part of this return, 139.80 pence per share has been paid to Shareholders in dividends up to the year-end. This represents an average annual yield on the initial 100 pence investment of 8.6% and 14.3% on the adjusted investment cost after income tax relief of 60.00 pence. The balance of the total return is the December 2020 NAV of 67.03 pence per share.
Share buybacks During the year, the Company bought back and cancelled 1,423,180 shares, allowing Shareholders who wanted to sell their shares to do so. The buybacks represented 1.4% (2019: 2.2%) of the issued share capital of the Company at the beginning of the year. Further details are included in the Report of the Directors in the Annual Report.
The Company's policy is to cancel all shares bought back in this way. The Board regularly reviews its buyback policy and currently seeks to maintain the discount at which the Company's shares trade at no more than 5% below the latest published NAV.
Shareholder communications May I remind you that the Company has its own website containing useful information for Shareholders: www.migvct.co.uk.
The annual Shareholder event was held on Tuesday, 4 February 2020 at the National Gallery in central London. Feedback from attendees was that this was a successful and informative event. Due to the uncertainty of when it may be possible to meet in a physical location again and for the safety of all concerned, the Investment Adviser is planning to hold a virtual Shareholder event later in 2021. Details will be notified to Shareholders once finalised and will be shown on the Company's website.
Environmental, Social and Governance (ESG) Whilst the requirements under company law to detail ESG matters are not directly applicable to the Company, the Board is conscious of its potential impact on the environment as well as its social and corporate governance responsibilities. The Investment Adviser takes ESG considerations into account when investing and has presented its ESG strategy to the Board and has started to provide regular updates regarding the ESG responsibilities of its portfolio of investee companies.
Your Board would like to assure Shareholders that it is taking these issues seriously. The future FCA reporting requirements consistent with the Task Force on Climate-related Financial Disclosures commencing from 1 January 2021 do not currently apply to the Company. However, it will be kept under review in light of any recommended changes.
Fraud Warnings - Boiler Room Fraud We are aware of a number of cases where Shareholders are being fraudulently contacted or are being subjected to attempts of identity fraud. Shareholders should remain vigilant of all potential financial scams or attempts for them to disclose personal data for fraudulent gains. The Board strongly recommends Shareholders take time to read the Company's fraud warning section, including details of who to contact, contained within the Information for Shareholders section of the Annual Report.
Annual General Meeting The Annual General Meeting ("AGM") of the Company will be held at 2:00 pm on Monday, 10 May 2021. Shareholders should note that physical meetings will still not be permitted due to the UK Government's COVID-19 restrictions and therefore Shareholders will not be allowed to attend the AGM in person as a precaution. In planning our AGM we have sought to prioritise the safety and wellbeing of our Shareholders and all attendees. The AGM will be held as a closed meeting with Shareholders able to join the meeting as attendees by electronic means. You will be able to see the Board members and Investment Adviser on your screen. A link to attend the meeting can be found in the Notice of Meeting at the rear of the Annual & Financial Statements. This link is also available on the Company's website at www.migvct.co.uk under the red AGM bubble on the front page. You do not need to download or have an electronic account to access the event. The meeting will also be accessible by telephone conference call for those without a suitable device and/or Wi-Fi connection. Once the formal business of the meeting is concluded, a presentation by the Investment Adviser will commence followed by Shareholders' questions.
Shareholders will not be able to vote at the meeting. Voting will be conducted by way of a poll, by the quorum of members present, of all the valid proxy votes lodged. The Board encourages Shareholders to submit their vote by proxy either by completing and returning the form enclosed or otherwise proxy votes may also be submitted electronically via Computershare's Investor Centre at: www.investorcentre.co.uk/eproxy
Shareholders are also strongly advised to appoint the Chairman of the Meeting as their proxy as any other nominated proxy may not be able to attend the meeting and the vote would not then count.
Shareholders can also submit any questions by 4 May 2021 about the resolutions to be passed at the AGM before the meeting, using the [email protected] email address and a response will be provided prior to the deadline for lodging proxy votes of 6 May 2021. You can also register a question for the AGM by using the same email address or alternatively, use the question facility available during the meeting.
Outlook The impact of COVID-19 was and will continue to be widespread although your Board considers that the Company is well positioned to continue to adapt and respond to the most likely scenarios as can be foreseen at present. The five successful realisations and the fundraising completed earlier in the year gave the Company strong liquidity to support the existing portfolio, but also to take advantage of opportunities as they arise for new investment, like those we have seen during the year. The year-end valuations reflect the strong performance by many of our investee companies and a robust, adequately-funded and resilient portfolio, that is well equipped to meet the ever-changing environment.
The results achieved for the year include valuation increases across the portfolio, underpinned by the five successful realisations. The Investment Adviser is seeing a good pipeline of new and interesting investment opportunities and also of opportunities to realise investments. The COVID-19 uncertainties and economic instability may still cause global markets and economies to be more volatile in the short-term.
As a result of teething problems in the application of the new EU trade agreement post Brexit, UK and European businesses in particular, will continue to operate in a slightly uncertain trading environment for the near future (although no material issues have been experienced by the investee companies to date). The companies in the portfolio have been well prepared for the impact of Brexit for some time and this seems to be working well.
Whilst the degree of any future lockdowns or other restrictions to the UK economy remains unclear, both the Investment Adviser and the portfolio companies are well equipped to respond appropriately. Consequently, your Board is cautiously optimistic about the future of the Company.
I would like to take this opportunity, once again, to thank all Shareholders for their continued support and I hope you and your families remain healthy and well.
Clive Boothman Chairman 30 March 2021
INVESTMENT POLICY The Company's policy is designed to meet the Company's Objective.
Investments The Company invests primarily in a diverse portfolio of UK unquoted companies.
Investments are made selectively across a wide variety of sectors, principally in established companies.
Investments are generally structured as part loan and part equity in order to receive regular income and to generate capital gain from realisations.
There are a number of conditions within the VCT legislation which need to be met by the Company and which may change from time to time. The Company will seek to make investments in accordance with the requirements of prevailing VCT legislation.
Asset allocation and risk diversification policies, including the size and type of investments the Company makes, are determined in part by the requirements of prevailing VCT legislation. No single investment may represent more than 15% (by VCT tax value) of the Company's total investments at the date of investment.
Liquidity The Company's cash and liquid funds are held in a portfolio of readily realisable interest-bearing investments, deposit and current accounts, of varying maturities, subject to the overriding criterion that the risk of loss of capital be minimised.
Borrowing The Company's Articles of Association permit borrowing of up to 10% of the adjusted capital and reserves (as defined therein). However, the Company has never borrowed and the Board would only consider doing so in exceptional circumstances.
INVESTMENT ADVISER'S REVIEW
Overview This has been an unprecedented year in terms of initial value decline and the subsequent recovery and further progress. The Company's year started well with a strong portfolio performance and two highly successful realisations. The UK Government introduced lockdown and social distancing measures in response to the COVID-19 pandemic in March. These measures had an immediate and adverse impact on UK businesses, resulting in many companies experiencing a substantial reduction in demand, restrictions on their working practices and disruption to their supply chains. Global markets also fell significantly at the same time. The valuations of the portfolio companies reflected all of this, with a majority experiencing a significant decline at the end of the March quarter.
Once the immediate impact of lockdown subsided, the pandemic's continuing influence on business generally and portfolio companies in particular, became far clearer. The impact has been far less negative than was initially feared with markets recovering and business activity levels quickly returning to pre COVID-19 levels in most cases. There have been a few portfolio companies which have experienced major disruption during this time but a significant proportion have benefited from the structural change in consumer purchasing habits and are now trading at or above the level pre COVID-19. The FTSE General Retail sector now comprises over 50% of the portfolio and all these companies have significant direct to consumer channels, a business model that has performed very well. Most of the portfolio has demonstrated a high degree of resilience with nearly 90% of companies showing revenue and/or earnings progression over the previous year. Software and other technology enabled businesses have also in the main performed strongly and the portfolio has benefited from limited exposure to more challenging sectors such as hospitality and travel.
Strong trading activity levels created investment opportunities for the Company as portfolio companies sought to consolidate their positions by building capacity in response to demand. Several further growth capital investments were therefore made into the existing portfolio over the year. Mobeus continues to review the opportunities for follow-on investments and, due to the Company's strong liquidity, is in a good position to capitalise on these. M&A sentiment also remained buoyant with a continuing stream of attractive realisations throughout the year. The outlook for both follow-on investment and realisations continues to be positive.
Although quoted markets have rallied somewhat since March, the principal driver of the rise in valuations over the recent months was strong underlying trading performance. Although a small number of companies have clearly struggled, they are in the minority and their impact on overall shareholder returns has been minimal. Increase in revenues and earnings achieved across most of the portfolio have driven the significant overall uplift in the value of the portfolio at 31 December 2020. In two cases, this increase in portfolio valuations at the year-end has been further validated by post balance sheet events: 1) The flotation of Virgin Wines on the AIM market on 2 March 2021, at a price per share that further materially increases the value of the Company's investment since the December year-end valuation, and; 2) The flotation on the AIM market of Parsley Box, which is expected to take place on 31 March 2021, again at a price per share that will increase the value of the Company's investment since the 31 December year-end valuation.
The social and economic consequences of COVID-19 will be experienced for some time to come and the practical impact of Brexit is as yet still emerging. However, the majority of the portfolio is well prepared, in robust shape and is comfortably placed to respond to the challenges and opportunities that will arise.
Overall, the portfolio has demonstrated great resilience and potential in trying times. Nevertheless, we remain mindful of the macro-economic uncertainties and market volatility. We are cautiously optimistic, based upon the recent evidence of improved trading performance experienced by many constituents of the portfolio. Mobeus believes much of this uplift will become permanent in many cases and should underpin further potential growth within the portfolio.
New and further investments The Company made new and follow-on investments totalling £5.43 million (2019: £5.85 million), comprising £1.86 million (2019: £5.27 million) into three new investments and £3.57 million (2019: £0.58 million) into four existing investments. This level of new and follow-on investment is pleasing given that there was effectively a pause in new investment going into the summer months as entrepreneurs temporarily deferred fundraising, but a healthy pipeline of suitable opportunities has been seen more recently. Overall, the level of follow on investment has increased over the previous year and the Investment Adviser is confident that opportunities to back growing portfolio companies will continue.
New investments during the year A total of £1.86 million was invested into three new investments during the year, as detailed below:
Further investments during the year A total of £3.57 million was invested into four existing portfolio companies during the year, as detailed below:
Portfolio valuation movements The portfolio generated net unrealised gains of £10.47 million during the year. The scale of the valuation increases in the last nine months of the year was primarily driven by the Company's growth portfolio, many of which have direct to consumer business models that have been ideally suited to the more physically remote business environment under COVID-19. Mobeus believes that this has accelerated an existing trend and in many cases the shift in behaviour will prove permanent. Over this period, some older style MBO portfolio companies with similar business practices have also benefited. A few companies have struggled in this environment, and while there remains a possibility such businesses will fail, their value has already been reduced to modest levels, reducing their risk to future shareholder value. Details of the principal valuation increases and reductions are explained below. Total valuation increases were £15.54 million. The main valuation increases were:
Virgin Wines, MPB and Parsley Box have generated record earnings and revenues over the lockdown periods and beyond. All have significantly increased their customer base and there is evidence that these new customers are continuing to be at least as active and profitable as their pre-COVID-19 counterparts. Wetsuit Outlet has seen a marked turnaround in the last year and its performance is likely to further benefit from stronger brand relationships and increased usage by customers of its online channel. Within total valuation decreases of £(5.07) million. The main reductions were:
These companies saw the most significant impact of a sudden decline in demand for their products or services because of COVID-19. However, as restrictions are eventually eased, a recovery is anticipated in due course.
Most of the increase in portfolio value lies in the top 10 companies which represent over 70% of the portfolio by value. Year-on-year growth by either revenues or earnings has been seen in all of the top ten companies and it is pleasing to note that eight of these are from the younger growth portfolio made since the rule change in 2015.
The year also saw portfolio companies Jablite, Oakheath (formerly Super Carers) and CB (Country Baskets) entering voluntary liquidation and recognised as a realised loss. These companies were struggling before the impact of COVID-19 and valuation reductions for these companies had already been made. As a result, there has been little impact on shareholder value from these administration processes.
Growth capital investing involves companies which often have not achieved profitability, and as a result, have to be measured on other metrics. The table below shows the proportion of the portfolio that is represented by high growth but yet to be profitable companies (often valued by reference to revenue or gross profit multiple), compared with more mature, established companies with a history of profitability and which can therefore be valued on an earnings multiple:
Portfolio Realisations The Company realised its investments in Biosite, Auction Technology Group, Access IS, Blaze Signs and Vectair Holdings during the year, receiving a total of £20.15 million in sale proceeds, contributing to total proceeds of £20.80 million received during the year, as detailed below. In summary, aggregate proceeds and income generated over the life of these investments were £35.64 million representing gains over original cost of £25.02 million.
Loan stock repayments and other gains/(losses) During the year, proceeds of £0.47 million were received via loan repayments from BookingTek, Vian Marketing (trading as Red Paddle) and Buster & Punch, generating realised gains of £0.07 million.
Finally, consideration and a realised gain of £0.18 million was received in respect of Redline Worldwide, an investment realised in a previous year and a realised loss of £(0.06) million from Jablite Holdings was recognised as this company entered liquidation, with some further recovery of monies still anticipated.
1 Total portfolio income in the year is generated solely from investee companies within the portfolio. See Note 3 of the Financial Statements for all income receivable by the Company. The increase in income was mainly due to interest of £1.78 million received on the loan instruments in Auction Technology Group being paid, as part of the sale transaction, which had not previously been recognised. Portfolio yield is expected to fall for the foreseeable future, as the growth portfolio's returns are likely to be more capital in nature.
Portfolio review The portfolio's movements and valuation changes in the year are summarised below:
New investments after the year-end £1.34 million was invested into two new investments after the year-end, as detailed below:
Further investments after the year-end A total of £1.23 million was invested into four existing portfolio companies after the year-end, as detailed below:
Admission to AIM of Virgin Wines Mobeus is also pleased to report that on 2 March 2021, Virgin Wines UK plc ("Virgin Wines"), an existing portfolio company, was admitted to trading on the Alternative Investment Market ("AIM") of the London Stock Exchange, alongside a placing of new and existing shares. The Placing Price of these shares was £1.97 per share, valuing Virgin Wines at a market capitalisation of £110m. Mobeus Equity Partners LLP has been proud to partner the management of Virgin Wines in growing this business. We continue to support Virgin Wines and its future development and are pleased to be retaining the Company's entire equity holding.
At the date of the admission, and based upon the Placing Price of £1.97 per share, the Company's beneficial equity investment in Virgin Wines was valued at £11.52 million. This represented a significant uplift in valuation of £5.86 million, compared to that included in the Company's audited Net Asset Value ("NAV") per share at 31 December 2020 as shown as part of this Annual Report. This increase reflects a premium generated by the strong support received from investors in the public offer. As part of this transaction, the Company received net proceeds of £2.35 million (net of transaction costs) to repay its loan stock and interest, leaving Virgin Wines ungeared at that point. At the date of this Report, Virgin's share price has remained above its placing price.
Environmental, Social, Governance considerations The Investment Adviser and the Board are considering an appropriate framework within which to assess progress on these matters within the existing portfolio. The Investment Adviser is encouraging this matter to be a standing agenda item at investee company board meetings. It will continue to be an important consideration in the Investment Adviser's and the Board's assessment of new investment opportunities.
The statutory environmental disclosures are included in the Directors' Report within the Annual Report.
Outlook The portfolio is in a healthy position with many companies trading well throughout the lockdowns and several at record levels. It continues to evolve, offering a balance of fast-growing and more stable investments at various stages of maturity and scale across a range of diverse market sectors. There is a significant exposure to the direct to consumer business model which has underpinned performance during the year. This also gives confidence about the future performance of the portfolio and its ability to cope with other uncertainties, challenges and opportunities associated with Brexit, the macro-economic outlook and the most recent imposition and subsequent lifting of national lockdowns. The new investment pipeline is recovering to levels seen pre-COVID-19 and capital deployment should continue at an encouraging rate in line with forecast. The Investment Adviser, although cautious in its approach, is confident that the portfolio is in a robust shape to be able to cope with whatever the short to medium-term holds.
Mobeus Equity Partners LLP Investment Adviser 30 March 2021
Investment Portfolio Summary as at 31 December 2020
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 and emerging risks faced by the Company. The Board's risk appetite is cognitive of the risks and rewards of investing in small unquoted companies. A key risk management review and robust assessment of the risks takes place at each quarterly Board meeting and the Board discusses emerging risks as and when they arise, such as the COVID-19 pandemic, and puts in place mitigating actions to manage the risk. The principal and emerging risks identified by the Board, a description of the possible consequences of each risk and how the Board manages each risk are set out below:
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 of 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 Director's 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, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice give a true and fair view of the assets, liabilities, financial position and the profit of the Company; and
b) the Annual Report includes a fair review of the development and performance of the business and the 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 Financial Statements, taken as a whole, is 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.
For and on behalf of the Board
Clive Boothman Chairman 30 March 2021
FINANCIAL STATEMENTS
The Notes below form part of these Financial Statements.
The Financial Statements were approved and authorised for issue by the Board of Directors on 30 March 2021 and were signed on its behalf by Clive Boothman, Chairman.
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