TIDMIGV
RNS Number : 6910Z
Income & Growth VCT (The) PLC
15 January 2024
THE INCOME & GROWTH VCT PLC
LEI: 213800FPC15FNM74YD92
ANNUAL FINANCIAL RESULTS OF THE COMPANY FOR THE YEARED 30 SEPTEMBER
2023
The Income & Growth VCT plc (the "Company") announces the final results
for the year ended 30 September 2023. These results were approved by
the Board of Directors on 12 January 2024.
You may, in due course, view the Annual Report & Financial Statements,
comprising the statutory accounts of the Company by visiting https://www.mobeusvcts.co.uk/
.
FINANCIAL HIGHLIGHTS
As at 30 September 2023:
Net assets: GBP122.78 million
Net asset value ("NAV") per share: 79.33 pence
- There was a positive Net asset value ("NAV") total return (including
dividends)(1) per share of 4.3%.
- Dividends paid/payable in respect of the year total 11.00 pence per
share. This brings cumulative dividends paid(1) to Shareholders in respect
of the past five years to 48.00 pence per share.
- The Company realised investments totalling GBP9.13 million of cash
proceeds and generated net realised gains in the year of GBP0.41 million.
- GBP3.34 million was invested into five new companies and two follow-on
investments.
(1) - Definitions of key terms and alternative performance measures
shown above and throughout this report are provided in the Glossary of
terms in the Annual Report & Financial Statements.
(2) - Further details on the share price total return are shown in the
Performance section of the Strategic Report within the Annual Report
& Financial Statements.
OUR INVESTMENT 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, while continuing
at all times to qualify as a VCT.
INVESTMENT POLICY
The Company's Investment 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, to generate
capital gain upon sale and to reduce the risk of high exposure to equities.
To further spread
risk, investments are made in a number of different businesses across
different industry sectors.
The Company's cash and liquid resources are held in a range of instruments
which can be of varying
maturities, subject to the overriding criterion that the risk of loss
of capital be minimised.
The Company seeks to make investments in accordance with the requirements
of VCT regulation.
The full text of the Company's Investment Policy is set out in the Annual
Report & Financial Statements.
CHAIRMAN'S STATEMENT
Overview
The Company has seen continuing challenging UK economic conditions during
this financial year. Rising inflation and high interest rates have both
impacted consumer and business confidence which caused a general softening
of trading performance. Worldwide, central banks have been assessing
the impact of their rising rates and there are early signs that inflation
is continuing, perhaps more stubbornly than anticipated. Despite this,
stock market multiples appear to have stabilised somewhat following the
material downward re-rating of growth stocks experienced over much of
2022 and a number of portfolio companies have experienced good growth
in the year. Positive NAV performance was generated over the last six
months in the year, reversing a small fall in the first six months, from
strong performance by a number of key assets and a degree of resilience
within the remainder of the portfolio. The result is that the Company's
NAV total return (including dividends paid in the year) increased by
4.3% (2022: (8.7)%).
The Company has continued to be an active investor and provided investment
finance to five new companies during the year: Connect Earth; Cognassist;
Dayrize; Mable Therapy and Branchspace. Follow-on investment activity
continued with further investments made during the year into Legatics
and Orri. It also delivered highly successful exits in both Equip Outdoor
Technologies (trading as Rab and Lowe Alpine) ("EOTH") and Tharstern
Group.
Overall, the portfolio remains well funded and diversified, however there
are three key assets which represent 46.5% of portfolio value. As is
the nature of growth assets, the risk of company failures is ever present.
The Company has strong liquidity to support the Investment Adviser's
team who are actively seeking opportunities within the existing portfolio.
Following the year-end, new investments were made into Ozone Financial
Technology Limited, Azarc and CitySwift. Additionally further follow-on
investments were made into RotaGeek, FocalPoint and MyTutor.
The Board and Investment Adviser were pleased with the Chancellor's confirmation
in the Autumn Budget held on 22 November 2023, of the intention to extend
the sunset clause to 6 April 2035 meaning that future investors will
still benefit from the tax reliefs available from VCTs, subject to EU
approval.
Company Objective and Strategy
A Venture Capital Trust ("VCT") is a company listed on the London Stock
Exchange that raises money from private investors and uses it to invest
in small, young, innovative companies with high potential for growth.
These companies are usually unquoted and often less established. As a
consequence they may be considered higher risk and some will not be successful.
However, because small company formation is an important source of growth
for the UK economy, the government has policies to help those companies
grow. The VCT scheme provides investors with generous tax reliefs to
help encourage investors for the risk they take with their investment
and there are strict guidelines on the type of company that can receive
VCT investment. Since incorporation, your Company has helped to create
jobs, reward innovation and bolster the UK economy in line with the UK
Government's VCT scheme policy.
The Company's objective 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, while continuing at all times to qualify as
a VCT. The investment strategy and policy of the Company as set out in
the Annual Report & Financial Statements is to invest primarily in a
diverse portfolio of UK unquoted companies to support this objective.
Performance
The Company's NAV total return per share increased by 4.3% (2022: a fall
of (8.7)%) after adding back a total of 8.00 pence per share in dividends
paid during the year. The increase was principally the result of positive
valuation movements across three of the five largest investments by value,
in particular, Preservica, as well as higher interest income generated
on cash held awaiting investment. In addition, the successful portfolio
exits of EOTH and Tharstern Group generated a positive net realised gain
for the Company, although this was partially offset by impairments applied
to the holdings of two other companies.
At the year-end, the Company was ranked 5th out of 37 Generalist VCTs
over three years, 2nd out of 36 Generalist VCTs over five years and 9(th)
out of 31 over ten years in the Association of Investment Companies'
("AIC") analysis of NAV Cumulative Total Return. Shareholders should
note that, due to the lag in the disclosed performance figures available
each quarter, the AIC ranking figures do not fully reflect the final
NAV uplift to 30 September 2023, or those of our peers.
Dividends
To meet the Company's objective, the Investment Adviser is tasked to
provide an attractive dividend stream to Shareholders. The Board was
therefore pleased to be able to declare two interim dividends of 4.00
and 7.00 pence per share, totalling 11.00 pence per share in respect
of the year ended 30 September 2023 to reflect gains and income generated
and ensure compliance with the VCT regulations. This surpassed the Company's
annual target of 6.00 pence per share which has been achieved, and often
exceeded, in each of the last twelve financial years.
The first interim dividend was paid on 26 May 2023, to Shareholders on
the Register on 21 April 2023 and the second interim dividend was paid
after the year end on 8 November 2023 to those Shareholders on the Register
on 6 October 2023. These dividend payments have brought cumulative dividends
paid per share since inception to 159.50 pence including the second interim
dividend paid after the year-end.
It should continue to be noted that the majority of the portfolio are
now younger growth capital investments. By their nature this results
in greater risk than the historic MBO portfolio and can result in increased
volatility in performance, which may affect the return Shareholders receive
in any given year. Shareholders should also note that there may continue
to be circumstances where the Company is required to pay dividends in
order to maintain its regulatory status as a VCT, for example, to stay
above the minimum percentage of assets required to be held in qualifying
investments.
On 20 June 2023, the Board obtained Court approval to cancel the Company's
share premium reserve and capital redemption reserve. Subject to HMRC's
Return of Capital rules, this will enable additional distributable reserves
to be available for dividends and will help the Company to meet its dividend
target in
future years.
Dividend Investment Scheme
The Company's Dividend Investment Scheme ("DIS") provides Shareholders
with the opportunity to reinvest their cash dividends into new shares
in the Company at the latest published NAV per share. New VCT shares
attract the same tax reliefs as shares purchased through an Offer for
Subscription. A total of 2,674,764 (2022: 1,901,145) Ordinary shares
were allotted as a result of dividends paid during the year resulting
in GBP2.07 million (2022: GBP1.81 million) of cash being retained by
the Company.
Shareholders wishing to take advantage of the scheme for any future dividends
can join the DIS by completing a mandate form available on the Company's
website, under the 'Dividends' heading, at:
www.incomeandgrowthvct.co.uk , or alternatively, Shareholders can opt-out
by contacting City Partnership, using their details provided under Corporate
Information in the Annual Report & Financial Statements.
Investment Portfolio
The portfolio movements across the year were as follows:
GBPm
Portfolio value at 30 September
2022 73.08
New and follow-on investments 3.34
Disposal proceeds (9.13)
Net unrealised gains 5.02
Net realised gains 0.41
-----
Net investment portfolio gains 5.43
-------
Portfolio value at 30 September
2023 72.72
Notwithstanding the current challenging environment, a number of investee
companies have shown positive revenue growth over the year (e.g. Preservica,
MPB and Bella & Duke). Alongside the improvements in market multiples
used as the basis of the Company's valuations, this has driven the portfolio
value increase compared to last year. The overall value of the portfolio
increased by GBP5.43 million, or 7.4%, on a like for like basis (adjusting
new investments in the year) compared to the opening value of the portfolio
at 1 October 2022 of GBP73.08 million (2022: GBP(10.84) million, or (12.3)%).
At the year-end, the portfolio was valued at GBP72.72 million (30 September
2022: GBP73.08 million). The portfolio's value is now substantially comprised
of growth capital investments. Over 55% of the portfolio's value is comprised
of the Company's largest five assets by value, with Preservica accounting
for c. 27%.
The Investment Adviser closely monitors these higher value assets as
part of its risk mitigation measures. The VCT's portfolio valuation methodology
has continued to be applied consistently and in line with IPEV guidelines.
During the year, this was triangulated with an independent valuation,
which was commissioned for Preservica and Bella & Duke. The intention
is that the valuation of four of the largest investee companies will
be externally reviewed over the course of the next year.
During the year under review, the Company invested GBP2.72 million (2022:
GBP2.69 million) into five new investments:
Connect Earth GBP0.33 An environmental data provider
million
Cognassist GBP0.67 An education and neuro-inclusion solutions
million business
--------- ---------------------------------------------
Dayrize GBP0.63 A provider of a rapid sustainability impact
million assessment tool
--------- ---------------------------------------------
Mable Therapy GBP0.55 Therapy & counselling for children and young
million adults
--------- ---------------------------------------------
Branchspace GBP0.54 A digital retailing consultancy and software
million provider to the
aviation and travel industry
--------- ---------------------------------------------
The Company also invested a total of GBP0.62 million (2022: GBP4.64 million)
into two existing portfolio companies during the year:
Legatics GBP0.45 million A SaaS LegalTech software provider
Orri GBP0.17 million An intensive day care provider for adults
with eating disorders
---------------- ------------------------------------------
In November 2022 it was pleasing to exit the equity investment held in
EOTH receiving GBP7.34 million including preference share dividends on
completion which generated a realised a capital gain in the year of GBP0.42
million, a 6.9x multiple of cost and an IRR of 23.2%. The Company retains
its interest yielding loan stock in EOTH which will increase returns
further. The Company also received GBP2.85 million in proceeds from the
realisation of Tharstern Group, generating a realised gain of GBP0.86
million. Over the life of this investment, the Company has received total
proceeds of GBP4.00 million which equates to a multiple on cost of 2.6x
and an IRR of 15.0%.
During the year, Spanish Restaurant Group Limited (trading as Tapas Revolution)
went into administration. The company had experienced extremely challenging
conditions since COVID-19 and under the HMRC Financial Health Test (more
detail below), your Company was unable to invest further. Including Tapas
Revolution and a restructuring of RDL Corporation, a total of GBP0.87
million has been recognised as a realised loss.
I reported previously on HMRC's recent stricter interpretation of the
Financial Health Test. Additional guidance has since been published on
this matter which outlines that each potential new VCT investment will
be assessed independently based on the specific financial circumstances
of the investee company. Although it will take time to see these assessments
in action, this updated guidance and expected increased flexibility is
a welcome development. The Board, AIC and Venture Capital Trust Association
will continue to monitor this.
Revenue Account
The results for the year are set out in the Income Statement in the Annual
Report & Financial Statements and show a revenue return (after tax) of
1.11 pence per share (2022: 1.23 pence per share). The revenue return
for the year of GBP1.66 million has increased from last year's figure
of GBP1.53 million which was, primarily, due to higher income received
from the liquid balances of the immediately realisable OEIC money market
funds.
Fundraising
Following the success of the two fundraises launched in 2022, the Company
has sufficient levels of
liquidity to continue to take advantage of new investment opportunities
and fund further expansion of the businesses in its investment portfolio,
helping to further diversify the portfolio and create opportunities for
future growth. The current level of funds also allows the Company to
seek to deliver attractive returns for its Shareholders, by way of the
payment of dividends over the medium term, and buy back its shares from
those Shareholders who may wish to sell theirs. Therefore, it is not
the intention of the Board to conduct another fundraise in the 2023/2024
tax year.
Liquidity
Cash and liquidity fund balances as at 30 September 2023 amounted to
GBP50.09 million representing 40.8% of net assets. After the year-end,
following a 7.00 pence dividend payment of GBP8.89 million and investments
totalling GBP3.84 million, the level of liquidity at 11 January 2024
is GBP37.36 million or 32.8% of net assets). The majority of cash resources
are held in liquidity funds with AAA credit ratings, the returns on which
have benefitted from the increases in interest rates over the past year
which will help support future returns to Shareholders. The Board however
continues to monitor credit risk in respect of all its cash and near
cash resources and still prioritises the security and protection of the
Company's capital.
Share buy-backs
During the year to 30 September 2023, the Company bought back and cancelled
3,975,746 of its own shares (2022: 1,166,089), representing 3.1% (2022:
1.1%) of the shares in issue at the beginning of the year, at a total
cost of GBP2.98 million (2022: GBP1.03 million), inclusive of expenses.
It is the Company's policy to cancel all shares bought back in this way.
The Board regularly reviews its buyback policy, where its priority is
to act prudently and in the interest of remaining Shareholders, whilst
considering other factors, such as levels of liquidity and reserves,
market conditions and applicable law and regulations. Under this policy,
the Company seeks to maintain the discount at which the Company's shares
trade at approximately 5% below the latest published NAV.
Shareholder Communications & Annual General Meeting
May I remind you that the Company has its own website which is available
at: www.incomeandgrowthvct.co.uk.
The Investment Adviser last held a virtual Shareholder Event on behalf
of all four Mobeus VCTs in March 2023. The event was well received and
the Investment Adviser plans to hold another event on 1 March 2024. Further
details were circulated to Shareholders in December 2023 and will be
shown on the Company's website in due course. You are encouraged to register
for attendance.
Your Board is pleased to hold the next Annual General Meeting ("AGM")
of the Company at 11.00 am on Thursday, 29 February 2024 at the offices
of Shakespeare Martineau LLP, 6th Floor, 60 Gracechurch Street, London
EC3V 0HR. A webcast will also be available at the same time for those
Shareholders who cannot attend in person however, please note that you
will not be able to vote via this method and so are encouraged to return
your proxy form before the deadline of 27 February 2024. Information
setting out how to join the meeting by virtual means will be shown on
the Company's website. For further details, please see the Notice of
the Meeting which can be found at the end of the Annual Report & Financial
Statements.
Change of Registrar
On 4 December 2023, the Company, along with the three other Mobeus VCTs,
changed its Registrar to City Partnership LLP ("City") bringing all four
VCTs under one Registrar for the first time. The Board believes the move
will bring additional benefits to Shareholders including the ability
to access multiple Mobeus VCT shareholdings in one place using City's
online portal, the Hub.
Shareholders are encouraged to register their email address with City
via the Hub portal or by calling them to reduce the printing/posting
costs of the Company. Further details can be found in the Shareholder
Information section at the end of the Annual Report & Financial Statements.
Co-investment Scheme
The Board is keen to ensure that the Investment Adviser retains a motivated
and incentivised investment team which can generate attractive future
returns for the Company. To improve the alignment of interests with shareholders,
on 26 July 2023, the Boards of the four Mobeus VCTs released a joint
announcement detailing the adoption of a Co-investment incentive scheme
("the Scheme") under which members of the Investment Adviser's VCT investment
and administration team will invest their own money into a proportion
of the ordinary shares of each investment made by the Mobeus VCTs (the
co-investment under the Scheme will represent 8% of the four VCTs' overall
ordinary share investment in an investee company).
The Scheme will apply to investments made on or after 26 July 2023, such
co-investment to be at the same time and on substantially the same terms
as the investment by the Mobeus VCTs. The Board will keep the Scheme
arrangements under regular review.
Acquisition of Investment Adviser, Gresham House
Further to the announcement on 17 July 2023, on the acquisition of the
Investment Adviser by Searchlight Capital Partners, L.P., the acquisition
has now completed, and Gresham House plc delisted from the London Stock
Exchange on 20 December 2023 to become a privately owned company. The
acquisition is expected to have minimal impact on the Company and business
is continuing as usual.
For further information please visit the website link: https://greshamhouse.com/
about/.
Consumer Duty
The Financial Conduct Authority's (FCA) new Consumer Duty regulation
came into effect on 31 July 2023. The Consumer Duty is an advance on
the previous concept of 'treating customers fairly', which sets higher
and clearer standards of consumer protection across financial services
and requires all firms to put their customers' needs first.
As previously notified, the Company is not regulated by the FCA and therefore
it does not directly fall into the scope of Consumer Duty. However, Gresham
House as the Investment Adviser, and any IFAs or financial platforms
used to distribute future fundraising offers, are subject to Consumer
Duty.
The Board will ensure that the principles behind Consumer Duty are upheld
and have worked closely with the Investment Adviser on the information
now available to assist consumers and their advisers to be able to discharge
their obligations under Consumer Duty.
Environmental, Social and Governance ("ESG")
The Board and the Investment Adviser believe that the consideration of
environmental, social and corporate governance ("ESG") factors throughout
the investment cycle will contribute towards enhanced Shareholder value.
Gresham House Asset Management Limited has a team which is focused on
sustainability, the Board views this as an opportunity to enhance the
Company's existing protocols and procedures through the adoption of the
highest industry standards.
The FCA reporting requirements consistent with the Task Force on Climate-related
Financial Disclosures ("TCFD"), which commenced on 1 January 2021 do
not currently apply to the Company but are kept under review, the Board
being mindful of any recommended changes. The Board is aware of the FCA's
new Sustainability Disclosure Requirements ("SDR") and investment labels
(together the "rules") to be phased-in across the next 3 years. As the
Company is classified as a Collective Investment Undertaking, the scope
of the rules capture such UK-domiciled unauthorised funds, however given
that the shares in the Company (the "product") do not have a sustainable
investment objective, the rules only apply on a very limited basis (through
the Investment Adviser) in relation to the Company. The Gresham House
first TCFD Report can be found on its website at: TCFD report - Gresham
House .
Fraud Warning
We are aware 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
requests for them to disclose personal data. The Board strongly recommends
Shareholders take time
to read the Company's Fraud warning section, including details of who
to contact, contained within
the Information for Shareholders section at the end of the Annual Report
& Financial Statements.
Outlook
The geopolitical and economic outlook for the next twelve months is likely
to remain challenging.
However, the Board and Investment Adviser are confident that this can
also provide a good opportunity to make high quality investments and
build strategic stakes in businesses with good potential for the future.
Despite the successful exits of EOTH and Tharstern during the year the
exit environment is likely to be more subdued when compared to recent
years, although this is not foreseen to be a significant issue given
that the Company is not time limited. We anticipate that further stresses
will become apparent across the UK business population over the coming
year with no sectors immune from the impact. Nevertheless, the Company's
portfolio is managed by a professional and capable Investment team, to
respond to the challenges which lie ahead.
Maurice Helfgott
Chairman
12 January 2024
INVESTMENT ADVISER'S REVIEW
Porfolio Review
The current exacting economic conditions are creating challenging circumstances
for portfolio companies although some stability has been seen in market
multiples compared to the previous year. UK business has seen both demand
and operating margins come under pressure due to marked increases in
inflation and interest rates. Such macro-economic conditions have not
been faced by management teams in a generation, however Gresham House's
experienced non-executive directors and consultants continue to support
the portfolio's companies during these turbulent times.
There is now a greater focus on cash management and capital efficiency.
With ample liquidity following the fundraises in 2022, the Company is
very well placed to support portfolio companies with follow-on funding
where it is appropriate and can be structured on attractive terms. Strong
liquidity also benefits the new investment environment for the Company
which, in our view, is strong as we are seeing a number of interesting
investment propositions.
The decline in consumer confidence and business investment has been impacting
portfolio companies'
trading. Inflation has remained at an elevated level and has impacted
economic growth expectations. In contrast, there are indications that
supply chains are returning to normal, that labour shortages are easing
and this is producing an element of positive market sentiment. The direct
impact of high interest rates on the Company's portfolio is appropriately
limited because most portfolio companies do not have any significant
third-party debt. The outlook is therefore mixed, with the emphasis on
robust funding structures and preparation for all circumstances.
The portfolio movements in the year are summarised as follows: 2023 2022
GBPm GBPm
Opening portfolio value 73.08 88.15
------- --------
New and follow-on investments 3.34 7.33
------- --------
Disposal proceeds (9.13) (11.56)
------- --------
Net unrealised gains/(losses) 5.02 (13.16)
------- --------
Realised valuation gains 0.41 2.32
------- --------
Portfolio value at 30 September 72.72 73.08
------- --------
Despite concerns about the wider trading environment, the portfolio's
largest investments have experienced some strong revenue growth, which
has underpinned a positive return over the last two quarters of the Company's
financial year. Preservica continues to see strong trading and is out-performing
its budget giving a material uplift in its valuation. A strengthening
has also been seen in the quoted share price of Virgin Wines UK plc following
the release of its trading update in July 2023. There has also been some
recovery in value across other portfolio companies, such as Veritek Global.
The profitable exit of EOTH provided a 6.9x multiple of cost and an IRR
of 23.2% over the life of the investment and the Tharstern exit gave
a return of 2.6x and an IRR of 15.0%. Unless there is a change in market
dynamics, it is likely that there will be few exit prospects in the next
year and portfolio companies will be held for longer periods. By contrast
however, there were also some larger portfolio value falls such as MyTutor,
Bleach and Wetsuit Outlet which continue to experience challenging trading
conditions. The
portfolio companies are now more focussed on establishing a path to profitability.
Disappointingly, after experiencing very difficult trading conditions
as a result of the effects of COVID-19, Tapas Revolution entered administration
during the year with no expected recovery for the Company.
The Company made five new growth capital investments during the year
totalling GBP2.72 million and
two follow-on investments totalling GBP0.62 million, further details
of these investments are on the
next pages.
After the year-end, new investments were made into Ozone Financial Technology,
Azarc and CitySwift and further follow-on investments were made into
RotaGeek, FocalPoint and MyTutor.
The investment and divestment activity during the year has further increased
the proportion of the
portfolio comprised of investments made since the 2015 VCT rule change
to 80.2% by value at the
year-end (30 September 2022: 71.5%).
The portfolio's valuation changes in the year are summarised as follows:
2023 2022
GBPm GBPm
Increase in the value of unrealised
investments 11.49 7.32
------- --------
Decrease in the value of unrealised
investments (6.47) (20.48)
------- --------
Net increase/(decrease) in the value
of unrealised investments 5.02 (13.16)
------- --------
Realised gains 1.28 3.03
------- --------
Realised losses (0.87) (0.71)
------- --------
Net realised gains in the year 0.41 2.32
------- --------
Net investment portfolio movement
in the year 5.43 (10.84)
------- --------
Valuation changes of portfolio investments still held
The total valuation increases were GBP11.49 million with the main increases
being:
-- Preservica GBP6.34 million
-- MPB Group GBP2.07 million
-- Aquasium GBP0.94 million
Preservica continues to perform well and is improving recurring revenues.
MPB's revenue growth continues with its latest valuation validated by
a significant third party investor round made after the
year end. Aquasium is gaining strong pipeline demand for its products.
The main reductions within total valuation decreases of GBP(6.47) million
were:
-- MyTutor GBP(2.39) million
-- Bleach GBP(0.94) million
-- Connect Childcare GBP(0.92) million
MyTutor has been impacted by declining sector multiples combined with
slower than anticipated growth over the year. Bleach is trading behind
budget but has recently received third party funding to support its cash
position. Connect Childcare struggled to deliver product cost effectively
but has now raised additional third party investment as part of its restructuring.
The Company's investment values have been partially insulated from market
movements and lower revenue growth by the preferred investment structures
utilised in many of the portfolio companies. This acts to moderate valuation
swings and the net result can be more modest falls when portfolio values
decline.
Realised gains/losses
The Company realised its investments in EOTH and Tharstern during the
year under review, generating
gains in the period of GBP0.42 million and GBP0.86 million, respectively.
These contributed to a multiple of cost of 6.9x and 2.6x over the life
of the investments. Realised losses through impairments of companies
still held totalling GBP0.87 million were applied to two investee companies.
Net realised gains for the year as a whole were GBP0.41 million.
Investment portfolio and income yield
In the year under review, the Company received the following amounts
of income:
2023 2022
GBPm GBPm
Interest received in the year 0.58 1.41
Dividends received in the year 0.64 1.16
OEIC and bank interest received
in the year 1.97 0.24
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Total Income in the year 3.19 2.57
------- -------
Net asset Value at 30 September 122.78 108.42
------- -------
Income Yield (Income as a % of
Net asset Value at 30 September) 2.6% 2.6%
------- -------
New investments during the year
The Company made five new investments totalling GBP2.72 million, as detailed
below: Company Business Date of Investment Amount of new
investment
(GBPm)
Environmental data
Connect Earth provider March 2023 0.33
--------------------- -------------------- --------------------
Founded in 2021, Connect Earth ( https://connect.earth/ ) is a London-based
environmental data company that seeks to facilitate easy access
to sustainability data. With its carbon tracking API technology,
Connect Earth supports financial institutions in offering their
customers transparent insights into the climate impact of their
daily spending and investment decisions. Connect Earth's defensible
and scalable product platform suite has the potential to be a future
market winner in the nascent but rapidly growing carbon emission
data market, for example, by enabling banks to provide end retail
and business customers with carbon footprint insights of their spending.
This funding round is designed to facilitate the delivery of the
technology and product roadmap to broaden the commercial reach of
a proven product.
Education and
neuro-inclusion
Cognassist solutions March 2023 0.67
--------------------- -------------------- --------------------
Cognassist ( https://cognassist.com ) is an education and neuro-inclusion
solutions company that provides a Software-as-a-Service (SaaS) platform
focused on identifying and supporting individuals with hidden learning
needs. The business is underpinned by extensive scientific research
and an extensive cognitive dataset. Cognassist has scaled its underlying
business within the education market. This investment will empower
Cognassist to continue its growth within education and penetrate
the enterprise market, where demand for neuro-inclusive employee
support solutions is rapidly emerging.
A provider of a
rapid
sustainability
impact
Dayrize assessment tool May 2023 0.63
--------------------- -------------------- --------------------
Founded in 2020, Amsterdam-based Dayrize ( https://Dayrize.io )
has developed a rapid sustainability impact assessment tool that
delivers product-level insights for consumer goods brands and retailers,
enabling them to be leaders in sustainability. Its proprietary software
platform and methodology bring together an array of data sources
to provide a single holistic product-level
sustainability score that is comparable across product categories
in under two seconds. This funding round is to drive product development
and develop its market strategy to build on an opportunity to emerge
as a market leader in the industry.
Digital health
platform
for speech therapy
and counselling for
children and young
Mable Therapy adults July 2023 0.55
---------------------- -------------------- --------------------
Based in Leeds, Mable ( https://mabletherapy.com ) is the UK's leading
digital health platform for speech therapy and counselling for children
and young adults. All sessions are undertaken live with qualified
paediatric therapists, and Mable uses gamification (games, activities
and other interactive resources) to provide improved therapeutic
outcomes in a child-friendly environment. This is a significant
and growing area of need, with 1.4 million children in the UK with
long-term speech, language or communication needs - Mable has the
potential to transform the lives of children in their crucial early
stages of development. The funding will be used to accelerate growth
in existing B2C and B2B customer groups as well as capitalising
on new, potentially significant, routes to market.
Digital retail
software
provider to aviation
and
Branchspace travel industry August 2023 0.54
---------------------- -------------------- --------------------
Branchspace ( https://branchspace.com ) is a well-established specialist
digital retailing consultancy and software provider to the aviation
and travel industry. Branchspace's offering helps customers to transform
their technology architecture to unlock best-in-class digital retailing
capabilities, driving distribution efficiencies and an improved
customer experience. Across two complementary service offerings
Branchspace can effectively cover the entire airline tech stack
and has carved a defensible position as sector experts, serving
clients including IAG, Lufthansa and Etihad. This funding round
will seek to accelerate product development increasing the customer
reach of their SaaS offering to establish itself as the leading
choice for airline digital retailing solutions.
Further investments during the year
The Company made two further investments into existing portfolio companies
in the year, totalling GBP0.62 million, as detailed below:
Company Business Date of Investment Amount of new
investment (GBPm)
Legatics SaaS LegalTech software July 2023 0.45
-------------------------- --------------------- --------------------
Legatics ( https://www.legatics.com/ ) transforms legal transactions
by enabling deal teams to collaborate and close deals in an interactive
online environment. Designed by lawyers to improve legacy working
methods and solve practical transactional issues, the legal transaction
management platform increases collaboration, efficiency and transparency.
As a result, Legatics
has been used by around 1,500 companies, and has been procured
by more than half of the top global banking and finance law firms,
with collaborations having been hosted in over 60 countries. This
funding round will provide headroom to further accelerate growth
in sales via marketing as well as increasing product development.
Specialists in eating
Orri disorder support August 2023 0.17
-------------------------- --------------------- --------------------
Orri Limited ( https://orri-uk.com ) is an intensive daycare provider
for adults with eating disorders. Orri provides an alternative
to expensive residential in-patient treatment and lighter-touch
outpatient services by providing highly structured day and half
day sessions either online or in-person at its clinic on Hallam
Street, London. Orri opened its current clinic on Hallam Street,
London in February 2019 which provides a homely environment in
a converted 4-storey manor house which is operating at capacity.
The plan sees a larger site being leased nearby with Hallam Street
being used to provide a step-down outpatient service. This follow
on loan stock is to provide additional cash headroom to help drive
growth.
Portfolio Realisations during the year
The Company realised two investments, as detailed below:
Company Business Period of Investment Total cash proceeds
over the life of
the investment/
Multiple over
cost
EOTH Branded clothing October 2011 GBP9.54 million
(RAB to 6.9x cost
and Lowe Alpine) November 2022
--------------------- --------------------- --------------------
The Company realised its equity investment in EOTH for GBP7.34 million
(realised gain in the period:
GBP0.42 million) including preference dividends. Total proceeds
received over the life of the investment were GBP9.54 million compared
to an original investment cost of GBP1.38 million, representing
a multiple on cost of 6.9x and an IRR of 23.2%. The Company has
retained its interest yielding loan stock investment. Once repaid,
this should increase the multiple on cost to
7.9x.
Software based July 2014 GBP4.00 million
Tharstern management to 2.6x cost
information systems March 2023
--------------------- --------------------- --------------------
The Company realised its investment in Tharstern Group for GBP2.85
million (realised gain in period: GBP0.86 million). Total proceeds
received over the life of the investment were GBP4.00 million compared
to an original cost of GBP1.54 million, representing a multiple
on cost of 2.6x and an IRR of 15.0%.
Investments made after the year-end
The Company made three follow-on and three new investments of GBP3.84
million after the year-end, as
detailed below:
Existing:
Company Business Date of Investment Amount of new
investment (GBPm)
Provider of
cloud-based
RotaGeek enterprise software November 2023 0.23
---------------------- -------------------- -------------------
RotaGeek ( https://www.rotageek.com/ ) is a provider of cloud-based
enterprise software to help larger retail, leisure and healthcare
organisations to schedule staff effectively. RotaGeek has proven
its ability to solve the scheduling issue for large retail clients
effectively competing due to the strength of its technologically
advanced proposition. Since investment it has also diversified and
started to prove its applicability in other verticals such as healthcare
and hospitality. This investment will help the company focus on
operational delivery and continue sales and client contract win
momentum.
Focal Point GPS enhancement
Positioning software provider December 2023 0.17
---------------------- -------------------- -------------------
Focal Point Positioning Limited ( https://focalpointpositioning.com
) is a deeptech business with a growing IP and software portfolio.
Its proprietary technology applies advanced physics and machine
learning to dramatically improve the satellite-based location sensitivity,
accuracy, and security of devices such as smartphones, wearables,
and vehicles and reduce costs. The further investment was agreed
at the time of the original funding in September 2022.
Digital marketplace
MyTutor for online tutoring January 2024 0.64
---------------------- -------------------- -------------------
MyTutorweb (trading as MyTutor) ( https://mytutor.co.uk ) is a digital
marketplace that connects school age pupils who are seeking private
online tutoring with university students. The business is satisfying
a growing demand from both schools and parents to improve pupils'
exam results. This further investment, alongside other existing
shareholders and Australian strategic coinvestor, SEEK, aims to
build and reinforce its position as a UK category leader in the
online education market. This additional funding will give the business
extra headroom to support its more focused product and growth strategy.
New:
Company Business Period of Amount of further
Investment investment (GBPm)
Open banking
Ozone Financial software
Technology Limited developer December 2023 1.50
------------------- ------------------ -------------------
Ozone API ( https://ozoneapi.com ) is a software developer providing
banks and financial institutions with a low cost, out of the box
solution enabling them to deliver open APIs which comply with open
banking and finance standards globally. The software goes beyond
compliance and enables customers to monetise open banking and finance
opportunities which are growing significantly following regulatory
& market development. This funding is the first equity investment
into Ozone and enables the team to invest into their product and
go to market teams as they look to capitalise on the large and fast-growing
global market.
Cross-border
customs
automation
software
Azarc provider December 2023 0.53
------------------- ------------------ -------------------
Azarc.io ( https://azarc.io ) specialises in business process automation
using distributed ledger technology. Its Verathread(R) product has
been applied to automating cross-border customs clearances, albeit
it has wider supply chain applications. Founded in 2021, Azarc successfully
secured British Telecom as a customer and a long-term strategic
partner in the UK and aims to improve inefficiencies over traditional
paper-based customs clearances for import and export trade. This
investment will support the company's growth trajectory with BT
and expedite its expansion into international import/export hubs
through new partnerships.
Passenger
transport
data and
scheduling
CitySwift software provider December 2023 0.77
------------------- ------------------- -------------------
Huddl Mobility Limited trading as CitySwift ( https://cityswift.com
) is a software business that works with bus operators and local
authorities to aggregate, cleanse and access insight from complex
data sources from across their networks, enabling them to optimise
schedules and unlock revenue generating or cost reduction opportunities.
This investment will be used to accelerate new customer acquisition
and unlock significant opportunities within the existing customer
base - CitySwift already works with major bus operators and local
transport authorities including National Express, Stagecoach and
Transport for Wales.
Environmental, Social, Governance considerations
Gresham House is committed to sustainable investment as an integral part
of its business strategy. The Investment Adviser has formalised its approach
to sustainability and has put in place several processes to ensure environmental,
social and governance factors and stewardship responsibilities are built
into asset management across all funds and strategies, including venture
capital trusts, for example, individual members of the investment team
now have their own individual ESG objectives set which align with the
wider ESG goals of Gresham House. For further details, Gresham House
published its third Sustainable Investment Report in April 2023, which
can be found on its website at: www.greshamhouse.com .
Outlook
Whilst the year under review was marked with volatility and uncertainty
as a result of a number of factors affecting the global economy, the
portfolio has continued to trade well. The UK outlook remains challenging
but the portfolio is well diversified and Gresham House has an experienced
team working closely with the portfolio companies to help them navigate
the challenges that lie ahead. The exit environment is likely to remain
subdued, resulting in longer average investment hold times, but also
providing further portfolio follow-on investment opportunities. Previous
evidence has shown that investing throughout the economic cycle has the
potential to yield strong returns and Gresham House is seeing a number
of opportunities, both new deals and further investment into the existing
portfolio, which have the potential to drive shareholder value over the
medium term.
Gresham House Asset Management Limited
Investment Adviser
12 January 2024
Annual General Meeting
The AGM will be held at 11.00 am on Thursday, 29 February 2024 at the
offices of Shakespeare Martineau LLP, 6(th) floor, 60 Gracechurch Street,
London EC3V 0HR and will also by webcast for those Shareholders who are
unable to attend in person. Details of how to join the meeting by virtual
means will be shown on the Company's website. Shareholders joining virtually
should note you will not be able to vote at the meeting and therefore
you are encouraged to lodge your proxy form. For further details, please
see the Notice of the Meeting which can be found at the end of the Annual
Report & Financial Statements.
Further Information
The Annual Report & Financial Statements for the year ended 30 September
2023 will be available shortly on www.incomeandgrowthvct.co.uk .
It will also be submitted shortly in full unedited text to the Financial
Conduct Authority's National Storage Mechanism and will be available
for inspection at data.fca.org.uk/#/nsm/nationalstoragemechanism in accordance
with DTR 6.3.5(1A) of the Financial Conduct Authority's Disclosure Guidance
and Transparency Rules.
Contact:
Gresham House Asset Management Limited
Company Secretary
mobeusvcts@greshamhouse.com
+44 20 7382 0999
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END
ACSQKPBKCBKKDDD
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January 15, 2024 04:04 ET (09:04 GMT)
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