Update (13 Jan 2020): Offer fully subscribed
The four Mobeus VCTs have all reached capacity and the offer is now closed.
This is the first share offer from Mobeus VCTs in two years. The previous Mobeus VCTs offer in 2017/18 raised £80 million, around £40 million of which came from existing shareholders – a testament to their loyal following.
In the 2019/20 offer, the four VCTs are seeking a total of £38 million, with an overallotment facility of up to £20 million (£5 million per VCT). The manager does not expect to raise funds next year.
- Longstanding and highly respected VCT manager
- Combined net assets of £245 million with a diverse portfolio of 43 companies
- More than 50% of the portfolio is in mature investments, predominantly from management buyouts, which could support dividend payments, with the remaining in newer capital growth deals
- Targets annual dividends of 4–6p per share – average of 12.2p paid in the last five years. Dividends are not guaranteed and past performance is not a guide to the future
- Experienced growth investment team
- 0.10% annual rebate for three years when you invest through Wealth Club
Mobeus is one of the UK’s most experienced VCT investment advisers with over 20 years of experience and £411.4 million assets under management. The team currently manages four VCTs, all of which are fundraising under the 2019/20 offer:
|Mobeus Income & Growth VCT (CLOSED)||£15m||£15m|
|Mobeus Income & Growth 2 VCT (CLOSED)||£20m||£20m|
|Mobeus Income & Growth 4 VCT (CLOSED)||£13m||£13m|
|The Income & Growth VCT (CLOSED)||£10m||£10m|
Historically, Mobeus specialised in management buyout (MBO) deals, both through the VCTs and its institutional funds. However, new VCT rules introduced in 2015 prevented VCTs from making new investments in management buyouts and prescribed new investment in growth deals.
As a result, Mobeus recruited heavily to develop the growth investment team. One of its key hires was Trevor Hope, previously Chief Investment Officer at Beringea, manager of the ProVen VCTs. Mr Hope’s first task was to develop a team capable of supporting the VCTs as they transitioned to the new growth strategy. In the last three years, the growth investment team has more than doubled in size to complement the existing buyout team. In total, the VCTs now have a team of around 30 individuals, all with different skills and backgrounds to provide broad sector knowledge.
Watch a video interview with Trevor Hope:
MIG4 is the eldest of the VCTs and was launched in January 1999. Originally known as TriVen VCT, together with I&G (previously called TriVest VCT) it was previously jointly managed by three investment advisers including Mobeus. By 2009 Mobeus was awarded the sole mandate of both VCTs. It has been the sole advisor of MIG and MIG2 since inception.
The four VCTs have the same investment remit and invest in the same companies, albeit usually in different proportions.
Historically they have primarily provided capital to fund the MBOs of larger (£10 million to £40 million turnover), established (10+ years) and profitable companies (£1 million to £3.5 million profit). Examples are Virgin Wines (still a portfolio holding) and The Gro Company, creator of the world’s leading baby sleep bag (sold in 2018 with an enterprise value of £22 million).
Deals were typically structured as loans with an equity element. The loan stock could produce regular interest payments for the life of the investment and the equity element could give the potential for a share in any upside.
New investments now focus on younger companies and are structured primarily as equity deals. These include both early-stage companies (anticipated to represent around 15% of the portfolio) as well as later-stage revenue-generating businesses. The average age of the growth portfolio companies is currently 2.5 years.
Overall, the manager aims to develop a balanced risk portfolio. This, combined with the uncertain economic outlook, means the manager believes it appropriate for a number of its companies to drive towards profitability and not to be solely reliant upon being able to raise further investment capital to support their business plans.
Mr Hope confirmed the Mobeus portfolio companies are making good progress in this area, with just under 50% of the companies across the entire portfolio currently profitable. Within the most recent 15 growth investments, post the November 2015 rule change, three are already profitable and a further two are planning to deliver profitability in their current financial year (profitability is defined as profit before interest, tax and amortisation of goodwill in for the latest available audited/unaudited annual accounts).
Exit track record
Over the last five years, Mobeus has realised 17 investments. Of these, all but one have been profitable and have generated a total cash gain of £134.4 million, at an average return multiple of 2.7x. However, please note past performance is not a guide to the future.
A repair and restoration specialist, Plastic Surgeon is the UK’s largest cosmetic plastic finishing service.
Based on the edge of Dartmoor, the company has been running for nearly 25 years. The business originally focused on restoring vehicles but moved into building and equipment repairs.
The company now employs over 250 people with eight regional hubs across the UK. Its projects have ranged from repairing a brand-new student living complex for the University of Birmingham to restoring the model of a Spitfire plane outside Edinburgh Airport.
Mobeus invested £2 million in 2008 to support the company through an MBO and the subsequent recession. In May 2019 the business was sold to Polygon Group, the European leader in property damage restoration. The sale generated a return of 5.6x for the VCTs. Past performance is not a guide to the future.
Founded in Sheffield, Lightwork has over three decades of expertise in 3D rendering software.
The company was originally created to allow manufacturers to design photorealistic 3D models. Its first product was demonstrated in the 1990 Autofact exhibition. Within a year the company had agreed a number of licensing deals and by 1993 it had signed its first major developer, Unigraphics (now Siemens) .
As life-like rendered images have become more mainstream, Lightworks has expanded its suite of products to fit the industry. It now provides solutions to over 50 CAD software packages and has over 3 million users worldwide.
The VCTs invested £1.9 million into VSI Limited, a group which included Lightwork Design and MachineWorks, a machine tool simulation business. VSI was demerged in 2011 and MachineWorks was sold to Westec Holding Company in 2014, generating a return of 4.1x cost. Lightworks was then sold to Siemens PLM Software in September 2018. Together, the exits from VSI Limited represent a return of 4.8x for the VCTs. Past performance is not a guide to the future.
As can be expected, not all investments work out. One example is Hemmels, a classic car refurbishment company.
The company specialised in completely rebuilding classic Mercedes-Benz cars. Mobeus liked the business because of the high resale targets, anywhere from £250,000 to £1 million, and the company’s strong client book.
However, post-investment the newly appointed CFO realised sale margins were much lower than originally believed. This was mainly due to work continuing on cars after they had been paid for. It became apparent the company would need a significant injection of capital to be turned around. Mobeus didn’t feel confident enough in the management team to commit more capital and so decided to sell its holding at a loss of £500,000.
As a result, Mobeus has adjusted its due diligence process to avoid similar events. Where required, CFOs are now appointed pre-investment, especially with younger companies that have not yet been through an audit.
Current portfolio overview
The VCTs’ portfolios include around 43 companies, currently valued at £245 million (as at October 2019). Of these, 28 are legacy investments and 15 are growth capital companies. The VCTs are sector agnostic although technology-enabled investments are preferred.
Whilst the portfolio weighting will begin to shift in favour of growth capital investments over the next few years, Mobeus plans to continue to hold its legacy assets. A good proportion of the older companies are profitable and relatively stable and so could help offset the younger, riskier side of the portfolio.
The top 10 holdings, which include both MBOs and growth capital deals, have generated average revenue of £20.8 million with average operating profit of £0.8 million (to 30 June 2019).
In the 12 months to October 2019, the Mobeus VCTs invested £9.5 million into three new companies and just under £7 million into three follow-on deals.
Example portfolio companies
Access-IS – largest holding (MBO)
Access-IS is one of the global leaders in ticket and ID document readers.
Originally a specialist keyboard maker, Access-IS has gone onto develop hardware capable of reading tickets, taking contactless payments and authenticating documents.
In fact, if you’ve been through an airport recently then you’ve likely used an Access-IS product to scan your boarding pass. The company currently has its passport and boarding pass readers installed in over 200 airports, including 36 of the world’s top 50. In recent years, the company has also expanded into security and transport, with its ticket barriers installed high-profile locations such as Kings Cross and Marylebone Stations.
Mobeus VCTs invested £11 million in 2015 to finance the company’s MBO. The investment has been used to restructure the company’s back office and to further develop its security and ticketing technology.
MPB Group – largest holding (growth capital)
While studying at the University of Warwick, Matt Barker began selling second-hand cameras to finance his studies. Upon graduating, rather than taking up a city job offer, he rented a small office in Brighton and launched MPB.
Buying and selling second-hand cameras and lenses can be difficult. There are several peer-to-peer marketplaces, such as Gumtree or eBay, however, the transaction process can often be long, complicated and very expensive. Furthermore, the quality of the equipment is difficult to guarantee.
In contrast, MPB’s platform manages the entire experience and offers a six-month warranty on every item. Its technology automates product listings and provides dynamic price updates to give users a more transparent and consistent service.
Mobeus has invested in each of the company’s series A, B, and C funding rounds. In total the VCTs have invested £7.1 million and have co-invested alongside Beringea and Acton Capital.
Parsley Box – recent investment
A meal delivery service, Parsley Box designs ambient meals for the elderly market.
The business was founded by Adrienne and Gordon MacAulay after they struggled to find a suitable service for Gordon’s mother. All of the existing options either required freezer storage or were expensive and slow to arrive.
In response, the pair developed a range of ambient meals which can be stored for up to six months in a cupboard. Not only is this convenient for customers but also significantly reduces storage and transportation costs for distributors. The company now has a client base of over 80,000 and has grown turnover to £5 million.
Mobeus invested £3 million in May 2019. The investment will be used to accelerate product development, customer acquisition and recruitment.
Performance and dividends
The dividend target for MIG and MIG4 is currently 4p per share. For I&G it is 6p a share, while MIG2 has a target of no less than 5p per share. Dividends are variable and not guaranteed. The dividend track records for all VCTs are shown below.
In practice, if you had invested £10,000 in the combined 2010/11 offer, by June 2019 you could have received approximately £9,800 back in dividend payments. If you had invested the same amount in the most recent offer (2017/18) you would have received approximately £1,950 in dividends. In the past five years, the four VCTs have paid a total of 244p in dividends, an average of 12.2p per VCT a year. Past performance is not a guide to the future.
Please note, while Mobeus still expects to provide consistent returns, it is likely that dividends will become much more volatile as the portfolio balance shifts more in favour of growth capital investments.
Risks – important
This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.
VCTs are high-risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. They also tend to be illiquid and hard to sell and value. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.
Tax rules can change and benefits depend on circumstances.
VCTs can now only invest new money in growth capital deals. Management buyouts, replacement capital deals and investments in mature companies are no longer permitted. This results in considerably higher risks.
Fees and charges
A summary of the main charges and savings is shown below. The net initial charge shown includes the Wealth Club saving and any early bird discount. The investment may have additional charges and expenses: please see the provider documents including the Key Information Document for more details.
|Full initial charge||3%|
|Early bird discount||—|
|Wealth Club initial saving||0.5%|
|Existing shareholder discount||—|
|Net initial charge through Wealth Club (new investors)||2.5%|
|Net initial charge through Wealth Club (existing shareholders)||2.5%|
|Annual management charge||2-2.4%|
|Annual administration charge||See offer documents|
|Annual rebate from Wealth Club (for three years)||0.10%|
More detail on the charges
Dividend investment scheme
The board of I&G has decided to recommence the VCT's dividend reinvestment scheme, effective from 12 February 2020. Under the new terms and conditions, the price at which new shares will be issued is the latest net asset value per existing share. The scheme for MIG4 is still under review and therefore suspended. It is expected a decision on this will be announced in 2020. There is no dividend reinvestment scheme for MIG or MIG2.
Share buyback policy
The VCTs intend to buy back shares at up to a 5% discount to the most recently announced net asset value. Buybacks are subject to the company having sufficient funds available and are at the discretion of the board.
Annual rebate when you invest through Wealth Club
The Mobeus VCTs include an annual rebate for Wealth Club investors, payable for the first three years.
This is a rebate of our renewal commission and should be equivalent to 0.10% of the Net Asset Value of the Offer Shares issued to you when you invest. Terms and conditions apply.
We believe this is one of the strongest VCT offers open or due to open this year from a long-established and respected manager.
The four Mobeus VCTs give investors access to a well diversified portfolio currently almost equally split between yield-producing MBO deals and younger companies with growth potential.
The performance track record is historically excellent, although past performance is not a guide to the future.
As the portfolio balance shifts more in favour of younger companies, dividends are likely to be more volatile. That said, the considered investment strategy adopted by the manager and the early performance indicators are encouraging.
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.
- Target dividend
- Initial charge
- Initial saving via Wealth Club
- Net initial charge
- Annual rebate
- Funds raised / sought
- £58.0 million / £58.0 million
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