That's 4 MOA, which is not bad for a 65-or-so-year-old rifle with the very minimal sights he was using. What ammunition, is my question?
From a COMBAT point of view, it is ALL HITS, which is NOT to be disrespected.
From a Deep-Freeze point of view it is one helluvva lot of MOOSE STEW, which also is not to be disrespected.
EVEN with the little Mark 2 sight, friend, there is a nasty little trick you can use to tighten up those groups. The FRONT SIGHT on your rifle is ADJUSTABLE sideways. Loosen it off and move the Sight Blade ONE HALF of a blade-width to the right (that's the LEFT when you are shooting the rifle). Now aim with the UPPER-RIGHT CORNER of the Sight Blade. Your groups WILL tighten up.
An alternative to your little Mark 2 rear sight would be the Mark 1, which was the preferred sight for the Number 4 Rifle, It was also the BOTTLENECK in production, owing to the difficulty in making that long, very fine micrometer-screw-thread elevating screw, hence the development of sights which were faster and cheaper to make. It is VERY finely-adjustable vertically; horizontal adjustment was done on your FRONT sight. They show up on the EE for about $25 these days. Changing-over from the Mark 2 to the Mark 1 is quick and easy, but it requires tools. You need NO extra parts. Do NOT lose that teensy-weensy-itty-bitty Sight Axis Locking Pin! A 1/16 pin punch is what you need to remove it, along with needle-nose pliers. Twenty-minute job.
The PH-5C sight is a beautiful mechanism, but there are not enough of them to go around. That's why they are so expensive. I had one on a 7.62 Number 4 and, even with DA 1961 ammo and my bad eyes, it would turn in just a hair over 1 MOA, same with my home-rolled stuff: 3-1/4 inch 5-shot groups at 300.
Pop over to milsurps dot com, take out a (free) Membership and download yourself a copy of "Shoot to Live!" (also free). It is the Canadian late-WW2 manual on accurate shooting with the Number 4 Rifle. It is lavishly illustrated and it EXPLAINS everything in language that even I can understand. We trained with this manual back in the early 1960s and there is NO better book ANYWHERE ANYWHEN on shooting an iron-sight rifle with Aperture Sights. And the price is right!
You are having a lot of fun. Good! THAT's what it's all about!
Hope this helps.