TIDMNVT
17 MAY 2016
NORTHERN VENTURE TRUST PLC
UNAUDITED HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHSED 31 MARCH
2016
Northern Venture Trust PLC is a Venture Capital Trust (VCT) whose
investment adviser is NVM Private Equity. The trust was one of the
first VCTs launched on the London Stock Exchange in 1995. It invests
mainly in UK unquoted companies and aims to provide high long-term
tax-free returns to shareholders through a combination of dividend yield
and capital growth.
Financial highlights (comparative figures as at 31 March 2015 and 30
September 2015)
Six months to Six months to Year to
31 March 31 March 30 September
2016 2015 2015
Net assets GBP77.9m GBP84.5m GBP78.9m
Net asset value per share 82.9p 88.6p 83.0p
Return per share:
Revenue 0.9p 1.1p 2.0p
Capital 1.9p 2.7p 5.2p
Total 2.8p 3.8p 7.2p
Dividend per share for the period
First interim dividend 3.0p 3.0p 3.0p
Second interim (special) dividend 7.0p 6.0p 6.0p
Final dividend - - 3.0p
Total 10.0p 9.0p 12.0p
Cumulative returns to shareholders
since launch:
Net asset value per share
Dividends paid per share* 82.9p 88.6p 83.0p
Net asset value plus dividends paid per share 138.5p 126.5p 135.5p
*Excluding interim dividends payable on 30 June 2016 221.4p 215.1p 218.5p
Mid-market share price at end of period 76.75 80.00p 76.00p
Share price discount to net asset value 7.4% 9.7% 8.4%
Tax-free dividend yield (based on mid-market
share price at end of period):
Excluding special dividend 7.8% 7.5% 7.9%
Including special dividend 16.9% 15.0% 15.8%
For further information, please contact:
NVM Private Equity LLP
Alastair Conn/Christopher Mellor 0191 244 6000
Website: www.nvm.co.uk
NORTHERN VENTURE TRUST PLC
HALF-YEARLY MANAGEMENT REPORT FOR THE SIX MONTHSED 31 MARCH 2016
Our venture capital portfolio has generally made good progress over the
past six months and two significant exits were achieved, enabling the
board to declare a special dividend in addition to the usual interim
payment. However we are still evaluating the effect of the Government's
recent changes to the VCT legislation, which have already altered the
way in which VCTs go about their investment activities and could have an
impact on portfolio returns in the longer term.
Results and dividend
The unaudited net asset value (NAV) per share at 31 March 2016 was 82.9p,
compared with the audited figure of 83.0p at 30 September 2015. The
overall return per share before dividends for the six months ended 31
March 2016 as shown in the income statement was 2.8p (six months ended
31 March 2015 3.8p), equivalent to 3.4% of the NAV at the start of the
period. Investment income and running costs were both lower than in the
corresponding period last year, but the reduction in income was
proportionately greater with the result that the revenue return per
share fell from 1.1p to 0.9p.
Investment realisations from the venture capital portfolio in the half
year produced a surplus of GBP1.1 million over September 2015 carrying
value, and GBP3.4 million over original cost. In addition, there was a
net uplift of GBP1.3 million in the valuation of the ongoing portfolio.
Against this favourable background the directors have decided to declare
a special dividend of 7.0p per share, which will be paid as a second
interim dividend for the year ending 30 September 2016.
It has long been our policy to maintain the annual dividend at not less
than 6.0p, and accordingly an unchanged first interim dividend of 3.0p
per share for the year ending 30 September 2016 has also been declared.
The first and second (special) interim dividends, totalling 10.0p per
share, will be paid on 30 June 2016 to shareholders on the register on 3
June 2016. Your directors will keep future dividend policy under review,
in the light of the changes which we expect to take place in the
investment portfolio as the new VCT regulations take effect over the
coming months and years.
Investments
During the period exits were achieved from the investments in Kitwave
One and Control Risks Group Holdings. Kitwave One was sold in a
secondary management buy-out financed by Pricoa Capital, generating
initial proceeds of GBP3.5 million and a gain of GBP2.0 million over
cost. A further GBP0.5 million may become receivable over the next 18
months, but is conditional and therefore has not been recognised in our
financial statements at this stage. Control Risks Group Holdings was
acquired by an employee ownership trust, our investment realising
proceeds of GBP1.5 million and a gain of GBP0.7 million. We also
received deferred proceeds totalling GBP0.7 million, not previously
recognised in the financial statements, from the sales of Alaric Systems
and Kerridge Commercial Systems in earlier years.
No new venture capital investments were completed in the period. Our
market has suffered from prolonged uncertainty as a result of the
legislative changes on which I comment further below, and investment
activity among VCTs generally has been at a very low level in recent
months. A follow-on investment of GBP0.5 million was made in No 1
Traveller, to support the company's continuing programme of airport
lounge development. It is however encouraging to report that subsequent
to 31 March 2016 we have completed our first new investment under the
revised VCT rules, a GBP0.9 development capital funding for MPD Group, a
Manchester-based business operating in the logistics technology sector.
Shareholder issues
The strong flow of cash from successful investment realisations in
recent years, added to the GBP15 million raised in the 2013/14 public
share offer, has meant that there has been no need to raise additional
funds from shareholders in the 2014/15 and 2015/16 tax years. The
directors are conscious that many shareholders would welcome the
opportunity to make a further investment in the company, and we will
keep the possibility of further share offers under review in the light
of future realisation proceeds and new investment commitments.
We announced in January 2016 that the dividend investment scheme, which
had been temporarily suspended pending our initial review of the changes
in the VCT legislation, would be reinstated with immediate effect. The
scheme enables shareholders to re-invest their dividends in new ordinary
shares free of dealing costs and with the benefit of the tax reliefs
available on new VCT share subscriptions. Details of the scheme can be
obtained from the company secretary.
The company has continued to buy back shares in the market, when
necessary in order to maintain liquidity, at a 5% discount to NAV.
During the six months ended 31 March 2016 a total of 1,140,000 shares
were repurchased by the company for cancellation, at an average price of
77p.
VCT qualifying status
The company has continued to meet the qualifying conditions laid down by
HM Revenue & Customs for maintaining its approval as a VCT. Our
investment adviser, NVM, monitors the position closely and reports
regularly to the board. Philip Hare & Associates LLP has continued to
act as independent adviser to the company on VCT taxation matters.
VCT legislation
The Finance Act (No 2) 2015, which received Royal Assent in November
2015, introduced some fundamental changes to the legislation governing
the investments which may be made by VCTs. The Government has indicated
that the changes were prompted by the need to comply with the European
Commission's State aid rules. The main provisions relevant to our
company are:
-- It will no longer be permissible for companies to use funds invested by
VCTs to acquire existing shares or businesses - in future such funds may
be used by investee companies only for "growth and development" purposes.
-- In order to be eligible for VCT investment, companies will normally have
to have made their first commercial sale within the past seven years (ten
years in the case of "knowledge-intensive" businesses, as defined by the
legislation).
-- In addition to the existing GBP5 million annual limit on the amount that
companies can raise from State aided sources such as VCTs, there will be
a new GBP12 million lifetime limit (GBP20 million for knowledge-intensive
businesses).
These are significant changes which are clearly designed to focus future
VCT investment on early stage opportunities: HM Revenue & Customs'
draft guidelines, which were not published until 10 May 2016, confirm
that VCT investment should be used only to fund "growth and
development". We have yet to see how HMRC will apply these criteria in
practice but our current experience is that the process of obtaining VCT
clearance for new investments has become more difficult and
time-consuming. This is particularly frustrating given that we are
currently seeing an encouraging flow of opportunities which appear
suitable for investment under the new rules.
As we have already indicated, it is likely that there will be a gradual
change in the composition of the investment portfolio as older holdings
are sold and new investments which qualify under the revised rules are
added. We expect that this will lead to a greater volatility in
investment returns, with probably a greater reliance in future on
capital growth rather than income yield. However, our investment
adviser NVM has invested successfully in early stage companies over many
years andhas already taken steps to augment its investment team and
re-focus its marketing approach. Whilst we do not underestimate the
task ahead, we believe that we are well equipped to implement the new
rules for future investments whilst also seeking to maximise returns
from our existing portfolio.
Outlook
The encouraging performance of the investment portfolio has inevitably
been rather overshadowed during the past six months by the radical
changes to the VCT legislation. Nevertheless we believe that the
foundations are in place for a successful transition to a different type
of investment in future, and we look forward to continuing to deliver
good returns to shareholders.
On behalf of the Board
Simon Constantine
Chairman
The unaudited half-yearly financial statements for the six months ended
31 March 2016 are set out below.
INCOME STATEMENT
(unaudited) for the six months ended 31 March 2016
Six months ended 31 March 2016 Six months ended 31 March 2015
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gain on
disposal of
investments - 1,053 1,053 - 4,490 4,490
Movements in
fair value
of
investments - 1,284 1,284 - (1,476) (1,476)
---------- ---------- ---------- ---------- ---------- ----------
- 2,337 2,337 - 3,014 3,014
Income 1,338 - 1,338 1,753 - 1,753
Investment
management
fee (207) (622) (829) (215) (645) (860)
Other
expenses (206) - (206) (259) - (259)
---------- ---------- ---------- ---------- ---------- ----------
Return on
ordinary
activities
before tax 925 1,715 2,640 1,279 2,369 3,648
Tax on
return on
ordinary
activities (104) 104 - (202) 137 (65)
---------- ---------- ---------- ---------- ---------- ----------
Return on
ordinary
activities
after tax 821 1,819 2,640 1,077 2,506 3,583
---------- ---------- ---------- ---------- ---------- ----------
Return per 0.9p 1.9p 2.8p 1.1p 2.7p 3.8p
share
Year ended 30 September 2015
Revenue Capital Total
GBP000 GBP000 GBP000
Gain on disposal of investments - 5,019 5,019
Movements in fair value of investments - 1,189 1,189
---------- ---------- ----------
- 6,208 6,208
Income 3,123 - 3,123
Investment management fee (433) (1,617) (2,050)
Other expenses (456) - (456)
---------- ---------- ----------
Return on ordinary activities before
tax 2,234 4,591 6,825
Tax on return on ordinary activities (333) 333 -
---------- ---------- ----------
Return on ordinary activities after tax 1,901 4,924 6,825
---------- ---------- ----------
Return per share 2.0p 5.2p 7.2p
BALANCE SHEET
(unaudited) as at 31 March 2016
31 March 2016 31 March 2015 30 September 2015
GBP000 GBP000 GBP000
Fixed asset investments 69,285 58,995 72,680
---------- ---------- ----------
Current assets:
Debtors 330 283 302
Cash and cash equivalents 8,416 25,479 6,418
---------- ---------- ----------
8,746 25,762 6,720
Creditors (amounts falling
due within one year) (169) (238) (452)
---------- ---------- ----------
Net current assets 8,577 25,524 6,268
---------- ---------- ----------
Net assets 77,862 84,519 78,948
---------- ---------- ----------
Capital and reserves:
Called-up equity share
capital 23,490 23,850 23,775
Share premium 1,359 1,359 1,359
Capital redemption reserve 513 152 228
Capital reserve 47,521 55,772 47,787
Revaluation reserve 2,674 823 3,367
Revenue reserve 2,305 2,563 2,432
---------- ---------- ----------
Total equity shareholders'
funds 77,862 84,519 78,948
---------- ---------- ----------
Net asset value per share 82.9p 88.6p 83.0p
STATEMENT OF CHANGES IN EQUITY
(unaudited) for the six months ended 31 March 2016
---------------Non-distributable
reserves--------------- Distributable reserves Total
Capital
Share Share redemption Revaluation Capital Revenue
capital premium reserve reserve reserve reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 October
2015 23,775 1,359 228 3,367 47,787 2,432 78,948
Return on
ordinary
activities
after tax
for the
period - - - (693) 2,512 821 2,640
Re-purchase
of shares (285) - 285 - (881) - (881)
Dividends
recognised - - - - (1,897) (948) (2,845)
---------- ---------- ---------- ---------- ---------- ---------- ----------
At 31 March
2016 23,490 1,359 513 2,674 47,521 2,305 77,862
---------- ---------- ---------- ---------- ---------- ---------- ----------
STATEMENT OF CHANGES IN EQUITY
(unaudited) for the six months ended 31 March 2015
---------------Non-distributable
reserves--------------- Distributable reserves Total
Capital
Share Share redemption Revaluation Capital Revenue
capital premium reserve reserve reserve reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 October
2014 23,770 1,073 106 10,788 45,348 2,436 83,521
Return on
ordinary
activities
after tax
for the
period - - - (9,965) 12,471 1,077 3,583
Net proceeds
of share
issues 126 286 - - - - 412
Re-purchase
of shares (46) - 46 - (145) - (145)
Dividends
recognised - - - - (1,902) (950) (2,852)
---------- ---------- ---------- ---------- ---------- ---------- ----------
At 31 March
2015 23,850 1,359 152 823 55,772 2,563 84,519
---------- ---------- ---------- ---------- ---------- ---------- ----------
STATEMENT OF CHANGES IN EQUITY
(unaudited) for the year ended 30 September 2015
---------------Non-distributable
reserves--------------- Distributable reserves Total
Capital
Share Share redemption Revaluation Capital Revenue
capital premium reserve reserve reserve reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 October
2014 23,770 1,073 106 10,788 45,348 2,436 83,521
Return on
ordinary
activities
after tax
for the
year - - - (7,421) 12,345 1,901 6,825
Net proceeds
of share
issues 127 286 - - - - 413
Re-purchase
of shares (122) - 122 - (373) - (373)
Dividends
recognised - - - - (9,533) (1,905) (11,438)
---------- ---------- ---------- ---------- ---------- ---------- ----------
At 30
September
2015 23,775 1,359 228 3,367 47,787 2,432 78,948
---------- ---------- ---------- ---------- ---------- ---------- ----------
STATEMENT OF CASH FLOWS
(unaudited) for the six months ended 31 March 2016
Six months ended Six months ended Year ended
31 March 2016 31 March 2015 30 September 2015
GBP000 GBP000 GBP000
Cash flows from
operating activities:
Return on ordinary
activities before tax 2,640 3,648 6,825
Adjustments for:
Gain on disposal of
investments (1,053) (4,490) (5,019)
Movement in fair value
of investments (1,284) 1,476 (1,189)
(Increase)/decrease in
debtors (28) 75 56
Increase/(decrease) in
creditors (283) (230) 50
---------- ---------- ----------
Net cash
inflow/(outflow) from
operating activities (8) 479 723
---------- ---------- ----------
Cash flows from
investing activities:
Purchase of investments (914) (5,508) (18,300)
Sale/repayment of
investments 6,646 20,582 22,882
---------- ---------- ----------
Net cash inflow from
investing activities 5,732 15,074 4,582
---------- ---------- ----------
Cash flows from
financing activities:
Issue of shares - 427 428
Share issue expenses - (15) (15)
Repurchase of ordinary
shares for
cancellation (881) (145) (373)
Dividends paid on
ordinary shares (2,845) (2,852) (11,438)
---------- ---------- ----------
Net cash outflow from
financing activities (3,726) (2,585) (11,398)
---------- ---------- ----------
Net increase/(decrease)
in cash/cash
equivalents 1,998 12,968 (6,093)
Cash and cash
equivalents at
beginning of period 6,418 12,511 12,511
---------- ---------- ----------
Cash and cash
equivalents at end of
period 8,416 25,479 6,418
---------- ---------- ----------
INVESTMENT PORTFOLIO SUMMARY
as at 31 March 2016
Cost Valuation % of net assets
GBP000 GBP000 by valuation
Venture capital investments:
Buoyant Upholstery 1,675 4,041 5.2
Silverwing 1,774 2,722 3.5
MSQ Partners Group 1,695 2,618 3.4
Lineup Systems 974 2,470 3.2
No 1 Traveller 2,173 2,364 3.0
Entertainment Magpie Group 1,611 2,059 2.6
Wear Inns 1,640 1,961 2.5
Weldex (International) Offshore
Holdings 3,262 1,959 2.5
Cawood Scientific 1,073 1,789 2.3
IDOX* 269 1,788 2.3
Biological Preparations Group 2,366 1,759 2.3
Closerstill Group 1,747 1,747 2.3
It's All Good 1,205 1,741 2.2
Axial Systems Holdings 1,004 1,738 2.2
Volumatic Holdings 1,762 1,694 2.2
------------ ------------ ------------
Fifteen largest venture capital
investments 24,230 32,450 41.7
Other venture capital investments 28,381 23,051 29.6
------------ ------------ ------------
Total venture capital investments 52,611 55,501 71.3
Listed equity investments 7,777 7,741 9.9
Listed interest-bearing
investments 6,223 6,043 7.8
------------ ------------ ------------
Total fixed asset investments 66,611 69,285 89.0
------------
Net current assets:
Cash and cash equivalents 8,416 10.8
Debtors less creditors 161 0.2
------------ ------------
Net assets 77,862 100.0
------------ ------------
* Quoted on AIM
**Listed on London Stock Exchange
BUSINESS RISKS
The board carries out a regular and robust review of the risk
environment in which the company operates. The principal risks and
uncertainties identified by the board which might affect the company's
business model and future performance, and the steps taken with a view
to their mitigation, are as follows:
Investment and liquidity risk: many of the company's investments are in
small and medium-sized unquoted and AIM-quoted companies which are VCT
qualifying holdings, and which by their nature entail a higher level of
risk and lower liquidity than investments in large quoted companies.
Mitigation: the directors aim to limit the risk attaching to the
portfolio as a whole by careful selection, close monitoring and timely
realisation of investments, by carrying out rigorous due diligence
procedures and maintaining a wide spread of holdings in terms of
financing stage and industry sector. The board reviews the investment
portfolio with the investment adviser on a regular basis.
Financial risk: most of the company's investments involve a medium- to
long-term commitment and many are relatively illiquid. Mitigation: the
directors consider that it is inappropriate to finance the company's
activities through borrowing except on an occasional short-term basis.
Accordingly they seek to maintain a proportion of the company's assets
in cash or cash equivalents in order to be in a position to take
advantage of new unquoted investment opportunities. The company has
very little direct exposure to foreign currency risk and does not enter
into derivative transactions.
Economic risk: events such as economic recession or general fluctuation
in stock markets and interest rates may affect the valuation of investee
companies and their ability to access adequate financial resources, as
well as affecting the company's own share price and discount to net
asset value. Mitigation: the company invests in a diversified portfolio
of investments spanning various industry sectors, and maintains
sufficient cash reserves to be able to provide additional funding to
investee companies where appropriate.
Stock market risk: some of the company's investments are quoted on the
London Stock Exchange or AIM and will be subject to market fluctuations
upwards and downwards. External factors such as terrorist activity can
negatively impact stock markets worldwide. In times of adverse
sentiment there can be very little, if any, market demand for shares in
smaller companies quoted on AIM. Mitigation: the company's quoted
investments are actively managed by specialist managers and the board
keeps the portfolio under ongoing review.
Credit risk: the company holds a number of financial instruments and
cash deposits and is dependent on the counterparties discharging their
commitment. Mitigation: the directors review the creditworthiness of
the counterparties to these instruments and cash deposits and seek to
ensure there is no undue concentration of credit risk with any one
party.
Legislative and regulatory risk: in order to maintain its approval as a
VCT, the company is required to comply with current VCT legislation in
the UK, which reflects the European Commission's State aid rules.
Changes to the UK legislation or the State aid rules in the future could
have an adverse effect on the company's ability to achieve satisfactory
investment returns whilst retaining its VCT approval. Mitigation: The
board and the investment adviser monitor political developments and
where appropriate seek to make representations either directly or
through relevant trade bodies.
Internal control risk: the company's assets could be at risk in the
absence of an appropriate internal control regime. Mitigation: the
board regularly reviews the system of internal controls, both financial
and non-financial, operated by the company and the investment adviser.
These include controls designed to ensure that the company's assets are
safeguarded and that proper accounting records are maintained.
VCT qualifying status risk: the company is required at all times to
observe the conditions laid down in the Income Tax Act 2007 for the
maintenance of approved VCT status. The loss of such approval could
lead to the company losing its exemption from corporation tax on capital
gains, to investors being liable to pay income tax on dividends received
from the company and, in certain circumstances, to investors being
required to repay the initial income tax relief on their investment.
Mitigation: the investment adviser keeps the company's VCT qualifying
status under continual review and its reports are reviewed by the board
on a quarterly basis. The board has also retained Philip Hare &
Associates LLP to undertake an independent VCT status monitoring role.
OTHER MATTERS
The unaudited half-yearly financial statements for the six months ended
31 March 2016 do not constitute statutory financial statements within
the meaning of Section 434 of the Companies Act 2006, have not been
reviewed or audited by the company's independent auditor and have not
been delivered to the Registrar of Companies. The comparative figures
for the year ended 30 September 2015 have been extracted from the
audited financial statements for that year, which have been delivered to
the Registrar of Companies. The auditor's report on those financial
statements (i) was unqualified, (ii) did not include any reference to
matters to which the auditor drew attention by way of emphasis without
qualifying the report and (iii) did not contain a statement under
Section 498(2) or (3) of the Companies Act 2006. The half-yearly
financial statements have been prepared on the basis of the accounting
policies set out in the annual financial statements for the year ended
30 September 2015, except where changes were required by the adoption of
FRS 102 "The Financial Reporting Standard applicable in the UK and
Republic of Ireland". An assessment of the impact of adopting FRS 102
has been carried out and no restatement of balances as at the transition
date, 1 October 2015, or of the comparative figures in the income
statement or balance sheet is considered necessary.
Each of the directors confirms that to the best of his knowledge the
half-yearly financial statements have been prepared in accordance with
the Statement "Half-yearly financial reports" issued by the UK
Accounting Standards Board and the half-yearly financial report includes
a fair review of the information required by (a) DTR 4.2.7R of the
Disclosure Rules and Transparency Rules, being an indication of
important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties
for the remaining six months of the year, and (b) DTR 4.2.8R of the
Disclosure Rules and Transparency Rules, being related party
transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial
position or performance of the entity during that period, and any
changes in the related party transactions described in the last annual
report that could do so.
The directors of the company at the date of this statement were Mr S J
Constantine (Chairman), Mr N J Beer, Mr R J Green, Mr T R Levett, Mr D A
Mayes and Mr H P Younger.
The calculation of the revenue and capital return per share is based on
the return on ordinary activities after tax for the period and on
94,713,918 (2015 94,798,353) ordinary shares, being the weighted average
number of shares in issue during the period.
The calculation of the net asset value per share is based on the net
assets at 31 March 2016 divided by the 93,959,820 (2015 95,399,820)
ordinary shares in issue at that date.
The first interim dividend of 3.0p per share and the second interim
dividend of 7.0p per share for the year ending 30 September 2016 will be
paid on 30 June 2016 to shareholders on the register at the close of
business on 3 June 2016.
A copy of the half-yearly financial report for the six months ended 31
March 2016 is expected to be posted to shareholders by 31 May 2016 and
will be available to the public at the registered office of the company
at Time Central, 32 Gallowgate, Newcastle upon Tyne NE1 4SN and on the
NVM Private Equity LLP website, www.nvm.co.uk.
Neither the contents of the NVM Private Equity LLP website nor the
contents of any website accessible from hyperlinks on the NVM Private
Equity LLP website (or any other website) is incorporated into, or forms
part of, this announcement.
This announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Northern Venture Trust PLC via Globenewswire
HUG#2013305
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