Annual Financial Report for the Period Ended 31 March 2023
15/06/2023 15:00
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15 JUNE 2023
NORTHERN VENTURE TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE PERIOD ENDED 31 MARCH 2023
Northern Venture Trust PLC is a Venture Capital Trust (VCT) whose investment
adviser is Mercia Fund Management Limited. The trust was one of the first VCTs
launched on the London Stock Exchange in 1995. It invests mainly in unquoted
venture capital holdings and aims to provide high long-term tax-free returns
to shareholders through a combination of dividend yield and capital growth.
This report covers the eighteen month period to 31 March 2023.
Financial highlights (comparative figures as at 31 March 2022 and 30 September
2021):
18m period ended Unaudited 12m period ended Unaudited 12m period ended Year ended
31 March 31 March 31 March 30 September
2023 2023 2022 2021
Net assets £102.5m £102.5m £109.9m £119.3m
Net asset value per share 62.1p 62.1p 68.4p 74.1p
Return per share
Revenue (0.3)p (0.3)p 0.2p 0.2p
Capital (5.7)p (2.1)p (1.5)p 13.7p
Total (6.0)p (2.4)p (1.3)p 13.9p
Dividend per share declared in respect of the period
Interim dividend 2.0p 2.0p 2.0p 2.0p
Second interim/special dividend 2.0p 2.0p 6.0p 6.0p
Proposed final dividend 2.0p 0.0p 2.0p 2.0p
Total 6.0p 4.0p 10.0p 10.0p
Cumulative return to shareholders since launch
Net asset value per share 62.1p 62.1p 68.4p 74.1p
Dividends paid per share* 188.5p 188.5p 184.5p 182.5p
Net asset value plus dividends paid per share 250.6p 250.6p 252.9p 256.6p
Mid-market share price at end of period 57.5p 57.5p 66.0p 70.25p
Share price discount to net asset value 7.4% 7.4% 3.5% 5.2%
Annualised tax-free dividend yield**
Excluding special dividend 5.4% 5.8% 5.0% 5.7%
Including special dividend 5.4% 5.8% 12.5% 14.1%
*Excluding proposed final dividend payable on 18 August 2023
** Based on net asset value per share at the start of the period
Enquiries:
James Sly / Sarah Williams, Mercia Asset Management PLC – 0330 223 1430
Website: www.mercia.co.uk/vcts/nvt/
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CHAIR’S STATEMENT
Overview
Following our change of year end from 30 September to 31 March, this report
covers the 18 months ended 31 March 2023.
A great deal has changed in the UK’s macroeconomic climate over the past 18
months. At the start of the period, the impact of COVID-19 lingered over
supply chains, and as the period progressed the rate of inflation increased
rapidly, as did interest rates. This has not come without its challenges to
the portfolio, and while our investment adviser has spent considerable time
working with management teams, our portfolio valuations in this report reflect
how the financial markets have shifted over this period, in particular the
re-rating of technology-based and consumer-facing stocks.
Against this backdrop, the portfolio has remained relatively robust, with few
failures, and there have been several strong realisations in the past 18
months. The Company has also experienced a record investment period, with
£25.0 million deployed including £17.0 million into new opportunities.
The Company raised £12.0 million before fees in the period from two separate
offers and intends to raise further funds in the 2023/24 tax year to enable us
to continue to invest over the next three years.
Results and dividend
In the 18 months ended 31 March 2023 the Company suffered a negative return on
ordinary activities of minus 6.0 pence per share (year ended 30 September
2021: gain of 13.9 pence), representing a total return of minus 8.1% on the
opening net asset value (NAV) per share. The majority of this reduction can be
attributed to just two holdings, musicMagpie and Oddbox, which over the period
saw reductions in their holding values due to poorer than expected trading and
the change in market sentiment towards consumer facing companies. The NAV per
share as at 31 March 2023, after deducting dividends paid during the period of
6.0 pence, was 62.1 pence, compared with 74.1 pence at 30 September 2021.
Investment income was lower than the prior year at £0.9 million (2021: £1.4
million), reflecting the move away from income-yielding investments as the
portfolio mix continued to pivot towards earlier stage ventures. However,
after more than a decade of record-low interest rates, the Company has
recently allocated part of its liquidity to a money market fund to diversify
its risk and seek a higher return compared to that which is available from
traditional banks; this will increase investment income over the coming
financial years for as long as interest rates remain higher.
In 2018 we revised our dividend policy in the light of the new VCT rules for
investment introduced in 2015 and 2017, which we expected to result in more
volatile returns. We introduced an annualised target dividend yield of 5% of
opening NAV, which has been exceeded in every period since.
After careful consideration, the Board has proposed a final dividend of 2.0
pence per share, bringing the total dividend for the period to 6.0 pence per
share, which represents an annualised tax-free yield of 5.4% on the opening
net asset value per share of 74.1 pence. The final dividend, if approved, will
be paid on 18 August 2023 to shareholders on the register on 21 July 2023.
Our dividend investment scheme, under which dividends can be re-invested in
new ordinary shares free of dealing costs and with the benefit of the tax
reliefs available on new VCT share subscriptions, continues to operate with
around 17% participation during the period. Instructions on how to join the
scheme are included within the dividend section of our website, which can be
found here: mercia.co.uk/
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Investment Portfolio
Investment activity has reached record levels over the period, with £17.0
million of capital provided to fifteen new venture capital investments and
£8.0 million of follow on capital invested into the existing portfolio. The
investments into new portfolio companies were made across a variety of sectors
including technology and life sciences. We also made strong progress in
realising the Company’s mature portfolio acquired under the previous VCT
rules with the remaining such investments now representing 22% by value of the
total venture capital portfolio (30 September 2021: 37%).
The value of the portfolio fell by £9.8 million (6.1 pence per share) in the
18 months, suffering two significant write-downs; the value of musicMagpie,
which is listed on AIM fell by £6.2 million (3.8 pence per share) and the
value of Oddbox was written down by £4.2 million (2.6 pence per share). The
portfolio was further exposed to the volatility of markets with its listed
investments reducing by £0.9 million (0.5 pence per share). This is clearly a
disappointing result, but it is worth noting that both musicMagpie and Oddbox
generated significant realised returns for the portfolio in the preceding
period, which exceed the write-downs in this period, through their partial
realisations in cash.
In the unquoted portfolio, while we experienced reductions in the valuations
of other consumer-facing portfolio companies, which represent only 16% of the
total, we also experienced strong performances from others, with Evotix in
particular growing rapidly over the period. In this report we have valued
Evotix at the value realised shortly after the balance sheet date, resulting
in a gain of £8.3 million (5.1 pence per share) in the period and £9.9
million overall, 4.6x our original investment.
It was a busy period for other realisation activity, with several notable
transactions. The highlights during the period included the sales of
Currentbody.com, Intelling Group and Lineup Systems for lifetime returns of
2.9x, 3.6x and 7.8x respectively. In total £26.1 million was generated in
sales proceeds over the period, representing a blended 1.9x multiple on cost.
Share offers and liquidity
In the period gross proceeds of £6.0 million were received from the fully
subscribed 2021/2022 share offer. Additionally, following the public share
offer launched in January 2023, 9,741,182 new ordinary shares were issued just
after the period end in April 2023 for gross proceeds of a further £6.0
million.
Following the smaller top-up offers in the 2021/22 and 2022/23 tax years, and
taking into account the increased rate of investment, the Board is pleased to
announce that the Company will launch a prospectus top-up offer in the 2023/24
tax year for £14.0 million, with an over-allotment facility of £6.0 million.
This offer will launch in September 2023, and full details will be published
shortly.
Share buy-backs
We have maintained our policy of being willing to buy back the Company’s
shares in the market when necessary, in order to maintain liquidity, at a 5%
discount to NAV. During the 18 month period ended 31 March 2023 a total of
7,335,532 (year ended 30 September 2021: 2,620,797) shares were repurchased by
the Company for cancellation at an average price of 61.2 pence (year ended 30
September 2021: 70.2 pence), representing 4.6% (2021: 1.6%) of the opening
issued share capital.
Changes to the performance-related management fee (‘performance fee’)
Following a review of current arrangements by the Board, a resolution is
included in the Circular for the General Meeting proposing changes to the
investment advisory agreement in relation to the performance fee with the
investment adviser. The changes in VCT legislation in 2015 required the
Company to focus new investments on earlier stage companies which, by their
nature, are higher risk and therefore likely to deliver more volatile
investment returns. It has become clear in recent years that the current
arrangements no longer work either for the investment adviser or for the
Company.
In order to align future performance fees better with shareholder returns and
harmonise the methodology and fee rates across the Northern VCTs, a number of
changes are proposed. In particular, the definition and operation of the
high-water mark, the lowering of both the hurdle rate to 5% and the amount
earned above this rate to 14%, will ensure that strong returns delivered
consistently, and not just in a single year, will be rewarded appropriately.
As part of these changes the Board has agreed with the investment adviser that
80% of any performance fee generated will be paid to members of the VCT
investment team, thereby aligning the personal interests of the investment
team directly with those of shareholders. Full details of the changes are set
out in the accompanying Circular for the upcoming General Meeting.
Responsible Investment
The Company is mindful of its Environmental, Social and Governance (ESG)
responsibilities and we have outlined our evolving approach in the annual
report.
Geopolitical and other macroeconomic risks
The Company’s investments may be affected by regional events or politics. A
recent example of this is the high-inflation environment in the aftermath of
COVID-19 and the conflict in Ukraine. The Board has no control over such macro
events, and as the Company’s investments are domiciled in the UK with only a
limited presence in the rest of the world, risks are primarily localised to
those facing the UK economy. As a result of the conflict in Ukraine, during
the period our investment adviser undertook a review of the entire portfolio
for links to sanctioned individuals and companies, took appropriate action
where required, and continues to monitor the situation carefully. A review of
portfolio company exposure to Silicon Valley bank was also performed during
the period and appropriate action taken in the days before the bank’s UK
subsidiary was acquired by HSBC.
VCT legislation and qualifying status
The Company has continued to meet the stringent and complex qualifying
conditions laid down by HM Revenue & Customs for maintaining its approval as a
VCT. The investment adviser 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.
The upcoming 2025 ‘sunset clause’ was a European state aid requirement
when the VCT scheme received state aid approval in 2015, which means that
without a change in legislation investors will not receive upfront tax relief
when investing in VCTs after this date. While the government has signalled
that it will extend the scheme, to date no formal legislation has been
introduced to enact this commitment. The Company and the investment adviser
will continue to monitor progress in this area. The Board considers that the
Company, and VCTs more generally, are successfully delivering in-line with the
Government’s mandate, which is to channel money into higher-risk,
early-stage businesses.
Whilst no further amendments to the VCT legislation were announced by the
Chancellor in his 2023 Budget statement, it is possible that further changes
will be made in the future. We will continue to work closely with our
investment adviser to maintain compliance with the scheme rules at all times.
HMRC has recently clarified the rules relating to the financial health of
companies at the time of any investment, which may limit VCTs’ ability to
make investments in some cases. However a recent review demonstrated that very
few of the Company’s current investments are likely to be affected in the
near term, concluding that our portfolio is not exposed significantly to this.
Annual General Meeting
The Company’s AGM will be held at 12.30pm on 21 July 2023. The AGM provides
an excellent opportunity for shareholders, Directors and the investment
adviser to meet in person, exchange views and comment. We will hold the AGM in
person at Reed Smith LLP, Broadgate Tower, 20 Primrose Street, London, EC2A
2RS. Following positive feedback received from the last three years, we also
intend to offer remote access for shareholders through an online webinar
facility for those who would prefer not to travel. Full details and formal
notice of the AGM are set out in a separate document. The General Meeting
regarding the proposed changes to the performance-related management fee will
be held immediately after the conclusion of the AGM.
Board Retirement
Tim Levett is retiring from the Board and so will not be standing for
re-election at the AGM in July. Tim founded our Company almost 30 years ago,
having established Northern Venture Managers as one of the leading regional
investors in the eighties. He has been instrumental in promoting venture
capital trusts in general and the Northern Venture Trusts in particular to
government and financial advisers for decades. He was a founding member and
recent chairman of the Venture Capital Trust Association, which represents
more than 90% of the VCT industry by value. His contribution to the Board has
been immeasurable and we will miss his deep knowledge and insight. On behalf
of the Board and all shareholders, I would like to thank Tim for his
exceptional service to the Company over so many years and wish him well in his
retirement.
Outlook
The geopolitical and economic conditions for the next twelve months are likely
to continue to be challenging and this provides a good opportunity to invest
for the longer term and support our existing portfolio companies. Failure
rates remain low and despite some reductions in valuations this year, the
Directors remain encouraged by the resilience of the wider portfolio. We
remain committed to supporting the development of entrepreneurial early-stage
businesses in the UK.
Simon Constantine
Chair
15 June 2023
Extracts from the audited financial statements for the 18 month period ended
31 March 2023 are set out below.
Income Statement
for the 18 month period ended 31 March 2023
18 month p eriod ended 31 March 2023 Year ended 30 September 2021
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gain/(loss) on disposal of investments - 2,944 2,944 - 8,380 8,380
Unrealised fair value gains/(losses) on investments - (9,776) (9,776) - 17,660 17,660
- (6,832) (6,832) - 26,040 26,040
Dividend and interest income 948 - 948 1,372 - 1,372
Investment management fee (811) (2,432) (3,243) (579) (4,275) (4,854)
Other expenses (796) - (796) (472) - (472)
Return before tax (659) (9,264) (9,923) 321 21,765 22,086
Tax on return 181 (181) - (15) 15 -
Return after tax (478) (9,445) (9,923) 306 21,780 22,086
Return per share (0.3)p (5.7)p (6.0)p 0.2p 13.7p 13.9p
Balance Sheet
as at 31 March 2023
31 March 2023 30 September 2021
£000 £000
Fixed assets
Investments 88,609 96,563
Current assets
Debtors 70 308
Cash and deposits 14,001 25,106
14,071 25,414
Creditors (amounts falling due within one year) (183) (2,679)
Net current assets 13,888 22,735
Net assets 102,497 119,298
Capital and reserves
Called-up equity share capital 41,230 40,268
Share premium 19,394 14,608
Capital redemption reserve 5,342 3,508
Capital reserve 34,433 38,325
Revaluation reserve 1,698 21,430
Revenue reserve 400 1,159
Total equity shareholders' funds 102,497 119,298
Net asset value per share 62.1p 74.1p
Statement of changes in equity
for the 18 month period ended 31 March 2023
Non-distributable reserves Distributable reserves Total
Called-up share capital Share premium Capital redemption reserve Revaluation reserve* Capital reserve Revenue reserve
£000 £000 £000 £000 £000 £000 £000
At 1 October 2021 40,268 14,608 3,508 21,430 38,325 1,159 119,298
Return after tax - - - (19,732) 10,287 (478) (9,923)
Dividends paid - - - - (9,609) (281) (9,890)
Net proceeds of share issues 2,796 4,786 - - - - 7,582
Shares purchased for cancellation (1,834) - 1,834 - (4,570) - (4,570)
At 31 March 2023 41,230 19,394 5,342 1,698 34,433 400 102,497
Year ended 30 September 2021 Non-distributable reserves Distributable reserves Total
Called-up share capital Share premium Capital redemption reserve Revaluation reserve* Capital reserve Revenue reserve
£000 £000 £000 £000 £000 £000 £000
At 1 October 2020 39,905 12,745 2,853 18,086 37,872 1,330 112,791
Return after tax - - - 3,344 18,436 306 22,086
Dividends paid - - - - (16,144) (477) (16,621)
Net proceeds of share issues 1,018 1,863 - - - - 2,881
Shares purchased for cancellation (655) - 655 - (1,839) - (1,839)
At 30 September 2021 40,268 14,608 3,508 21,430 38,325 1,159 119,298
Statement of cash flows
for the 18 month period ended 31 March 2023 Period ended Year ended
31 March 2023 30 September 2021
£000 £000
Cash flows from operating activities
Return before tax (9,923) 22,086
Adjustments for:
(Gain)/loss on disposal of investments (2,944) (8,380)
Movements in fair value of investments 9,776 (17,660)
Decrease in debtors 238 366
Decrease in creditors (2,496) 2,251
Net cash outflow from operating activities (5,349) (1,337)
Cash flows from investing activities
Purchase of investments (27,450) (13,506)
Proceeds on disposal of investments 28,572 34,835
Net cash inflow/(outflow) from investing activities 1,122 21,329
Cash flows from financing activities
Issue of ordinary shares 7,796 2,921
Share issue expenses (214) (40)
Purchase of ordinary shares for cancellation (4,570) (1,839)
Equity dividends paid (9,890) (16,621)
Net cash (outflow)/inflow from financing activities (6,878) (15,579)
Increase/(decrease) in cash and cash equivalents (11,105) 4,413
Cash and cash equivalents at beginning of period 25,106 20,693
Cash and cash equivalents at end of period 14,001 25,106
INVESTMENT PORTFOLIO SUMMARY
as at 31 March 2023
Cost Valuation Like for like valuation increase/ (decrease) over period** % of net assets
£'000 £'000 % by value
Fifteen largest venture capital investments
1 Evotix (formerly SHE) 2,766 12,658 188.6% 12.3%
2 Grip-UK (t/a Climbing Hangar) 3,530 3,530 0.0% 3.4%
3 Volumatic Holdings 216 3,275 17.1% 3.2%
4 Gentronix 1,362 3,082 111.5% 3.0%
5 Tutora (t/a Tutorful) 2,722 2,837 4.7% 2.8%
6 Rockar 1,877 2,795 36.9% 2.7%
7 Newcells Biotech 2,479 2,519 (10.8)% 2.5%
8 Biological Preparations Group 2,366 2,267 (17.7)% 2.2%
9 Adludio 2,103 2,103 0.0% 2.1%
10 Clarilis 1,972 1,972 (22.8)% 1.9%
11 IDOX* 238 1,970 (10.9)% 1.9%
12 Administrate 2,374 1,901 5.6% 1.9%
13 Buoyant Upholstery 1,173 1,895 (31.6)% 1.8%
14 Pure Pet Food 1,774 1,845 0.3% 1.8%
15 Netacea 1,781 1,781 0.0% 1.7%
Other venture capital investments
16 Project Glow Topco (t/a Currentbody.com) 1,686 1,686 0.0% 1.6%
17 Social Value Portal 1,573 1,573 0.0% 1.5%
18 Enate 1,516 1,516 0.0% 1.5%
19 Ridge Pharma 1,497 1,500 0.2% 1.5%
20 Forensic Analytics 1,490 1,490 0.0% 1.5%
21 Turbine Simulated Cell Technologies 1,433 1,433 0.0% 1.4%
22 Broker Insights 1,395 1,395 0.0% 1.4%
23 Optellum 1,276 1,276 0.0% 1.2%
24 Duke & Dexter 1,237 1,246 0.7% 1.2%
25 VoxPopMe 1,218 1,205 (12.6)% 1.2%
26 Weldex (International) Offshore Holdings 3,262 1,137 (41.0)% 1.1%
27 musicMagpie* 238 1,111 (85.4)% 1.1%
28 Centuro Global 1,038 1,038 0.0% 1.0%
29 Pimberly 1,008 1,008 0.0% 1.0%
30 Send Technology Solutions 974 974 0.0% 1.0%
31 Axis Spine Technologies 955 955 0.0% 0.9%
32 Wonderush (t/a Hownow) 947 947 0.0% 0.9%
33 LMC Software 929 929 0.0% 0.9%
34 Fresh Approach (UK) Holdings 965 899 (0.3)% 0.9%
35 Locate Bio 876 876 0.0% 0.9%
36 Moonshot 874 874 0.0% 0.9%
37 Naitive Technologies 787 787 0.0% 0.8%
38 Oddbox 1,093 753 (84.7)% 0.7%
39 Northrow 1,427 730 (45.7)% 0.7%
40 Atlas Cloud 704 704 1.1% 0.7%
41 Intuitive Holding 1,674 686 (5.4)% 0.7%
42 Sen Corporation 681 681 0.0% 0.7%
43 Medovate 1,770 534 (67.5)% 0.5%
44 Thanksbox (t/a Mo) 1,559 518 (52.3)% 0.5%
45 Synthesized 510 510 0.0% 0.5%
46 Rego Technologies (t/a Upp) (formerly Volo) 2,369 470 (13.5)% 0.5%
47 Seahawk Bidco 513 467 (21.3)% 0.5%
48 Nutshell 734 385 (47.6)% 0.4%
49 Haystack Dryers 1,661 242 42.8% 0.2%
50 Arnlea Holdings 1,305 226 17.9% 0.2%
51 Sorted Holdings 3,022 212 (87.5)% 0.2%
52 Customs Connect Group 1,525 121 57.1% 0.1%
53 Angle* 131 73 (61.0)% 0.1%
54 RTC Group* 436 57 (64.3)% 0.0%
55 Velocity Composites* 108 43 (14.9)% 0.0%
56 Quotevine 1,311 - (100.0)% 0.0%
57 Ablatus Therapeutics 612 - (100.0)% 0.0%
Total venture capital investments 79,052 79,697 77.8%
Listed equity investments 7,859 8,912 8.7%
Total fixed asset investments 86,911 88,609 86.5%
Net current assets 13,888 13.5%
Net assets 102,497 100.0%
* Quoted on AIM
**This percentage change in ‘like for like’ valuations is a comparison of
the 31 March 2023 valuations with the 30 September 2021 valuations (or where a
new investment has been made in the period, the investment amount), having
adjusted for any partial disposals, loan stock repayments or new and follow-on
investments in the period.
RISK MANAGEMENT
The Board carries out a regular and robust assessment of the risk environment
in which the Company operates and seeks to identify new risks as they emerge.
The principal and emerging 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: investment in smaller and unquoted companies,
such as those in which the Company invests, involves a higher degree of risk
than investment in larger listed companies because they generally have limited
product lines, markets and financial resources and may be more dependent on
key individuals. The securities of smaller companies in which the Company
invests are typically unlisted, making them illiquid, and this may cause
difficulties in valuing and disposing of the securities. The Company may
invest in businesses whose shares are quoted on AIM – the fact that a share
is quoted on AIM does not mean that it can be readily traded and the spread
between the buying and selling prices of such shares may be wide.
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
within the rules of the VCT scheme. 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 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 pursue new
unquoted investment opportunities and to make follow-on investments in
existing portfolio companies. 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, exchange rates 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. The level of economic risk has been elevated most recently by
inflationary pressures, interest rate increases, and supply shortages.
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 it is
appropriate and in the interests of the Company to do so. The investment
adviser typically provides an investment executive to actively support the
Board of each unquoted investee company. At all times, and particularly during
periods of heightened economic uncertainty, the investment executives share
best practice from across the portfolio with investee management teams in
order to mitigate economic risk.
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, political
activity or global health crises, can negatively impact stock markets
worldwide. In times of adverse sentiment there may 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, including Mercia in the case of the AIM-quoted
investments, and the Board keeps the portfolio and the actions taken 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.
Changes to UK legislation 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 which is able to operate effectively
even during times of disruption.
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: while it is the intention of the Directors that
the Company will be managed so as to continue to qualify as a VCT, there can
be no guarantee that this status will be maintained. A failure to continue
meeting the qualifying requirements could result in the loss of VCT tax
relief, the Company losing its exemption from corporation tax on capital
gains, to shareholders being liable to pay income tax on dividends received
from the Company and, in certain circumstances, to shareholders 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.
DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the annual report and financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law they are required to prepare the financial
statements in accordance with UK accounting standards, including FRS 102
‘The Financial Reporting Standard applicable in the UK and Republic of
Ireland’.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of its profit or loss for the period. In
preparing these financial statements, the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and estimates that are reasonable and prudent;
* state whether applicable UK accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements;
* assess the Company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern; and
* use the going concern basis of accounting unless they either intend to
liquidate the Company or to cease operations, or have no realistic alternative
but to do so.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that its financial statements comply with the Companies
Act 2006. They are responsible for such internal control as they determine
is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the Company and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors’ Remuneration
Report and Corporate Governance statement that complies with that law and
those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s website.
Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
The Directors confirm that to the best of their knowledge:
* the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
* the Strategic Report and Directors' Report includes a fair review of the
development and performance of the business and the position of the issuer,
together with a description of the principal risks and uncertainties that they
face.
The Directors consider the annual report and accounts, taken as a whole, is
fair, balanced and understandable and provides the information necessary for
shareholders to assess the Company’s position and performance, business
model and strategy.
The Directors of the company at the date of this statement were Mr S J
Constantine (Chair), Mr R J Green, Ms D N Hudson, Mr T R Levett, and Mr D A
Mayes.
OTHER MATTERS
The above summary of results for the 18 month period ended 31 March 2023 does
not constitute statutory financial statements within the meaning of Section
435 of the Companies Act 2006 and has not been delivered to the Registrar of
Companies. Statutory financial statements will be filed with the Registrar of
Companies in due course; the independent auditor’s report on those financial
statements under Section 495 of the Companies Act 2006 is unqualified, does
not include any reference to matters to which the auditor drew attention by
way of emphasis without qualifying the report and does not contain a statement
under Section 498 (2) or (3) of the Companies Act 2006.
The calculation of return per share is based on the loss after tax for the 18
months ended 31 March 2023 of £9,923,000 (12 months to 30 September 2021:
profit of £22,086,000) and on 165,209,895 (12 months to 30 September 2021:
159,349,187) ordinary shares, being the weighted average number of shares in
issue during the period.
The calculation of the net asset value per share as at 31 March 2023 is based
on the net assets of £102,497,000 (12 months to 30 September 2021:
119,298,000) divided by the 164,920,166 (12 months to 30 September 2021:
161,070,303) ordinary shares in issue at that date.
If approved by shareholders, the proposed final dividend of 2.0 pence per
share for the period ended 31 March 2023 will be paid on 18 August 2023 to
shareholders on the register at the close of business on 21 July 2023.
The full annual report including financial statements for the 18 month period
ended 31 March 2023 is expected to be made available to shareholders on or
around 26 June 2023 and will be available to the public at the registered
office of the company at Forward House, 17 High Street, Henley-in-Arden B95
5AA and on the company’s website.
Neither the contents of the Mercia Asset Management PLC website, nor the
contents of any website accessible from hyperlinks on the Mercia Asset
Management PLC website (or any other website), are incorporated into, or form
part of, this announcement