REG-Half-yearly report <Origin Href="QuoteRef">NTHV.L</Origin>
17/05/2016 16:05
17 MAY 2016
NORTHERN VENTURE TRUST PLC
UNAUDITED HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 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 31 March 2016 Six months to 31 March 2015 Year to 30 September 2015
Net assets £77.9m £84.5m £78.9m
Net asset value per share 82.9p 88.6p 83.0p
Return per share: Revenue Capital Total 0.9p 1.9p 2.8p 1.1p 2.7p 3.8p 2.0p 5.2p 7.2p
Dividend per share for the period First interim dividend Second interim (special) dividend Final dividend Total 3.0p 7.0p - 10.0p 3.0p 6.0p - 9.0p 3.0p 6.0p 3.0p 12.0p
Cumulative returns to shareholders since launch: Net asset value per share Dividends paid per share* Net asset value plus dividends paid per share *Excluding interim dividends payable on 30 June 2016 82.9p 138.5p 221.4p 88.6p 126.5p 215.1p 83.0p 135.5p 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 Including special dividend 7.8% 16.9% 7.5% 15.0% 7.9% 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 MONTHS ENDED 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 £1.1 million over September 2015 carrying value, and
£3.4 million over original cost. In addition, there was a net uplift of
£1.3 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 £3.5
million and a gain of £2.0 million over cost. A further £0.5 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 £1.5 million and a gain of £0.7 million.
We also received deferred proceeds totalling £0.7 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
£0.5 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 £0.9 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 £15 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 £5 million annual limit on the amount that
companies can raise from State aided sources such as VCTs, there will be a new
£12 million lifetime limit (£20 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 £000 Capital £000 Total £000 Revenue £000 Capital £000 Total £000
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 share 0.9p 1.9p 2.8p 1.1p 2.7p 3.8p
Year ended 30 September 2015
Revenue £000 Capital £000 Total £000
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
£000 £000 £000
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
Share capital Share premium Capital redemption reserve Revaluation reserve Capital reserve Revenue reserve
£000 £000 £000 £000 £000 £000 £000
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
Share capital Share premium Capital redemption reserve Revaluation reserve Capital reserve Revenue reserve
£000 £000 £000 £000 £000 £000 £000
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
Share capital Share premium Capital redemption reserve Revaluation reserve Capital reserve Revenue reserve
£000 £000 £000 £000 £000 £000 £000
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
£000 £000 £000
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 £000 Valuation £000 % of net assets 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
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