REG-Half-yearly report <Origin Href="QuoteRef">NTHV.L</Origin>
23/05/2017 15:05
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23 MAY 2017
NORTHERN VENTURE TRUST PLC
UNAUDITED HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 31 MARCH 2017
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 2016 and 30 September
2016)
Six months to Six months to Year to
31 March 31 March 30 September
2017 2016 2016
Net assets £76.9m £77.9m £77.2m
Net asset value per share 79.1p 82.9p 80.0p
Return per share: 0.9p 0.9p 1.6p
Revenue Capital Total 1.2p 1.9p 8.5p
2.1p 2.8p 10.1p
Dividend per share for the period: 3.0p 3.0p 3.0p
First interim dividend Second interim (special) dividend Final dividend Total 5.0p 7.0p 7.0p
- - 3.0p
8.0p 10.0p 13.0p
Cumulative returns to shareholders 79.1p 82.9p 80.0p
since launch: 151.5p 138.5p 148.5p
Net asset value per share Dividends paid per share* Net asset value plus dividends paid per share *Excluding interim dividends payable on 30 June 2017 230.6p 221.4p 228.5p
Mid-market share price at end of period 75.50p 76.75p 70.00p
Tax-free dividend yield (based on mid-market
share price at end of period):
Excluding special dividend Including special dividend 7.9% 7.8% 8.6%
14.6% 16.9% 18.6%
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 2017
The past six months have been relatively quiet in terms of portfolio
movements, but there has been considerable activity as the process of adapting
to the recent changes to the VCT rules continues. We completed a small
top-up share offer and achieved two significant investment sales, one of which
occurred just after the March period end but has been valued at the sale price
in the March balance sheet. Our cash position remains healthy and I am
pleased to report that the board has decided to declare a special dividend of
5.0p per share in recognition of the investment gains recorded over the past
12 months, in addition to the normal 3.0p interim dividend. The flow of
potential new investments is currently looking strong.
Results and dividend
The unaudited net asset value (NAV) per share at 31 March 2017 was 79.1p,
compared with the audited figure of 80.0p at 30 September 2016. The total
return per share before dividends for the six months ended 31 March 2017 as
shown in the income statement was 2.1p (six months ended 31 March 2016 2.8p),
equivalent to 2.6% of the NAV at the start of the period. Investment income
was slightly higher than in the corresponding period last year at £1.4
million, but this reflected the benefit of a one-off receipt of £0.4 million
from Optilan Group as mentioned below, and across the portfolio we have seen
the beginning of an inevitable downward trend in investment income as the
profile of the portfolio changes towards earlier stage investments in response
to the new VCT rules. The revenue return per share for the period was
unchanged at 0.9p.
We have declared an unchanged first interim dividend of 3.0p per share for the
year ending 30 September 2017. There has been a strong inflow of cash from
investment realisations since we last paid a special dividend in mid-2016, and
the VCT rules allow only a relatively short six month period for re-investment
of such receipts before they become non-qualifying if retained by the
company. Accordingly the directors have also decided to declare a special
dividend of 5.0p, which will be paid as a second interim dividend for the year
ending 30 September 2017. The first and second interim dividends, totalling
8.0p per share, will be paid on 30 June 2017 to shareholders on the register
on 2 June 2017.
We will continue to keep our dividend policy under review, and shareholders
should bear in mind that in the short to medium term the move towards
earlier-stage investments may have the effect of reducing the amounts of
income and realised gains available for distribution.
Investments
One new VCT-qualifying holding was acquired during the period, when £1.0
million was invested in Intelling Group, a Manchester-based business which
provides telemarketing and customer care services, mainly in the
business-to-consumer market. NVM has reported an increase recently in the
volume of work in progress on potential new investments, and we expect to see
this reflected in further investment activity in the second half of the year.
Two significant exits have been achieved since our last report, one just
before the March period end and one just after. Cawood Scientific was sold
in March in a secondary buyout funded by Inflexion Private Equity, generating
cash proceeds of £2.9 million and a gain of £1.8 million over the original
cost; in April we sold Optilan Group to Blue Water Energy for proceeds of
£2.2 million and a gain of £1.2 million, as well as recovering £0.4 million
of accrued loan stock interest. These investments, held for seven years and
nine years respectively, are excellent examples of how long-term funding from
VCTs can be used by growing companies to enhance shareholder value whilst
creating increased employment and contributing to the wider UK economy.
Our portfolio companies have generally continued to make good progress, and we
hope to see further exit activity later in the year.
Shareholder issues
In January 2017 we launched a top-up offer of new ordinary shares to raise up
to £4.3 million, in conjunction with similar offers by Northern 2 VCT and
Northern 3 VCT. The offer was restricted to existing investors in the
Northern VCTs and sold out almost immediately, demonstrating the strong level
of market demand for new shares in well-established VCTs. A substantial
number of applications had to be declined and we regret the disappointment
felt by unsuccessful applicants. The possibility of future share issues will
be kept under review, and will naturally depend on the rate of new investment
and realisations from the existing portfolio.
Our dividend investment scheme, which 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, continues to
operate.
We have maintained our policy of being willing to buy back the company's
shares in the market at a 5% discount to NAV. During the period under
review, however, secondary market demand was sufficient to accommodate
would-be sellers without the need for buy-backs by the company.
VCT legislation
We have come through a period of rapid change in the VCT legislation, and VCTs
and HM Revenue & Customs are still coming to terms with some of the practical
implications. In November 2016 the Government announced its Patient Capital
Review, with a remit to identify barriers to access to long-term finance for
growing firms in the UK and to assess what changes in government policy may be
needed to improve the supply of funding. In an uncertain economic climate,
with the political landscape also changing, we believe that VCTs have
continued to play a significant role in relation to this aspect of the UK
economy.
VCT qualifying status
The company has continued to meet the stringent 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.
Outlook
The unforeseen events of the past 12 months, both in the UK and on a global
stage, have emphasised the difficulty of making statements about what lies
ahead. Your company has over the years developed the resilience to cope with
changing circumstances and still produce satisfactory returns for
shareholders, and we therefore take a broadly positive view of the future.
On behalf of the Board
Simon Constantine
Chairman
The unaudited half-yearly financial statements for the six months ended 31
March 2017 are set out below.
INCOME STATEMENT
(unaudited) for the six months ended 31 March 2017
Six months ended 31 March 2017 Six months ended 31 March 2016
Revenue £000 Capital £000 Total £000 Revenue £000 Capital £000 Total £000
Gain on disposal of investments - 759 759 - 1,053 1,053
Movements in fair value of investments - 800 800 - 1,284 1,284
---------- ---------- ---------- ---------- ---------- ----------
- 1,559 1,559 - 2,337 2,337
Income 1,431 - 1,431 1,338 - 1,338
Investment management fee (199) (596) (795) (207) (622) (829)
Other expenses (204) - (204) (206) - (206)
---------- ---------- ---------- ---------- ---------- ----------
Return on ordinary activities before tax 1,028 963 1,991 925 1,715 2,640
Tax on return on ordinary activities (176) 176 - (104) 104 -
---------- ---------- ---------- ---------- ---------- ----------
Return on ordinary activities after tax 852 1,139 1,991 821 1,819 2,640
---------- ---------- ---------- ---------- ---------- ----------
Return per share 0.9p 1.2p 2.1p 0.9p 1.9p 2.8p
Year ended 30 September 2016
Revenue £000 Capital £000 Total £000
Gain on disposal of investments - 2,398 2,398
Movements in fair value of investments - 7,458 7,458
---------- ---------- ----------
- 9,856 9,856
Income 2,570 - 2,570
Investment management fee (404) (2,054) (2,458)
Other expenses (397) - (397)
---------- ---------- ----------
Return on ordinary activities before tax 1,769 7,802 9,571
Tax on return on ordinary activities (240) 240 -
---------- ---------- ----------
Return on ordinary activities after tax 1,529 8,042 9,571
---------- ---------- ----------
Return per share 1.6p 8.5p 10.1p
BALANCE SHEET
(unaudited) as at 31 March 2017
31 March 2017 31 March 2016 30 September 2016
£000 £000 £000
Fixed asset investments 66,858 69,285 73,572
---------- ---------- ----------
Current assets:
Debtors 597 330 369
Cash and cash equivalents 13,807 8,416 4,206
---------- ---------- ----------
14,404 8,746 4,575
Creditors (amounts falling due within one year) (4,388) (169) (947)
---------- ---------- ----------
Net current assets 10,016 8,577 3,628
---------- ---------- ----------
Net assets 76,874 77,862 77,200
---------- ---------- ----------
Capital and reserves:
Called-up equity share capital 24,302 23,490 24,110
Share premium 2,984 1,359 2,599
Capital redemption reserve 544 513 544
Capital reserve 40,805 47,521 40,514
Revaluation reserve 6,278 2,674 7,360
Revenue reserve 1,961 2,305 2,073
---------- ---------- ----------
Total equity shareholders' funds 76,874 77,862 77,200
---------- ---------- ----------
Net asset value per share 79.1p 82.9p 80.0p
STATEMENT OF CHANGES IN EQUITY
(unaudited) for the six months ended 31 March 2017
---------------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 2016 24,110 2,599 544 7,360 40,514 2,073 77,200
Return on ordinary activities
after tax for the period - - - (1,082) 2,221 852 1,991
Dividends paid - - - - (1,930) (964) (2,894)
Net proceeds of share issues 192 385 - - - - 577
---------- ---------- ---------- ---------- ---------- ---------- ----------
At 31 March 2017 24,302 2,984 544 6,278 40,805 1,961 76,874
---------- ---------- ---------- ---------- ---------- ---------- ----------
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
Dividends paid - - - - (1,897) (948) (2,845)
Re-purchase of shares (285) - 285 - (881) - (881)
---------- ---------- ---------- ---------- ---------- ---------- ----------
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 year ended 30 September 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 year - - - 3,993 4,049 1,529 9,571
Dividends paid - - - - (10,354) (1,888) (12,242)
Net proceeds of share issues 651 1,240 - - - - 1,891
Re-purchase of shares (316) - 316 - (968) - (968)
---------- ---------- ---------- ---------- ---------- ---------- ----------
At 30 September 2016 24,110 2,599 544 7,360 40,514 2,073 77,200
---------- ---------- ---------- ---------- ---------- ---------- ----------
STATEMENT OF CASH FLOWS
(unaudited) for the six months ended 31 March 2017
Six months ended Six months ended Year ended
31 March 2017 31 March 2016 30 September 2016
£000 £000 £000
Cash flows from operating activities:
Return on ordinary activities before tax 1,991 2,640 9,571
Adjustments for:
Gain on disposal of investments (759) (1,053) (2,398)
Movement in fair value of investments (800) (1,284) (7,458)
(Increase)/decrease in debtors (266) (28) (29)
Increase/(decrease) in creditors (856) (283) 495
---------- ---------- ----------
Net cash inflow/(outflow) from operating activities (690) (8) 181
---------- ---------- ----------
Cash flows from investing activities:
Purchase of investments (2,496) (914) (10,471)
Sale/repayment of investments 10,807 6,646 19,397
---------- ---------- ----------
Net cash inflow from investing activities 8,311 5,732 8,926
---------- ---------- ----------
Cash flows from financing activities:
Issue of shares 592 - 1,899
Share issue expenses (15) - (8)
Share subscriptions held pending allotment 4,297 - -
Repurchase of ordinary shares for cancellation - (881) (968)
Dividends paid on ordinary shares (2,894) (2,845) (12,242)
---------- ---------- ----------
Net cash inflow/(outflow) from financing activities 1,980 (3,726) (11,319)
---------- ---------- ----------
Net increase/(decrease) in cash/cash equivalents 9,601 1,998 (2,212)
Cash and cash equivalents at beginning of period 4,206 6,418 6,418
---------- ---------- ----------
Cash and cash equivalents at end of period 13,807 8,416 4,206
---------- ---------- ----------
INVESTMENT PORTFOLIO SUMMARY
as at 31 March 2017
Cost £000 Valuation £000 % of net assets by valuation
Venture capital investments:
Entertainment Magpie Group 1,610 5,516 7.2
No 1 Lounges 2,006 4,012 5.2
Buoyant Upholstery 1,674 3,263 4.2
MSQ Partners Group 1,695 2,798 3.6
Lineup Systems 974 2,468 3.2
IDOX* 238 2,210 2.9
Optilan Group 1,000 2,196 2.9
Agilitas IT Holdings 1,662 1,865 2.4
Wear Inns 1,640 1,854 2.4
Biological Preparations Group 2,366 1,759 2.3
It's All Good 1,205 1,751 2.3
Closerstill Group 1,747 1,747 2.3
Volumatic Holdings 1,595 1,677 2.2
Weldex (International) Offshore Holdings 3,262 1,670 2.2
Graza 1,581 1,581 2.1
------------ ------------ ------------
Fifteen largest venture capital investments 24,255 36,367 47.4
Other venture capital investments 26,311 19,247 25.0
------------ ------------ ------------
Total venture capital investments 50,566 55,614 72.4
Listed equity investments 5,183 6,373 8.3
Listed interest-bearing investments 4,831 4,871 6.3
------------ ------------ ------------
Total fixed asset investments 60,580 66,858 87.0
------------
Net current assets:
Cash and cash equivalents 13,807 18.0
Debtors less creditors (3,791) (5.0)
------------ ------------
Net assets 76,874 100.0
------------ ------------
*Quoted on AIM
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 2017 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 2016
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 2016.
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 96,859,127 (2016
94,713,918) 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 2017 divided by the 97,209,695 (2016 93,959,820) ordinary shares in
issue at that date.
The first interim dividend of 3.0p per share and the second interim dividend
of 5.0p per share for the year ending 30 September 2017 will be paid on 30
June 2017 to shareholders on the register at the close of business on 2 June
2017.
A copy of the half-yearly financial report for the six months ended 31 March
2017 is expected to be posted to shareholders by 2 June 2017 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 Corporate Solutions on behalf of
Nasdaq 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.
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