Unaudited Half-Yearly Financial Report for the Six Month Period Ended 30 September 2023
23/11/2023 14:00
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23 NOVEMBER 2023
NORTHERN VENTURE TRUST PLC
UNAUDITED HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTH PERIOD ENDED 30
SEPTEMBER 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 long-term tax-free returns to
shareholders through a combination of dividend yield and capital growth.
Financial highlights (comparative figures as at 30 September 2022 and 31 March
2023):
Six months ended Six months ended Eighteen months ended
30 September 30 September 31 March
2023 2022 2023
Net assets £106.6m £106.2m £102.5m
Net asset value per share 61.4p 63.5p 62.1p
Return per share
Revenue 0.2p (0.2)p (0.3)p
Capital 1.1p (2.8)p (5.7)p
Total 1.3p (3.0)p (6.0)p
Dividend per share declared in respect of the period 1.6p 2.0p 6.0p
Cumulative return to shareholders since launch
Net asset value per share 61.4p 63.5p 62.1p
Dividends paid per share* 190.5p 186.5p 188.5p
Net asset value plus dividends paid per share 251.9p 250.0p 250.6p
Mid-market share price at end of period 56.50p 61.75p 57.50p
Share price discount to net asset value 8.0% 2.8% 7.4%
Tax-free dividend yield (based on the net asset value per share)** 6.3% 5.4% 5.4%
*Excluding interim dividend not yet paid.
**The annualised dividend yield is calculated by dividing the dividends paid
in respect of the 12 month period ended on each reference date by the net
asset value per share at the start of the 12 month period.
Enquiries:
James Sly, Mercia Asset Management PLC – 0330 223 1430
Website: www.mercia.co.uk/vcts
HALF-YEARLY MANAGEMENT REPORT FOR THE SIX MONTH PERIOD ENDED 30 SEPTEMBER 2023
Over the past six months, the UK economy has faced numerous challenges
including high inflation and little growth. Despite this backdrop, your
Company has continued to provide much needed investment into early-stage
companies, support for its existing portfolio companies and achieve returns
through realisations.
Venture capital investment activity and portfolio update
Despite the macroeconomic backdrop, we are pleased to report that a number of
our venture investments have performed well over the period, reflected in an
overall increase in the valuation of the unquoted portfolio. Where portfolio
companies have struggled or are at risk of failure, we have also made a number
of reductions in valuations to reflect our current assessment. The listed AIM
portfolio has stabilised following a decline in the previous financial period.
Further progress has been made on the development of the portfolio and
deployment of our cash reserves, with two new venture capital investments
totalling £3.0 million made during the six month period and £1.9 million
invested in five existing portfolio companies.
One benefit of the increased interest rate environment is the yield that we
are able to achieve on uninvested cash balances. In the period we liquidated
the Company’s portfolio of listed shares with RBC Brewin Dolphin, placing
the cash in a money market fund, and as at 30 September the blended rate
achieved on uninvested cash was 4.3%. Approximately £10m of our cash was held
in listed shares for almost five years and generated a compound total return
of 5.0% a year over that period, significantly exceeding the rate of return
available from interest rates.
We have continued to see positive realisations from portfolio companies. We
have sold our holding in Evotix, for initial net proceeds of £12.7 million,
representing 4.6 times return on the original cost. We have also sold our
holding in Weldex (International) Offshore Holdings for proceeds of £1.6
million. The original investment in Weldex was in 1996 and this final exit
represents a lifetime return (including previously received proceeds and
interest) of 9.9 times. Venture investment disposals made in the six month
period generated blended proceeds of 2.4 times original cost.
Results and dividend
The unaudited net asset value (NAV) per share at 30 September 2023 was 61.4
pence (62.1 pence (audited) on 31 March 2023). The total return per share
before dividends for the six months ended 30 September 2023 as shown in the
income statement was 1.3 pence, compared with minus 3.0 pence in the
corresponding period last year. The performance was driven by an unrealised
increase of £1.9 million in the valuation of investments over the last six
months, along with a realised gain on disposal of investments of £0.8
million.
Five years ago, we introduced a target dividend yield of 5% of opening NAV,
which has been exceeded in each of the years since then. On 18 August 2023 the
final dividend of 2.0 pence in respect of the period ending 31 March 2023 was
paid to shareholders. After careful consideration, and taking our target yield
into account, we have decided to declare an interim dividend of 1.6 pence per
share in respect of the year to 31 March 2024. The interim dividend will be
paid on 17 January 2024 to shareholders on the register on 15 December 2023.
Our dividend investment scheme, which enables shareholders to 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. Details on how to join the scheme are included within the dividend
section of our website, which can be found here: mercia.co.uk/vcts/nvt/.
Shareholder issues
As a result of the fully subscribed public share offer launched in January
2023, 9,741,182 new ordinary shares were issued in April 2023 for gross
proceeds of £6.0 million.
We continue to experience a sustained demand for long-term growth capital for
smaller companies in the UK. In order to continue to support our existing
portfolio and invest in new early-stage opportunities, we are currently
fundraising in conjunction with the other Northern VCTs. Full details of how
to participate in the fund raise is available on the Company’s website at
http://www.mercia.co.uk/vcts/.
We have maintained our policy of being willing to buy back the Company’s
shares in the market in order to maintain liquidity, at a 5% discount to NAV.
During the period a total of 1,836,810 shares were purchased by the Company
for cancellation, representing around 1.1% of the opening ordinary share
capital.
Change of registrar
We are pleased to report that from close of business on 10 November 2023 the
Company changed its registrar to The City Partnership (UK) Limited
(“City”). You will receive a letter confirming this change, and should you
need to contact City, contact details may be found on the Company’s website.
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. Mercia 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 2025 ‘sunset clause’ was a European state aid requirement that was
introduced when the VCT scheme received state aid approval, which meant that
without small change in legislation investors would not receive upfront tax
relief when investing in VCTs after this date. We were pleased to receive the
news on 22nd November 2023 that the Sunset Clause will be extended by 10 years
to 2035 in the Autumn Finance Bill 2023.
Outlook
While macroeconomic conditions remain challenging, the unquoted venture
portfolio remains resilient and the Company is well capitalised, which will
enable the existing portfolio to be supported as necessary. We remain
confident in the long term prospects of your Company’s diversified portfolio
of businesses.
On behalf of the Board
Simon Constantine
Chair
INVESTMENT PORTFOLIO
(Unaudited) as at 30 September 2023
Cost £000 Valuation £000 % of net assets by value
Fifteen largest venture capital investments
Gentronix 1,362 4,317 4.0%
Grip-UK (t/a Climbing Hangar) 3,885 3,885 3.6%
Volumatic Holdings 216 3,037 2.8%
Tutora (t/a Tutorful) 2,722 2,872 2.7%
Pure Pet Food 1,774 2,722 2.6%
Project Glow Topco (t/a Currentbody.com) 1,686 2,632 2.5%
Newcells Biotech 2,479 2,629 2.5%
Rockar 1,877 2,488 2.3%
Biological Preparations Group 2,366 2,417 2.3%
Netacea 2,292 2,309 2.2%
Buoyant Upholstery 1,173 2,201 2.1%
Adludio 2,103 2,103 2.0%
Forensic Analytics 2,016 2,015 1.9%
IDOX* 238 2,002 1.9%
Clarilis 1,972 1,972 1.8%
28,161 39,601 37.2%
Other venture capital investments 49,738 33,105 31.0%
Total venture capital investments 77,899 72,706 68.2%
Net current assets 33,941 31.8%
Net assets 106,647 100.0%
*Quoted on AIM
Extracts from the unaudited half-yearly financial statements for the six
months ended 30 September 2023 are set out below.
INCOME STATEMENT
(Unaudited) for the six months ended 30 September 2023
Six months ended 30 September 2023 Six months ended 30 September 2022 Eighteen months ended 31 March 2023
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Gain on disposal of investments - 834 834 - 132 132 - 2,944 2,944
Movements in fair value of investments - 1,922 1,922 - (3,983) (3,983) - (9,776) (9,776)
- 2,756 2,756 - (3,851) (3,851) - (6,832) (6,832)
Dividend and interest income 873 - 873 128 - 128 948 - 948
Investment management fee (260) (780) (1,040) (265) (796) (1,061) (811) (2,432) (3,243)
Other expenses (345) - (345) (214) - (214) (796) - (796)
Return before tax 268 1,976 2,244 (351) (4,647) (4,998) (659) (9,264) (9,923)
Tax on return 86 (86) - - - - 181 (181) -
Return after tax 354 1,890 2,244 (351) (4,647) (4,998) (478) (9,445) (9,923)
Return per share 0.2p 1.1p 1.3p (0.2)p (2.8)p (3.0)p (0.3)p (5.7)p (6.0)p
BALANCE SHEET
(Unaudited) as at 30 September 2023
30 September 2023 £000 30 September 2022 £000 31 March 2023 £000
Fixed assets
Investments 72,706 83,625 88,609
Current assets
Debtors 362 50 70
Cash and cash equivalents 33,720 22,632 14,001
34,082 22,682 14,071
Creditors (amounts falling due within one year) (141) (109) (183)
Net current assets 33,941 22,573 13,888
Net assets 106,647 106,198 102,497
Capital and reserves
Called-up equity share capital 43,457 41,781 41,230
Share premium 23,159 19,069 19,394
Capital redemption reserve 5,801 4,544 5,342
Capital reserve 38,668 36,160 34,433
Revaluation reserve (5,192) 4,172 1,698
Revenue reserve 754 472 400
Total equity shareholders’ funds 106,647 106,198 102,497
Net asset value per share 61.4p 63.5p 62.1p
STATEMENT OF CHANGES IN EQUITY
(Unaudited) for the six months ended 30 September 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 April 2023 41,230 19,394 5,342 1,698 34,433 400 102,497
Return after tax - - - (6,890) 8,780 354 2,244
Dividends paid - - - - (3,475) - (3,475)
Net proceeds of share issues 2,686 3,765 - - - - 6,451
Shares purchased for cancellation (459) - 459 - (1,070) - (1,070)
At 30 September 2023 43,457 23,159 5,801 (5,192) 38,668 754 106,647
Six months ended 30 September 2022
At 1 April 2022 40,143 14,969 3,833 9,904 40,220 823 109,892
Return after tax - - - (5,732) 1,085 (351) (4,998)
Dividends paid - - - - (3,369) - (3,369)
Net proceeds of share issues 2,349 4,100 - - - - 6,449
Shares purchased for cancellation (711) - 711 - (1,776) - (1,776)
At 30 September 2022 41,781 19,069 4,544 4,172 36,160 472 106,198
Eighteen months ended 31 March 2023
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
*The revaluation reserve is generally non-distributable other than that part
of the reserve relating to gains/losses on readily realisable quoted
investments, which are distributable.
STATEMENT OF CASH FLOWS
(Unaudited) for the six months ended 30 September 2023
Six months ended Six months ended Eighteen months ended
30 September 2023 30 September 2022 31 March 2023
£000 £000 £000
Cash flows from operating activities
Return before tax 2,244 (4,998) (9,923)
Adjustments for:
(Gain)/loss on disposal of investments (834) (132) (2,944)
Movements in fair value of investments (1,922) 3,983 9,776
(Increase)/decrease in debtors (292) 5 238
(Decrease)/increase in creditors (42) (12) (2,496)
Net cash (outflow)/inflow from operating activities (846) (1,154) (5,349)
Cash flows from investing activities
Purchase of investments (5,263) (5,543) (27,450)
Sale/repayment of investments 23,922 4,592 28,572
Net cash inflow/(outflow) from investing activities 18,659 (951) 1,122
Cash flows from financing activities
Issue of ordinary shares 6,603 6,480 7,796
Share issue expenses (152) (32) (214)
Purchase of ordinary shares for cancellation (1,070) (1,776) (4,570)
Equity dividends paid (3,475) (3,368) (9,890)
Net cash inflow/(outflow) from financing activities 1,906 1,304 (6,878)
Net increase/(decrease) in cash and cash equivalents 19,719 (801) (11,105)
Cash and cash equivalents at beginning of period 14,001 23,433 25,106
Cash and cash equivalents at end of period 33,720 22,632 14,001
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 and interest rate increases.
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 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 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 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.
OTHER MATTERS
The unaudited half-yearly financial statements for the six months ended 30
September 2023 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 eighteen months
ended 31 March 2023 have been extracted from the audited financial statements
for that period, which have been delivered to the Registrar of Companies; the
independent 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 period ended 31 March 2023.
Each of the directors confirms that to the best of their 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 R J Green, Ms D N Hudson, and Mr D A Mayes.
The calculation of return per share is based on the return after tax for the
six months ended 30 September 2023 and on 173,914,768 (30 September 2022:
168,596,795) ordinary shares, being the weighted average number of shares in
issue during the period.
The calculation of net asset value per share is based on the net assets at 30
September 2023 divided by the 173,828,792 (30 September 2022: 167,123,927)
ordinary shares in issue at that date.
The interim dividend of 1.6 pence per share for the year ending 31 March 2024
will be paid on 17 January 2024 to shareholders on the register on 15 December
2023.
A copy of the half-yearly financial report for the six months ended 30
September 2023 will be available to shareholders on the Mercia Asset
Management PLC 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