TIDMNVT
14 NOVEMBER 2017
NORTHERN VENTURE TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE YEARED 30 SEPTEMBER 2017
Northern Venture Trust PLC is a Venture Capital Trust (VCT) whose
investment adviser is NVM Private Equity LLP. 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.
Financial highlights (comparative figures as at 30 September 2016):
2017 2016
Net assets GBP76.3m GBP77.2m
Net asset value per share 72.6p 80.0p
Return per share after tax:
Revenue 1.8p 1.6p
Capital 1.9p 8.5p
Total 3.7p 10.1p
Dividend per share for the year:
First interim dividend 3.0p 3.0p
Second interim (special) dividend 5.0p 7.0p
Proposed final dividend 3.0p 3.0p
Total 11.0p 13.0p
Cumulative return to shareholders since launch:
Net asset value per share 72.6p 80.0p
Dividends paid per share* 159.5p 148.5p
Net asset value plus dividends paid per share 232.1p 228.5p
Mid-market share price at end of year 71.0p 70.0p
Tax-free dividend yield (based on mid-market share
price at end of year):
Excluding special dividend 8.5% 8.6%
Including special dividend 15.5% 18.6%
*Excluding proposed final dividend payable on 22 December 2017
For further information, please contact:
NVM Private Equity LLP
Alastair Conn/Christopher Mellor 0191 244 6000
Website: www.nvm.co.uk
CHAIRMAN'S STATEMENT
Overview
The past year has been a busy one of consolidation as we continue to
adapt to the new VCT rules, building the pipeline of opportunities in
earlier stage companies. The companies exited during the year had
already been marked up in value in previous years and so the surplus for
the year to September 2017 was lower than the preceding year. However
the strong inflow of cash enabled the board once again to declare a
special dividend, this time of 5.0 pence per share paid in June. The
pace of investment increased in the second half with four new
VCT-qualifying investments being completed, in addition to the
investment reported in the first half. Two share offers were launched
successfully during the year and filled very quickly so we start the new
financial year in a position of considerable cash strength to support
future investment activities.
Results and dividend
In the year ended 30 September 2017 the company achieved a return after
tax of GBP3,675,000 (2016: GBP9,571,000), or 3.7 pence per share (2016:
10.1 pence), representing a total return of 4.6% over the opening net
asset value (NAV) per share. The NAV per share at 30 September 2017,
after deducting dividends paid during the year of 11.0 pence, was 72.6
pence compared with 80.0 pence as at 30 September 2016 as we continued
to return cash to shareholders following the successful sale of
investments.
An interim dividend of 3.0 pence per share was paid in June 2017,
together with a special dividend of 5.0 pence in recognition of
profitable investment realisations. As previously highlighted, 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. The directors propose a final dividend also of 3.0 pence per
share, which will be paid on 22 December 2017 to shareholders on the
register on 24 November 2017, taking the total dividend in respect of
the year to 11.0 pence. This is the fourteenth consecutive year in
which a dividend of at least 6.0 pence has been paid. A 6.0 pence
dividend represents a tax-free yield of 8.5% on the mid-market share
price of 71.0 pence at 30 September 2017.
Investment income was higher than in the prior year at GBP3.0 million
(2016: GBP2.6 million), as a result of positive developments in a number
of portfolio companies, which have enabled them to clear significant
arrears of interest. Notwithstanding this one-off positive impact, we
continue to expect a downward trend in investment income as the profile
of the portfolio shifts towards earlier stage investments in response to
the current VCT rules. This change in the portfolio may also make the
flow of realised gains less predictable in the medium to long term and
so future dividends are likely to be subject to fluctuation.
Investment portfolio
During the past year, five new VCT-qualifying investments have been
completed at a total cost of GBP3.9 million; this demonstrates a lower
average level of initial investment in portfolio companies than in the
past as we expect to support them through various stages of growth in
the future with further investments. Shareholders may recall that the
current VCT rules, which were enacted two years ago, removed management
buyout transactions from the permitted range of investment activities.
Our focus has necessarily shifted to earlier stage companies requiring
capital for the development of new products and markets. Our investment
adviser, NVM, has continued to supplement its early stage investment
capability and the flow of attractive opportunities meeting our criteria
has been encouraging.
The cash proceeds from venture capital investments sold or repaid
amounted to GBP15.4 million, representing a surplus of GBP4.0 million
over original cost. The gain recognised during the year relating to the
disposals was less significant at GBP1.6 million, owing to the progress
made in several of these exit processes before the start of the year and
gains therefore recorded in previous years. The resulting inflow of
cash facilitated the declaration of the special dividend referred to
above.
Share issues and buy-backs
In February 2017 we launched a top-up offer of new ordinary shares to
raise up to GBP4.3 million, in conjunction with similar offers by
Northern 2 VCT and Northern 3 VCT, which became fully subscribed within
48 hours. Having reviewed the forecast cash requirements for the
forthcoming year and beyond, we also launched a full prospectus offer to
raise up to GBP20.0 million in September 2017. The demand experienced
was again strong and on 16 October 2017 we announced that the latest
offer was also fully subscribed. Priority was given to existing
shareholders for a three week period, during which time all applications
received from existing shareholders were satisfied in full. With
approximately 40% of the total gross subscription coming from new
investors, we welcome almost 800 new shareholders to the register and I
would like to record my sincere thanks to all applicants for the strong
vote of confidence received. As a result, we are well positioned both
to support existing early stage investee companies which may require
further finance to thrive and to exploit new investment opportunities
which meet our key criteria of growth potential, strong management and
an ability to generate cash in the medium to long term.
Whilst we have maintained flexibility to buy back shares in the market
at a 5% discount to NAV, the secondary market has met all selling demand
in the year and consequently there were no buy-backs.
In addition to the public offers, 3,175,620 shares were issued during
the year under our dividend investment scheme for consideration of
GBP2.3 million, representing around one fifth of the total dividend
payments during the year.
VCT qualifying status
The company has maintained its approved venture capital trust status
with HM Revenue & Customs. The company's compliance with the VCT
qualifying conditions is closely monitored by the board, who receive
regular reports from NVM and from our VCT taxation advisers, Philip Hare
& Associates LLP.
VCT legislation
The past two years have seen unprecedented change in the VCT industry.
However I am encouraged that our investment rate in attractive
opportunities has been maintained with 13 new investments completed
under the new VCT rules, including two investments since the year-end.
By way of a reminder, our portfolio of VCT-qualifying investments
acquired before the changes were enacted is not affected by the new
legislation, except to the extent that it is no longer possible for us
to make follow-on investments in many of those companies.
More change may yet be on the horizon as the Government assesses the
findings of its Patient Capital Review. The review was commissioned
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 conjunction with our
investment adviser, we have welcomed the opportunity to consult on these
important topics and to highlight the considerable support that the VCT
industry provides to growing, innovative businesses.
We look forward to the Chancellor's Budget announcement on 22 November
and to obtaining further clarity on the future legislative environment
for our industry.
Annual general meeting
The 2017 annual general meeting will take place in Edinburgh on Tuesday
19 December 2017. Details of the formal business of the meeting are set
out in a separate circular which is being sent to shareholders with the
annual report. We look forward to meeting shareholders on that
occasion.
Outlook
The past year has been another period of adapting as we refine our
approach to investment activities under the current rules and assess the
evolving political and economic landscapes, including Britain's future
relationship with the EU. Whilst making definitive statements about
what lies ahead is inherently difficult, we are confident in the
resilience developed to deal with change and remain positive about the
future.
Simon Constantine
Chairman
The audited financial statements for the year ended 30 September 2017
are set out below.
INCOME STATEMENT
for the year ended 30 September 2017
Year ended 30 September 2017 Year ended 30 September 2016
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gain on
disposal of
investments - 1,651 1,651 - 2,398 2,398
Movements in
fair value
of
investments - 1,072 1,072 - 7,458 7,458
---------- ---------- ---------- ---------- ---------- ----------
- 2,723 2,723 - 9,856 9,856
Income 2,989 - 2,989 2,570 - 2,570
Investment
management
fee (407) (1,222) (1,629) (404) (2,054) (2,458)
Other
expenses (408) - (408) (397) - (397)
---------- ---------- ---------- ---------- ---------- ----------
Return on
ordinary
activities
before tax 2,174 1,501 3,675 1,769 7,802 9,571
Tax on
return on
ordinary
activities (373) 373 - (240) 240 -
---------- ---------- ---------- ---------- ---------- ----------
Return on
ordinary
activities
after tax 1,801 1,874 3,675 1,529 8,042 9,571
---------- ---------- ---------- ---------- ---------- ----------
Return per 1.8p 1.9p 3.7p 1.6p 8.5p 10.1p
share
BALANCE SHEET
as at 30 September 2017
30 September 2017 30 September 2016
GBP000 GBP000
Fixed asset investments 65,699 73,572
---------- ----------
Current assets:
Debtors 661 369
Cash and deposits 9,981 4,206
---------- ----------
10,642 4,575
Creditors (amounts falling due within
one year) (81) (947)
---------- ----------
Net current assets 10,561 3,628
---------- ----------
Net assets 76,260 77,200
---------- ----------
Capital and reserves
Called-up equity share capital 26,256 24,110
Share premium 6,941 2,599
Capital redemption reserve 544 544
Capital reserve 34,150 40,514
Revaluation reserve 5,972 7,360
Revenue reserve 2,397 2,073
---------- ----------
Total equity shareholders' funds 76,260 77,200
---------- ----------
Net asset value per share 72.6p 80.0p
STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2017
---------------Non-distributable
reserves--------------- Distributable reserves Total
Capital
Share Share redemption Revaluation Capital Revenue
capital premium reserve reserve reserve reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1
October
2016 24,110 2,599 544 7,360 40,514 2,073 77,200
Return on
ordinary
activities
after tax
for the
year - - - (1,388) 3,262 1,801 3,675
Net
proceeds
of share
issues 2,146 4,342 - - - - 6,488
Dividends
paid - - - - (9,626) (1,477) (11,103)
---------- ---------- ---------- ---------- ---------- ---------- ----------
At 30
September
2017 26,256 6,941 544 5,972 34,150 2,397 76,260
---------- ---------- ---------- ---------- ---------- ---------- ----------
STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2016
---------------Non-distributable
reserves--------------- Distributable reserves Total
Capital
Share Share redemption Revaluation Capital Revenue
capital premium reserve reserve reserve reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 October
2015 23,775 1,359 228 3,367 47,787 2,432 78,948
Return on
ordinary
activities
after tax for
the year - - - 3,993 4,049 1,529 9,571
Net proceeds
of share
issues 651 1,240 - - - - 1,891
Shares
purchased
for
cancellation (316) - 316 - (968) - (968)
Dividends
paid - - - - (10,354) (1,888) (12,242)
---------- ---------- ---------- ---------- ---------- ---------- ----------
At 30
September
2016 24,110 2,599 544 7,360 40,514 2,073 77,200
---------- ---------- ---------- ---------- ---------- ---------- ----------
STATEMENT OF CASH FLOWS
for the year ended 30 September 2017
Year ended Year ended
30 September 2017 30 September 2016
GBP000 GBP000
Cash flows from operating activities:
Return on ordinary activities before tax 3,675 9,571
Adjustments for:
Gain on disposal of investments (1,651) (2,398)
Movement in fair value of investments (1,072) (7,458)
(Increase)/decrease in debtors (292) (29)
Increase/(decrease) in creditors (866) 495
---------- ----------
Net cash inflow/(outflow) from operating
activities (206) 181
---------- ----------
Cash flows from investing activities:
Purchase of investments (6,458) (10,471)
Sale/repayment of investments 17,054 19,397
---------- ----------
Net cash inflow from investing
activities 10,596 8,926
---------- ----------
Cash flows from financing activities:
Issue of shares 6,592 1,899
Share issue expenses (104) (8)
Shares purchased for cancellation - (968)
Dividends paid (11,103) (12,242)
---------- ----------
Net cash outflow from financing
activities (4,615) (11,319)
---------- ----------
Net increase/(decrease) in cash and cash
equivalents 5,775 (2,212)
Cash and cash equivalents at beginning
of year 4,206 6,418
---------- ----------
Cash and cash equivalents at end of year 9,981 4,206
---------- ----------
INVESTMENT PORTFOLIO SUMMARY
as at 30 September 2017
Cost Valuation % of net assets
Company GBP000 GBP000 by valuation
Fifteen largest venture capital
investments:
No 1 Lounges 2,006 3,900 5.1
Entertainment Magpie Group 1,610 3,751 4.9
Buoyant Upholstery 1,674 3,263 4.3
Sorted Holdings 1,808 2,820 3.7
MSQ Partners Group 1,695 2,628 3.4
Lineup Systems 974 2,468 3.2
Biological Preparations Group 2,366 2,067 2.7
IDOX* 238 2,036 2.7
Agilitas IT Holdings 1,662 1,981 2.6
Closerstill Group 1,747 1,902 2.5
Wear Inns 1,640 1,854 2.4
It's All Good 1,205 1,751 2.3
Weldex (International) Offshore
Holdings 3,262 1,670 2.2
Love Saving Group 1,204 1,656 2.2
Graza 1,581 1,581 2.1
---------- ---------- -------
24,672 35,328 46.3
Other venture capital investments:
Volumatic Holdings 1,423 1,555 2.0
CGI Group Holdings 3,818 1,521 2.0
Intuitive Holding 1,674 1,500 2.0
Customs Connect Group 1,406 1,406 1.8
Volo Commerce 1,173 1,173 1.5
Knowledgemotion 1,048 1,048 1.4
Intelling Group 1,048 1,048 1.4
Rockar 874 874 1.1
Axial Systems Holdings 1,004 859 1.1
Vectura Group** 599 750 1.0
AVID Technology Group 715 715 1.0
Haystack Dryers 1,661 706 0.9
Lanner Group 523 699 0.9
Channel Mum 662 662 0.9
Nasstar* 323 597 0.8
Arnlea Holdings 1,305 585 0.8
Contego Fraud Solutions 519 519 0.7
Other investments each valued at less
than GBP500,000 5,198 2,559 3.3
---------- ---------- -------
Total venture capital investments 49,645 54,104 70.9
Listed equity investments 5,181 6,681 8.9
Listed interest-bearing investments 4,901 4,914 6.4
---------- ---------- -------
Total fixed asset investments 59,727 65,699 86.2
----------
Net current assets 10,561 13.8
---------- -------
Net assets 76,260 100.0
---------- -------
* 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: 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 their management or 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. 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 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 advisers 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: 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 the
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 have elected 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 the profit or loss of the
company for the year.
In preparing the financial statements, the directors are required to (i)
select suitable accounting policies and then apply them consistently;
(ii) make judgements and estimates that are reasonable and prudent;
(iii) state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained in
the financial statements; and (iv) prepare the financial statements on
the going concern basis unless it is inappropriate to presume that the
company will continue in business.
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 the financial statements
comply with the Companies Act 2006. They 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 directors' report, strategic report, directors'
remuneration report and corporate governance statement that comply 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 United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
DIRECTORS' RESPONSIBILITY STATEMENT IN RELATION TO THE ANNUAL REPORT AND
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 SEPTEMBER 2017
The directors have confirmed that to the best of their knowledge (i)
taken as a whole the financial statements, prepared in accordance with
the applicable accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
company, and (ii) the strategic report and directors' report include a
fair review of the development and performance of the business and the
position of the company, together with a description of the principal
risks and uncertainties that they face. The directors consider that the
annual report and financial statements, taken as a whole, are fair,
balanced and understandable and provide 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 announcement 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.
OTHER MATTERS
The above summary of results for the year ended 30 September 2017 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 the revenue and capital return per share is based on
the return on ordinary activities after tax for the year and on
100,330,704 (2016 95,009,513) ordinary shares, being the weighted
average number of shares in issue during the year.
The calculation of the net asset value per share is based on the net
assets at 30 September 2017 divided by the 105,026,156 (30 September
2016 96,440,979) ordinary shares in issue at that date.
The proposed final dividend of 3.0 pence per share for the year ended 30
September 2017 will, if approved by shareholders, be paid on 22 December
2017 to shareholders on the register at the close of business on 24
November 2017.
The full annual report including financial statements for the year ended
30 September 2017 is expected to be posted to shareholders on 21
November 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.
Source: Northern Venture Trust PLC via Globenewswire
(END) Dow Jones Newswires
November 14, 2017 10:30 ET (15:30 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Northern Venture (LSE:NVT)
Historical Stock Chart
From Apr 2024 to May 2024
Northern Venture (LSE:NVT)
Historical Stock Chart
From May 2023 to May 2024