Announcements

Northern Venture Trust PLC.

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
31 March
 2017
Six months to
31 March
 2016
Year to
30 September
 2016
Net assets£76.9m£77.9m£77.2m
Net asset value per share79.1p82.9p80.0p
Return per share:
Revenue
Capital
Total

0.9p
1.2p
2.1p

0.9p
1.9p
2.8p

1.6p
8.5p
10.1p
Dividend per share for the period:
First interim dividend
Second interim (special) dividend
Final dividend
Total

3.0p
5.0p
-
8.0p

3.0p
7.0p
-
10.0p

3.0p
7.0p
3.0p
13.0p
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 2017


79.1p
151.5p
230.6p


82.9p
138.5p
221.4p


80.0p
148.5p
228.5p
Mid-market share price at end of period75.50p76.75p70.00p
Tax-free dividend yield (based on mid-market
share price at end of period):
   
Excluding special dividend
Including special dividend
7.9%
14.6%
7.8%
16.9%
8.6%
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 reservesTotal 
  

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 reservesTotal 
  

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 reservesTotal 
  

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.




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Source: Northern Venture Trust PLC via Globenewswire