TIDMNVT
15 JUNE 2023
NORTHERN VENTURE TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE PERIODED 31 MARCH 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 high long-term tax-free returns to
shareholders through a combination of dividend yield and capital
growth.
This report covers the eighteen month period to 31 March
2023.
Financial highlights (comparative figures as at 31 March 2022
and 30 September 2021):
Unaudited Unaudited
18m period 12m period 12m period Year
ended ended ended ended
30
31 March 31 March 31 March September
2023 2023 2022 2021
Net assets GBP102.5m GBP102.5m GBP109.9m GBP119.3m
Net asset value per share 62.1p 62.1p 68.4p 74.1p
Return per share
Revenue (0.3)p (0.3)p 0.2p 0.2p
Capital (5.7)p (2.1)p (1.5)p 13.7p
Total (6.0)p (2.4)p (1.3)p 13.9p
Dividend per share declared in
respect of the period
Interim dividend 2.0p 2.0p 2.0p 2.0p
Second interim/special dividend 2.0p 2.0p 6.0p 6.0p
Proposed final dividend 2.0p 0.0p 2.0p 2.0p
Total 6.0p 4.0p 10.0p 10.0p
----------------------------------
Cumulative return to shareholders
since launch
Net asset value per share 62.1p 62.1p 68.4p 74.1p
Dividends paid per share* 188.5p 188.5p 184.5p 182.5p
Net asset value plus dividends
paid per share 250.6p 250.6p 252.9p 256.6p
Mid-market share price at end
of period 57.5p 57.5p 66.0p 70.25p
Share price discount to net asset
value 7.4% 7.4% 3.5% 5.2%
Annualised tax-free dividend
yield**
Excluding special dividend 5.4% 5.8% 5.0% 5.7%
Including special dividend 5.4% 5.8% 12.5% 14.1%
*Excluding proposed final dividend payable on 18 August 2023
** Based on net asset value per share at the start of the
period
Enquiries:
James Sly / Sarah Williams, Mercia Asset Management PLC -- 0330
223 1430
Website: www.mercia.co.uk/vcts/nvt/
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CHAIR'S STATEMENT
Overview
Following our change of year end from 30 September to 31 March,
this report covers the 18 months ended 31 March 2023.
A great deal has changed in the UK's macroeconomic climate over
the past 18 months. At the start of the period, the impact of
COVID-19 lingered over supply chains, and as the period progressed
the rate of inflation increased rapidly, as did interest rates.
This has not come without its challenges to the portfolio, and
while our investment adviser has spent considerable time working
with management teams, our portfolio valuations in this report
reflect how the financial markets have shifted over this period, in
particular the re-rating of technology-based and consumer-facing
stocks.
Against this backdrop, the portfolio has remained relatively
robust, with few failures, and there have been several strong
realisations in the past 18 months. The Company has also
experienced a record investment period, with GBP25.0 million
deployed including GBP17.0 million into new opportunities.
The Company raised GBP12.0 million before fees in the period
from two separate offers and intends to raise further funds in the
2023/24 tax year to enable us to continue to invest over the next
three years.
Results and dividend
In the 18 months ended 31 March 2023 the Company suffered a
negative return on ordinary activities of minus 6.0 pence per share
(year ended 30 September 2021: gain of 13.9 pence), representing a
total return of minus 8.1% on the opening net asset value (NAV) per
share. The majority of this reduction can be attributed to just two
holdings, musicMagpie and Oddbox, which over the period saw
reductions in their holding values due to poorer than expected
trading and the change in market sentiment towards consumer facing
companies. The NAV per share as at 31 March 2023, after deducting
dividends paid during the period of 6.0 pence, was 62.1 pence,
compared with 74.1 pence at 30 September 2021.
Investment income was lower than the prior year at GBP0.9
million (2021: GBP1.4 million), reflecting the move away from
income-yielding investments as the portfolio mix continued to pivot
towards earlier stage ventures. However, after more than a decade
of record-low interest rates, the Company has recently allocated
part of its liquidity to a money market fund to diversify its risk
and seek a higher return compared to that which is available from
traditional banks; this will increase investment income over the
coming financial years for as long as interest rates remain
higher.
In 2018 we revised our dividend policy in the light of the new
VCT rules for investment introduced in 2015 and 2017, which we
expected to result in more volatile returns. We introduced an
annualised target dividend yield of 5% of opening NAV, which has
been exceeded in every period since.
After careful consideration, the Board has proposed a final
dividend of 2.0 pence per share, bringing the total dividend for
the period to 6.0 pence per share, which represents an annualised
tax-free yield of 5.4% on the opening net asset value per share of
74.1 pence. The final dividend, if approved, will be paid on 18
August 2023 to shareholders on the register on 21 July 2023.
Our dividend investment scheme, under which dividends can be
re-invested 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 with around 17% participation
during the period. Instructions on how to join the scheme are
included within the dividend section of our website, which can be
found here:
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mercia.co.uk/
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vcts
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/
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nvt
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/.
Investment Portfolio
Investment activity has reached record levels over the period,
with GBP17.0 million of capital provided to fifteen new venture
capital investments and GBP8.0 million of follow on capital
invested into the existing portfolio. The investments into new
portfolio companies were made across a variety of sectors including
technology and life sciences. We also made strong progress in
realising the Company's mature portfolio acquired under the
previous VCT rules with the remaining such investments now
representing 22% by value of the total venture capital portfolio
(30 September 2021: 37%).
The value of the portfolio fell by GBP9.8 million (6.1 pence per
share) in the 18 months, suffering two significant write-downs; the
value of musicMagpie, which is listed on AIM fell by GBP6.2 million
(3.8 pence per share) and the value of Oddbox was written down by
GBP4.2 million (2.6 pence per share). The portfolio was further
exposed to the volatility of markets with its listed investments
reducing by GBP0.9 million (0.5 pence per share). This is clearly a
disappointing result, but it is worth noting that both musicMagpie
and Oddbox generated significant realised returns for the portfolio
in the preceding period, which exceed the write-downs in this
period, through their partial realisations in cash.
In the unquoted portfolio, while we experienced reductions in
the valuations of other consumer-facing portfolio companies, which
represent only 16% of the total, we also experienced strong
performances from others, with Evotix in particular growing rapidly
over the period. In this report we have valued Evotix at the value
realised shortly after the balance sheet date, resulting in a gain
of GBP8.3 million (5.1 pence per share) in the period and GBP9.9
million overall, 4.6x our original investment.
It was a busy period for other realisation activity, with
several notable transactions. The highlights during the period
included the sales of Currentbody.com, Intelling Group and Lineup
Systems for lifetime returns of 2.9x, 3.6x and 7.8x respectively.
In total GBP26.1 million was generated in sales proceeds over the
period, representing a blended 1.9x multiple on cost.
Share offers and liquidity
In the period gross proceeds of GBP6.0 million were received
from the fully subscribed 2021/2022 share offer. Additionally,
following the public share offer launched in January 2023,
9,741,182 new ordinary shares were issued just after the period end
in April 2023 for gross proceeds of a further GBP6.0 million.
Following the smaller top-up offers in the 2021/22 and 2022/23
tax years, and taking into account the increased rate of
investment, the Board is pleased to announce that the Company will
launch a prospectus top-up offer in the 2023/24 tax year for
GBP14.0 million, with an over-allotment facility of GBP6.0 million.
This offer will launch in September 2023, and full details will be
published shortly.
Share buy-backs
We have maintained our policy of being willing to buy back the
Company's shares in the market when necessary, in order to maintain
liquidity, at a 5% discount to NAV. During the 18 month period
ended 31 March 2023 a total of 7,335,532 (year ended 30 September
2021: 2,620,797) shares were repurchased by the Company for
cancellation at an average price of 61.2 pence (year ended 30
September 2021: 70.2 pence), representing 4.6% (2021: 1.6%) of the
opening issued share capital.
Changes to the performance-related management fee ('performance
fee')
Following a review of current arrangements by the Board, a
resolution is included in the Circular for the General Meeting
proposing changes to the investment advisory agreement in relation
to the performance fee with the investment adviser. The changes in
VCT legislation in 2015 required the Company to focus new
investments on earlier stage companies which, by their nature, are
higher risk and therefore likely to deliver more volatile
investment returns. It has become clear in recent years that the
current arrangements no longer work either for the investment
adviser or for the Company.
In order to align future performance fees better with
shareholder returns and harmonise the methodology and fee rates
across the Northern VCTs, a number of changes are proposed. In
particular, the definition and operation of the high-water mark,
the lowering of both the hurdle rate to 5% and the amount earned
above this rate to 14%, will ensure that strong returns delivered
consistently, and not just in a single year, will be rewarded
appropriately.
As part of these changes the Board has agreed with the
investment adviser that 80% of any performance fee generated will
be paid to members of the VCT investment team, thereby aligning the
personal interests of the investment team directly with those of
shareholders. Full details of the changes are set out in the
accompanying Circular for the upcoming General Meeting.
Responsible Investment
The Company is mindful of its Environmental, Social and
Governance (ESG) responsibilities and we have outlined our evolving
approach in the annual report.
Geopolitical and other macroeconomic risks
The Company's investments may be affected by regional events or
politics. A recent example of this is the high-inflation
environment in the aftermath of COVID-19 and the conflict in
Ukraine. The Board has no control over such macro events, and as
the Company's investments are domiciled in the UK with only a
limited presence in the rest of the world, risks are primarily
localised to those facing the UK economy. As a result of the
conflict in Ukraine, during the period our investment adviser
undertook a review of the entire portfolio for links to sanctioned
individuals and companies, took appropriate action where required,
and continues to monitor the situation carefully. A review of
portfolio company exposure to Silicon Valley bank was also
performed during the period and appropriate action taken in the
days before the bank's UK subsidiary was acquired by HSBC.
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. The investment adviser 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 upcoming 2025 'sunset clause' was a European state aid
requirement when the VCT scheme received state aid approval in
2015, which means that without a change in legislation investors
will not receive upfront tax relief when investing in VCTs after
this date. While the government has signalled that it will extend
the scheme, to date no formal legislation has been introduced to
enact this commitment. The Company and the investment adviser will
continue to monitor progress in this area. The Board considers that
the Company, and VCTs more generally, are successfully delivering
in-line with the Government's mandate, which is to channel money
into higher-risk, early-stage businesses.
Whilst no further amendments to the VCT legislation were
announced by the Chancellor in his 2023 Budget statement, it is
possible that further changes will be made in the future. We will
continue to work closely with our investment adviser to maintain
compliance with the scheme rules at all times. HMRC has recently
clarified the rules relating to the financial health of companies
at the time of any investment, which may limit VCTs' ability to
make investments in some cases. However a recent review
demonstrated that very few of the Company's current investments are
likely to be affected in the near term, concluding that our
portfolio is not exposed significantly to this.
Annual General Meeting
The Company's AGM will be held at 12.30pm on 21 July 2023. The
AGM provides an excellent opportunity for shareholders, Directors
and the investment adviser to meet in person, exchange views and
comment. We will hold the AGM in person at Reed Smith LLP,
Broadgate Tower, 20 Primrose Street, London, EC2A 2RS. Following
positive feedback received from the last three years, we also
intend to offer remote access for shareholders through an online
webinar facility for those who would prefer not to travel. Full
details and formal notice of the AGM are set out in a separate
document. The General Meeting regarding the proposed changes to the
performance-related management fee will be held immediately after
the conclusion of the AGM.
Board Retirement
Tim Levett is retiring from the Board and so will not be
standing for re-election at the AGM in July. Tim founded our
Company almost 30 years ago, having established Northern Venture
Managers as one of the leading regional investors in the eighties.
He has been instrumental in promoting venture capital trusts in
general and the Northern Venture Trusts in particular to government
and financial advisers for decades. He was a founding member and
recent chairman of the Venture Capital Trust Association, which
represents more than 90% of the VCT industry by value. His
contribution to the Board has been immeasurable and we will miss
his deep knowledge and insight. On behalf of the Board and all
shareholders, I would like to thank Tim for his exceptional service
to the Company over so many years and wish him well in his
retirement.
Outlook
The geopolitical and economic conditions for the next twelve
months are likely to continue to be challenging and this provides a
good opportunity to invest for the longer term and support our
existing portfolio companies. Failure rates remain low and despite
some reductions in valuations this year, the Directors remain
encouraged by the resilience of the wider portfolio. We remain
committed to supporting the development of entrepreneurial
early-stage businesses in the UK.
Simon Constantine
Chair
15 June 2023
Extracts from the audited financial statements for the 18 month
period ended 31 March 2023 are set out below.
Income Statement
for the 18 month period ended
31 March 2023
18 month period ended Year ended 30 September
31 March 2023 2021
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gain/(loss) on disposal of
investments - 2,944 2,944 - 8,380 8,380
Unrealised fair value gains/(losses)
on investments - (9,776) (9,776) - 17,660 17,660
- (6,832) (6,832) - 26,040 26,040
Dividend and interest income 948 - 948 1,372 - 1,372
Investment management fee (811) (2,432) (3,243) (579) (4,275) (4,854)
Other expenses (796) - (796) (472) - (472)
Return before tax (659) (9,264) (9,923) 321 21,765 22,086
Tax on return 181 (181) - (15) 15 -
Return after tax (478) (9,445) (9,923) 306 21,780 22,086
Return per share (0.3)p (5.7)p (6.0)p 0.2p 13.7p 13.9p
Balance Sheet
as at 31 March 2023
30 September
31 March 2023 2021
GBP000 GBP000
Fixed assets
Investments 88,609 96,563
Current assets
Debtors 70 308
Cash and deposits 14,001 25,106
14,071 25,414
Creditors (amounts falling due
within one year) (183) (2,679)
Net current assets 13,888 22,735
Net assets 102,497 119,298
Capital and reserves
Called-up equity share capital 41,230 40,268
Share premium 19,394 14,608
Capital redemption reserve 5,342 3,508
Capital reserve 34,433 38,325
Revaluation reserve 1,698 21,430
Revenue reserve 400 1,159
Total equity shareholders' funds 102,497 119,298
Net asset value per share 62.1p 74.1p
Statement of changes in equity
for the 18 month period ended 31 March 2023
Distributable
Non-distributable reserves reserves Total
Called-up Capital
share Share redemption Revaluation Capital Revenue
capital premium reserve reserve* reserve reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
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
------------------------- --------- -------- ----------- ----------- -------- -------- --------
Year ended 30 September Distributable
2021 Non-distributable reserves reserves Total
Called-up Capital
share Share redemption Revaluation Capital Revenue
capital premium reserve reserve* reserve reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 October 2020 39,905 12,745 2,853 18,086 37,872 1,330 112,791
Return after tax - - - 3,344 18,436 306 22,086
Dividends paid - - - - (16,144) (477) (16,621)
Net proceeds of share
issues 1,018 1,863 - - - - 2,881
Shares purchased for
cancellation (655) - 655 - (1,839) - (1,839)
At 30 September 2021 40,268 14,608 3,508 21,430 38,325 1,159 119,298
------------------------- --------- -------- ----------- ----------- -------- -------- --------
Statement of cash flows
for the 18 month period ended 31 March
2023 Period ended Year ended
31 March 30 September
2023 2021
GBP000 GBP000
Cash flows from operating activities
Return before tax (9,923) 22,086
Adjustments for:
(Gain)/loss on disposal of investments (2,944) (8,380)
Movements in fair value of investments 9,776 (17,660)
Decrease in debtors 238 366
Decrease in creditors (2,496) 2,251
Net cash outflow from operating activities (5,349) (1,337)
Cash flows from investing activities
Purchase of investments (27,450) (13,506)
Proceeds on disposal of investments 28,572 34,835
Net cash inflow/(outflow) from investing
activities 1,122 21,329
Cash flows from financing activities
Issue of ordinary shares 7,796 2,921
Share issue expenses (214) (40)
Purchase of ordinary shares for cancellation (4,570) (1,839)
Equity dividends paid (9,890) (16,621)
Net cash (outflow)/inflow from financing
activities (6,878) (15,579)
Increase/(decrease) in cash and cash
equivalents (11,105) 4,413
Cash and cash equivalents at beginning
of period 25,106 20,693
Cash and cash equivalents at end of period 14,001 25,106
INVESTMENT PORTFOLIO SUMMARY
as at 31 March 2023
Like for
like valuation
increase/
(decrease) % of net
Cost Valuation over period** assets
GBP'000 GBP'000 % by value
Fifteen largest venture capital investments
1 Evotix (formerly SHE) 2,766 12,658 188.6% 12.3%
2 Grip-UK (t/a Climbing Hangar) 3,530 3,530 0.0% 3.4%
3 Volumatic Holdings 216 3,275 17.1% 3.2%
4 Gentronix 1,362 3,082 111.5% 3.0%
5 Tutora (t/a Tutorful) 2,722 2,837 4.7% 2.8%
6 Rockar 1,877 2,795 36.9% 2.7%
7 Newcells Biotech 2,479 2,519 (10.8)% 2.5%
8 Biological Preparations Group 2,366 2,267 (17.7)% 2.2%
9 Adludio 2,103 2,103 0.0% 2.1%
10 Clarilis 1,972 1,972 (22.8)% 1.9%
11 IDOX* 238 1,970 (10.9)% 1.9%
12 Administrate 2,374 1,901 5.6% 1.9%
13 Buoyant Upholstery 1,173 1,895 (31.6)% 1.8%
14 Pure Pet Food 1,774 1,845 0.3% 1.8%
15 Netacea 1,781 1,781 0.0% 1.7%
Other venture capital investments
Project Glow Topco (t/a
16 Currentbody.com) 1,686 1,686 0.0% 1.6%
17 Social Value Portal 1,573 1,573 0.0% 1.5%
18 Enate 1,516 1,516 0.0% 1.5%
19 Ridge Pharma 1,497 1,500 0.2% 1.5%
20 Forensic Analytics 1,490 1,490 0.0% 1.5%
21 Turbine Simulated Cell Technologies 1,433 1,433 0.0% 1.4%
22 Broker Insights 1,395 1,395 0.0% 1.4%
23 Optellum 1,276 1,276 0.0% 1.2%
24 Duke & Dexter 1,237 1,246 0.7% 1.2%
25 VoxPopMe 1,218 1,205 (12.6)% 1.2%
Weldex (International) Offshore
26 Holdings 3,262 1,137 (41.0)% 1.1%
27 musicMagpie* 238 1,111 (85.4)% 1.1%
28 Centuro Global 1,038 1,038 0.0% 1.0%
29 Pimberly 1,008 1,008 0.0% 1.0%
30 Send Technology Solutions 974 974 0.0% 1.0%
31 Axis Spine Technologies 955 955 0.0% 0.9%
32 Wonderush (t/a Hownow) 947 947 0.0% 0.9%
33 LMC Software 929 929 0.0% 0.9%
34 Fresh Approach (UK) Holdings 965 899 (0.3)% 0.9%
35 Locate Bio 876 876 0.0% 0.9%
36 Moonshot 874 874 0.0% 0.9%
37 Naitive Technologies 787 787 0.0% 0.8%
38 Oddbox 1,093 753 (84.7)% 0.7%
39 Northrow 1,427 730 (45.7)% 0.7%
40 Atlas Cloud 704 704 1.1% 0.7%
41 Intuitive Holding 1,674 686 (5.4)% 0.7%
42 Sen Corporation 681 681 0.0% 0.7%
43 Medovate 1,770 534 (67.5)% 0.5%
44 Thanksbox (t/a Mo) 1,559 518 (52.3)% 0.5%
45 Synthesized 510 510 0.0% 0.5%
Rego Technologies (t/a Upp) (formerly
46 Volo) 2,369 470 (13.5)% 0.5%
47 Seahawk Bidco 513 467 (21.3)% 0.5%
48 Nutshell 734 385 (47.6)% 0.4%
49 Haystack Dryers 1,661 242 42.8% 0.2%
50 Arnlea Holdings 1,305 226 17.9% 0.2%
51 Sorted Holdings 3,022 212 (87.5)% 0.2%
52 Customs Connect Group 1,525 121 57.1% 0.1%
53 Angle* 131 73 (61.0)% 0.1%
54 RTC Group* 436 57 (64.3)% 0.0%
55 Velocity Composites* 108 43 (14.9)% 0.0%
56 Quotevine 1,311 - (100.0)% 0.0%
57 Ablatus Therapeutics 612 - (100.0)% 0.0%
Total venture capital investments 79,052 79,697 77.8%
----------------------------------------- ------- ---------
Listed equity investments 7,859 8,912 8.7%
Total fixed asset investments 86,911 88,609 86.5%
--------------- --------
Net current assets 13,888 13.5%
Net assets 102,497 100.0%
* Quoted on AIM
**This percentage change in 'like for like' valuations is a
comparison of the 31 March 2023 valuations with the 30 September
2021 valuations (or where a new investment has been made in the
period, the investment amount), having adjusted for any partial
disposals, loan stock repayments or new and follow-on investments
in the period.
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, interest rate increases, and supply
shortages.
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 investment 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 the London Stock Exchange or 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 specialist managers, including 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.
DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the annual report
and 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 are
required 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 its profit or
loss for the period. In preparing these financial statements, the
Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable UK accounting standards have been followed,
subject to any material departures disclosed and explained in the
financial statements;
-- assess the Company's ability to continue as a going concern, disclosing,
as applicable, matters related to going concern; and
-- use the going concern basis of accounting unless they either intend to
liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
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
its financial statements comply with the Companies Act 2006. They
are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error,
and 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 Strategic Report, Directors' Report,
Directors' Remuneration Report and Corporate Governance statement
that complies 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 UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors confirm that to the best of their knowledge:
-- the financial statements, prepared in accordance with the applicable set
of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company; and
-- the Strategic Report and Directors' Report includes a fair review of the
development and performance of the business and the position of the
issuer, together with a description of the principal risks and
uncertainties that they face.
The Directors consider the annual report and accounts, taken as
a whole, is fair, balanced and understandable and provides 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 statement were
Mr S J Constantine (Chair), Mr R J Green, Ms D N Hudson, Mr T R
Levett, and Mr D A Mayes.
OTHER MATTERS
The above summary of results for the 18 month period ended 31
March 2023 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 return per share is based on the loss after
tax for the 18 months ended 31 March 2023 of GBP9,923,000 (12
months to 30 September 2021: profit of GBP22,086,000) and on
165,209,895 (12 months to 30 September 2021: 159,349,187) ordinary
shares, being the weighted average number of shares in issue during
the period.
The calculation of the net asset value per share as at 31 March
2023 is based on the net assets of GBP102,497,000 (12 months to 30
September 2021: 119,298,000) divided by the 164,920,166 (12 months
to 30 September 2021: 161,070,303) ordinary shares in issue at that
date.
If approved by shareholders, the proposed final dividend of 2.0
pence per share for the period ended 31 March 2023 will be paid on
18 August 2023 to shareholders on the register at the close of
business on 21 July 2023.
The full annual report including financial statements for the 18
month period ended 31 March 2023 is expected to be made available
to shareholders on or around 26 June 2023 and will be available to
the public at the registered office of the company at Forward
House, 17 High Street, Henley-in-Arden B95 5AA and on the company's
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.
(END) Dow Jones Newswires
June 15, 2023 10:00 ET (14:00 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
Northern Venture (LSE:NVT)
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