ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED
Financial highlights (comparative figures as at 31 March 2019):
| 2020 | 2019 |
Net assets | £72.5m | £82.7m |
Net asset value per share | 78.1p | 94.2p |
Return per share: | ||
Revenue | 0.3p | 1.8p |
Capital | (12.1)p | 3.8p |
Total | (11.8)p | 5.6p |
Dividend per share for the year: | ||
Interim dividend | 2.0p | 2.0p |
Proposed final dividend | 2.0p | 2.0p |
Total | 4.0p | 4.0p |
Cumulative return to shareholders since launch: | ||
Net asset value per share | 78.1p | 94.2p |
Dividends paid per share* | 95.4p | 91.4p |
Net asset value plus dividends paid per share | 173.5p | 185.6p |
Mid-market share price at end of year | 70.00p | 86.00p |
Share price discount to net asset value | 10.4% | 8.7% |
Tax-free dividend yield (based on net asset value per share at the start of the year) | 4.2% | 4.3% |
*Excluding proposed final dividend payable on
Enquiries:
Website: www.nvm.co.uk
CHAIRMAN’S STATEMENT
The latter part of last year was dominated by the coronavirus (COVID-19) pandemic which has caused significant disruption to the
Results and dividend
The net asset value (NAV) per share at
We are continuing to build a portfolio of investments in innovative earlier stage
Investment manager
As announced on
Board
I am pleased to report that
Investment portfolio
Following the first reports of COVID-19 in
In
We continue to follow the International Private Equity and Venture Capital Valuation Guidelines (IPEV), when determining the fair value of investments. Although the majority of our portfolio is represented by unquoted investments, IPEV requires calibration of investment valuations to reflect the market conditions prevailing as at the valuation date. By reference to the quoted markets, the valuation metrics for many of the sectors in which we invest reduced during the first quarter of 2020. Having most recently undertaken a valuation of the portfolio as at
Venture capital investment activity
During the year, further progress has been made in the development of the portfolio, with seven new VCT-qualifying investments completed at a total cost of £4.3 million. A number of our companies are pursuing trends that may be accelerated in the current environment, such as innovative delivery and distribution, the digitisation of traditional off-line business processes and the development of innovative medical technologies. As previously highlighted, the businesses in the earlier stage portfolio are likely to require multiple rounds of funding as they develop. Follow-on investments totalling £5.6 million were made in 16 companies in the portfolio during the year.
Share offers and liquidity
Having reviewed the pipeline of follow-on investment opportunities and continued flow of new businesses seeking capital to develop innovative products or services, we launched a public offer of new shares in
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. Shareholders who wish to join the scheme or amend their current participation in the scheme may obtain an updated scheme mandate form from the company secretary.
Share buy-backs
We have maintained our policy of buying back our shares in the market, where necessary to maintain market liquidity, at a discount of 5% to NAV. During the year 2,666,301 shares, equivalent to approximately 3.0% of the opening share capital, were purchased for cancellation.
VCT legislation and qualifying status
The company has continued to meet the qualifying conditions laid down by
There were no further amendments to the VCT scheme rules announced during the period under review and our manager ensured that the company can comply with previously announced measures contained in the Finance Act 2018. From
Outlook
COVID-19 has caused a great deal of volatility in financial markets and whilst many quoted indices have staged a recovery since the lows experienced in
Chairman
Extracts from the audited financial statements for the year ended
INCOME STATEMENT
for the year ended
Year ended | Year ended | |||||
Revenue £000 | Capital £000 | Total £000 | Revenue £000 | Capital £000 | Total £000 | |
(Loss)/gain on disposal of investments | - | (168) | (168) | - | 3,204 | 3,204 |
Movements in fair value of investments | - | (9,943) | (9,943) | - | 1,195 | 1,195 |
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | |
- | (10,111) | (10,111) | - | 4,399 | 4,399 | |
Income | 1,126 | - | 1,126 | 2,541 | - | 2,541 |
Investment management fee | (435) | (1,304) | (1,739) | (397) | (1,190) | (1,587) |
Other expenses | (363) | - | (363) | (373) | - | (373) |
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | |
Return on ordinary activities before tax | 328 | (11,415) | (11,087) | 1,771 | 3,209 | 4,980 |
Tax on return on ordinary activities | - | - | - | (219) | 219 | - |
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | |
Return on ordinary activities after tax | 328 | (11,415) | (11,087) | 1,552 | 3,428 | 4,980 |
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | |
Return per share | 0.3p | (12.1)p | (11.8)p | 1.8p | 3.8p | 5.6p |
BALANCE SHEET
as at
31 March 2020 £000 | 31 March 2019 £000 | |
Fixed assets: | ||
Investments | 63,776 | 69,811 |
---------- | ---------- | |
Current assets: | ||
Debtors | 28 | 211 |
Cash and cash equivalents | 8,876 | 19,405 |
---------- | ---------- | |
8,904 | 19,616 | |
Creditors (amounts falling due within one year) | (137) | (6,696) |
---------- | ---------- | |
Net current assets | 8,767 | 12,920 |
---------- | ---------- | |
Net assets | 72,543 | 82,731 |
---------- | ---------- | |
Capital and reserves: | ||
Called-up equity share capital | 4,647 | 4,393 |
Share premium | 7,428 | 840 |
Capital redemption reserve | 432 | 299 |
Capital reserve | 60,786 | 65,665 |
Revaluation reserve | (1,653) | 9,166 |
Revenue reserve | 903 | 2,368 |
---------- | ---------- | |
Total equity shareholders’ funds | 72,543 | 82,731 |
---------- | ---------- | |
Net asset value per share | 78.1p | 94.2p |
STATEMENT OF CHANGES IN EQUITY
for the year ended
---------------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 | 4,393 | 840 | 299 | 9,166 | 65,665 | 2,368 | 82,731 | ||
Return on ordinary activities | |||||||||
after tax | - | - | - | (10,819) | (596) | 328 | (11,087) | ||
Dividends paid | - | - | - | - | (1,967) | (1,793) | (3,760) | ||
Net proceeds of share issues | 387 | 6,588 | - | - | - | - | 6,975 | ||
Shares purchased for cancellation | (133) | - | 133 | - | (2,316) | - | (2,316) | ||
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | |||
At | 4,647 | 7,428 | 432 | (1,653) | 60,786 | 903 | 72,543 | ||
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- |
STATEMENT OF CHANGES IN EQUITY
for the year ended
---------------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 | 4,483 | 214 | 171 | 8,463 | 69,721 | 1,208 | 84,260 |
Return on ordinary activities | |||||||
after tax | - | - | - | 703 | 2,725 | 1,552 | 4,980 |
Dividends paid | - | - | - | - | (4,512) | (392) | (4,904) |
Net proceeds of share issues | 38 | 626 | - | - | - | - | 664 |
Shares purchased for cancellation | (128) | - | 128 | - | (2,269) | - | (2,269) |
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | |
At | 4,393 | 840 | 299 | 9,166 | 65,665 | 2,368 | 82,731 |
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- |
*The revaluation reserve is generally non-distributable other than that part of the reserve relating to gains/losses on readily realisable quoted investments, which is distributable.
STATEMENT OF CASH FLOWS
for the year ended
Year ended | Year ended | |||
31 March 2020 | 31 March 2019 | |||
£000 | £000 | |||
Cash flows from operating activities: | ||||
Return on ordinary activities before tax | (11,087) | 4,980 | ||
Adjustments for: | ||||
Loss/(gain) on disposal of investments | 168 | (3,204) | ||
Movement in fair value of investments | 9,943 | (1,195) | ||
Decrease/(increase) in debtors | 183 | (44) | ||
(Decrease)/increase in creditors | (65) | 68 | ||
---------- | ---------- | |||
Net cash (outflow)/inflow from operating activities | (858) | 605 | ||
---------- | ---------- | |||
Cash flows from investing activities: | ||||
Purchase of investments | (12,772) | (18,342) | ||
Sale/repayment of investments | 8,696 | 15,700 | ||
---------- | ---------- | |||
Net cash outflow from investing activities | (4,076) | (2,642) | ||
---------- | ---------- | |||
Cash flows from financing activities: | ||||
Issue of ordinary shares | 7,109 | 702 | ||
Share issue expenses | (135) | (38) | ||
Share subscriptions held pending allotment | (6,493) | 6,493 | ||
Purchase of ordinary shares for cancellation | (2,316) | (2,269) | ||
Equity dividends paid | (3,760) | (4,904) | ||
---------- | ---------- | |||
Net cash inflow/(outflow) from financing activities | (5,595) | (16) | ||
---------- | ---------- | |||
Decrease in cash and cash equivalents | (10,529) | (2,053) | ||
Cash and cash equivalents at beginning of year | 19,405 | 21,458 | ||
---------- | ---------- | |||
Cash and cash equivalents at end of year | 8,876 | 19,405 | ||
---------- | ---------- |
INVESTMENT PORTFOLIO SUMMARY
as at
Cost £000 | Valuation £000 | % of net assets by value | |
Venture capital investments: | |||
822 | 4,611 | 6.4 | |
Lineup Systems | 974 | 4,135 | 5.7 |
Currentbody.com | 1,748 | 3,000 | 4.1 |
2,542 | 2,769 | 3.8 | |
2,168 | 2,686 | 3.7 | |
1,360 | 2,582 | 3.6 | |
906 | 1,898 | 2.6 | |
Ideagen* | 406 | 1,825 | 2.5 |
It’s All Good | 1,131 | 1,686 | 2.3 |
Knowledgemotion | 1,740 | 1,548 | 2.1 |
GRIP- | 1,904 | 1,503 | 2.1 |
Idox* | 530 | 1,486 | 2.0 |
Medovate | 1,432 | 1,432 | 2.0 |
1,915 | 1,412 | 1.9 | |
1,464 | 1,359 | 1.9 | |
---------- | ---------- | -------- | |
Fifteen largest venture capital investments | 21,042 | 33,932 | 46.7 |
Other venture capital investments | 34,139 | 21,000 | 28.9 |
---------- | ---------- | -------- | |
Total venture capital investments | 55,181 | 54,932 | 75.6 |
Listed equity investments | 10,248 | 8,844 | 12.3 |
---------- | ---------- | -------- | |
Total fixed asset investments | 65,429 | 63,776 | 87.9 |
---------- | |||
Net current assets | 8,767 | 12.1 | |
---------- | -------- | ||
Net assets | 72,543 | 100.0 | |
---------- | -------- |
*Quoted on AIM
RISK MANAGEMENT
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 manager 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 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 by the COVID-19 pandemic which is widely predicted to cause a global recession after the balance sheet date. 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 manager 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.
Brexit risk: the implementation of the decision for the
Stock market risk: some of the company’s investments are quoted on the
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
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, such as that caused by COVID-19. Mitigation: the board regularly reviews the system of internal controls, both financial and non-financial, operated by the company and the manager. 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 manager 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
DIRECTORS’ RESPONSIBILITIES STATEMENT
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
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 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
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 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 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
The directors have confirmed that to the best of their knowledge (i) 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 (ii) the directors’ report and strategic 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 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 announcement were Mr J G D Ferguson (Chairman), Mr C J Fleetwood, Mr T R Levett and Mr J M O Waddell.
OTHER MATTERS
The financial information set out above does not constitute the company's statutory accounts for the years ended
The calculation of the return per share is based on the loss on ordinary activities after tax for the year of £11,087,000 (2019: profit of £4,980,000) and on 94,141,026 (2019: 89,416,452) shares, being the weighted average number of shares in issue during the year.
The calculation of the net asset value per share as at
If approved by shareholders, the proposed final dividend of
The full annual report including financial statements for the year ended
Neither the contents of the
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