UNAUDITED HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED
Financial highlights (comparative figures as at
| Six months ended 31 March 2020 | Six months ended 31 March 2019 | Year ended 30 September 2019 |
Net assets | £80.2m | £92.0m | £95.7m |
Net asset value per share | 58.2p | 70.4p | 68.9p |
Return per share: Revenue Capital Total | (0.1)p (8.6)p (8.7)p | 0.7p 0.8p 1.5p | 0.8p 1.3p 2.1p |
Dividend per share declared in respect of the period Interim dividend Final dividend Total | 1.5p – 1.5p | 2.0p – 2.0p | 2.0p 2.0p 4.0p |
Cumulative return to shareholders since launch: Net asset value per share Dividends paid per share* Net asset value plus dividends paid per share | 58.2p 170.5p 228.7p | 70.4p 166.5p 236.9p | 68.9p 168.5p 237.4p |
Mid-market share price at end of period | 53.00p | 64.50p | 64.50p |
Tax-free dividend yield (based on the net asset per share)** | 5.0% | 5.7% | 5.6% |
*Excluding interim dividend not yet paid.
**The annualised dividend yield is calculated by dividing the dividends in respect of the 12 month period ended on each reference date by the net asset value per share at the start of the period.
Enquiries:
Website: www.nvm.co.uk
HALF-YEARLY MANAGEMENT REPORT FOR THE SIX MONTHS ENDED
The past six months have been another extremely busy period for the company, with four new investments completed, a change in investment advisor announced in
Results and dividend
The unaudited net asset value (NAV) per share at
We announced an NAV of 54.6p per share at 24 March prior to issuing shares under the offer. Whilst this was after lockdown had been announced, it was before the detailed guidance on certain government support initiatives had been released, most notably details of the Coronavirus Job Retention Scheme on 26 March. Together with more up to date trading information from investee companies as at
In 2018 we revised our dividend policy in the light of the new rules for investment introduced in 2015 and 2017, which we expected to result in more volatile returns. We introduced a target dividend yield of 5% of opening NAV, which has been exceeded in each of the last two years. A negative return in any period clearly puts considerable pressure on the payment of a dividend. However we are aware of the importance to our shareholders of regular distributions and remain confident in the long term prospects of our portfolio. We have therefore decided to pay an interim dividend for the year ending
Investment advisor update
As announced previously, the Company consented to the novation of its existing investment advisory agreement with
Venture capital investment activity
Four new VCT-qualifying holdings were acquired during the period, for total consideration of £2.5 million. These have all been in innovative earlier stage companies, developing a variety of disruptive products and services and requiring capital to scale up. Most of the earlier stage businesses we are backing will require further capital to realise their growth potential fully and we will continue to channel a significant proportion of our investment capital into our existing portfolio. We supported nine of our existing portfolio companies with growth capital of £3.5 million in aggregate during the period.
Inevitably in a portfolio of this type there will be some early losses of which we incurred one during the year with the sale of Primal Food for a nominal sum. We also exited AIM listed Nasstar which was taken private as a result of an agreed takeover and
Venture capital portfolio update
Following the first reports of COVID-19 in
The Company benefits from holding a diversified portfolio of investments, with no particular concentration to any one end-market sector. As is to be expected with a diverse generalist portfolio, the current situation has had varying effects on individual investments. When wide reaching restrictions on the movement of people were announced by the
The worldwide impact of COVID-19 on the financial markets has been extreme and caused a great deal of volatility. Although the vast majority of our portfolio is represented by unquoted investments, investors look to the quoted markets as a benchmark and the valuation metrics for many of the sectors in which we invest reduced during the first quarter of 2019. We continue to follow the International Private Equity and Venture Capital Valuation (IPEV) guidelines, being the industry accepted best practice, when determining the fair value of our unquoted investments. As usual, the directors have undertaken a full valuation exercise of the entire portfolio as at
Share offer and liquidity
Having considered the progress achieved to date and the likely further capital required to enable our investee companies to flourish, we announced in
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, when necessary in order to maintain liquidity, at a 5% discount to NAV. During the six months ended
VCT legislation and qualifying status
The VCT scheme rules have been subject to regular legislative changes in recent years and whilst there were no further amendments announced by the Chancellor in the recent Spring Budget statement, it is possible that further changes will be made in the future. We will continue to work closely with Mercia to maintain compliance with the scheme rules at all times.
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 and we receive regular reports from Mercia and from our VCT taxation advisers,
Outlook
The political and economic environment has been uncertain over the past few years. The clear result of the General Election held in
On behalf of the Board
Chairman
Extracts from the unaudited half-yearly financial statements for the six months ended
INCOME STATEMENT
(unaudited) for the six months ended
Six months ended 31 March 2020 | Six months ended 31 March 2019 | ||||||
Revenue £000 | Capital £000 | Total £000 | Revenue £000 | Capital £000 | Total £000 | ||
Gain on disposal of investments | - | 209 | 209 | - | 511 | 511 | |
Movements in fair value of investments | - | (11,541) | (11,541) | - | 1,148 | 1,148 | |
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ||
- | (11,332) | (11,332) | - | 1,659 | 1,659 | ||
Income | 419 | - | 419 | 1,489 | - | 1,489 | |
Investment management fee | (244) | (731) | (975) | (222) | (667) | (889) | |
Other expenses | (247) | - | (247) | (250) | - | (250) | |
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ||
Return on ordinary activities before tax | (72) | (12,063) | (12,135) | 1,017 | 992 | 2,009 | |
Tax on return on ordinary activities | - | - | - | (143) | 143 | - | |
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ||
Return on ordinary activities after tax | (72) | (12,063) | (12,135) | 874 | 1,135 | 2,009 | |
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ||
Return per share | (0.1)p | (8.6)p | (8.7)p | 0.7p | 0.8p | 1.5p |
Year ended 30 September 2019 | ||||||
| | | Revenue £000 | Capital £000 | Total £000 | |
Gain on disposal of investments | - | 1,244 | 1,244 | |||
Movements in fair value of investments | - | 1,673 | 1,673 | |||
---------- | ---------- | ---------- | ||||
- | 2,917 | 2,917 | ||||
Income | 2,166 | - | 2,166 | |||
Investment management fee | (445) | (1,334) | (1,779) | |||
Other expenses | (456) | - | (456) | |||
---------- | ---------- | ---------- | ||||
Return on ordinary activities before tax | 1,265 | 1,583 | 2,848 | |||
Tax on return on ordinary activities | (168) | 168 | - | |||
---------- | ---------- | ---------- | ||||
Return on ordinary activities after tax | 1,097 | 1,751 | 2,848 | |||
---------- | ---------- | ---------- | ||||
Return per share | 0.8p | 1.3p | 2.1p |
BALANCE SHEET
(unaudited) as at
31 March 2020 | 31 March 2019 | 30 September 2019 | |
£000 | £000 | £000 | |
Fixed assets: | |||
Investments | 65,837 | 71,183 | 72,409 |
---------- | ---------- | ---------- | |
Current assets: | |||
Debtors | 23 | 229 | 1,182 |
Cash and cash equivalents | 14,478 | 27,245 | 22,160 |
---------- | ---------- | ---------- | |
14,501 | 27,474 | 23,342 | |
Creditors (amounts falling due within one year) | (110) | (6,697) | (93) |
---------- | ---------- | ---------- | |
Net current assets | 14,391 | 20,777 | 23,249 |
---------- | ---------- | ---------- | |
Net assets | 80,228 | 91,960 | 95,658 |
---------- | ---------- | ---------- | |
Capital and reserves: | |||
Called-up equity share capital | 34,466 | 32,641 | 34,693 |
Share premium | 5,904 | 1,133 | 5,584 |
Capital redemption reserve | 2,532 | 1,576 | 2,106 |
Capital reserve | 42,046 | 49,028 | 46,820 |
Revaluation reserve | (5,461) | 5,599 | 4,948 |
Revenue reserve | 741 | 1,983 | 1,507 |
---------- | ---------- | ---------- | |
Total equity shareholders’ funds | 80,228 | 91,960 | 95,658 |
---------- | ---------- | ---------- | |
Net asset value per share | 58.2p | 70.4p | 68.9p |
STATEMENT OF CHANGES IN EQUITY
(unaudited) for the six months 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 | 34,693 | 5,584 | 2,106 | 4,948 | 46,820 | 1,507 | 95,658 | ||||
Return on ordinary activities | |||||||||||
after tax | - | - | - | (10,409) | (1,654) | (72) | (12,135) | ||||
Dividends paid | - | - | - | - | (2,082) | (694) | (2,776) | ||||
Net proceeds of share issues | 199 | 320 | - | - | - | - | 519 | ||||
Shares purchased for cancellation | (426) | - | 426 | - | (1,038) | - | (1,038) | ||||
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | |||||
At | 34,466 | 5,904 | 2,532 | (5,461) | 42,046 | 741 | 80,228 | ||||
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- |
STATEMENT OF CHANGES IN EQUITY
(unaudited) for the six months 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 | 33,142 | 817 | 879 | 6,346 | 51,617 | 1,109 | 93,910 | |
Return on ordinary activities | ||||||||
after tax | - | - | - | (747) | 1,882 | 874 | 2,009 | |
Dividends paid | - | - | - | - | (2,651) | - | (2,651) | |
Net proceeds of share issues | 196 | 316 | - | - | - | - | 512 | |
Shares purchased for cancellation | (697) | - | 697 | - | (1,820) | - | (1,820) | |
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ||
At | 32,641 | 1,133 | 1,576 | 5,599 | 49,028 | 1,983 | 91,960 | |
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- |
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 | 33,142 | 817 | 879 | 6,346 | 51,617 | 1,109 | 93,910 |
Return on ordinary activities | |||||||
after tax | - | - | - | (1,398) | 3,149 | 1,097 | 2,848 |
Dividends paid | - | - | - | - | (4,749) | (699) | (5,448) |
Net proceeds of share issues | 2,778 | 4,767 | - | - | - | - | 7,545 |
Shares purchased for cancellation | (1,227) | - | 1,227 | - | (3,197) | - | (3,197) |
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | |
At | 34,693 | 5,584 | 2,106 | 4,948 | 46,820 | 1,507 | 95,658 |
---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- |
*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
(unaudited) for the six months ended
Six months ended | Six months ended | Year ended | ||||||
31 March 2020 | 31 March 2019 | 30 September 2019 | ||||||
£000 | £000 | £000 | ||||||
Cash flows from operating activities: | ||||||||
Return on ordinary activities before tax | (12,135) | 2,009 | 2,848 | |||||
Adjustments for: | ||||||||
Gain on disposal of investments | (209) | (511) | (1,244) | |||||
Movement in fair value of investments | 11,541 | (1,148) | (1,673) | |||||
Decrease/(increase) in debtors | 1,159 | (89) | (1,041) | |||||
Increase/(decrease) in creditors | 16 | (3) | (13) | |||||
---------- | ---------- | ---------- | ||||||
Net cash inflow/(outflow) from operating activities | 372 | 258 | (1,123) | |||||
---------- | ---------- | ---------- | ||||||
Cash flows from investing activities: | ||||||||
Purchase of investments | (6,500) | (12,963) | (18,705) | |||||
Sale/repayment of investments | 1,741 | 12,757 | 18,531 | |||||
---------- | ---------- | ---------- | ||||||
Net cash outflow from investing activities | (4,759) | (206) | (174) | |||||
---------- | ---------- | ---------- | ||||||
Cash flows from financing activities: | ||||||||
Issue of ordinary shares | 533 | 540 | 7,692 | |||||
Share issue expenses | (15) | (26) | (147) | |||||
Share subscriptions held pending allotment | - | 6,593 | - | |||||
Purchase of ordinary shares for cancellation | (1,038) | (1,820) | (3,197) | |||||
Equity dividends paid | (2,775) | (2,651) | (5,448) | |||||
---------- | ---------- | ---------- | ||||||
Net cash (outflow)/inflow from financing activities | (3,295) | 2,636 | (1,100) | |||||
---------- | ---------- | ---------- | ||||||
Net (decrease)/increase in cash and cash equivalents | (7,682) | 2,688 | (2,397) | |||||
Cash and cash equivalents at beginning of period | 22,160 | 24,557 | 24,557 | |||||
---------- | ---------- | ---------- | ||||||
Cash and cash equivalents at end of period | 14,478 | 27,245 | 22,160 | |||||
---------- | ---------- | ---------- |
INVESTMENT PORTFOLIO SUMMARY
as at
Cost £000 | Valuation £000 | % of net assets by valuation | |
Fifteen largest venture capital investments: | |||
943 | 5,292 | 6.6% | |
Lineup Systems | 975 | 4,137 | 5.2% |
Currentbody.com | 1,944 | 3,337 | 4.2% |
3,022 | 3,292 | 4.1% | |
1,611 | 3,057 | 3.8% | |
2,412 | 2,988 | 3.7% | |
905 | 1,899 | 2.4% | |
It’s All Good | 1,205 | 1,791 | 2.2% |
2,366 | 1,759 | 2.2% | |
GRIP- | 2,118 | 1,672 | 2.1% |
Knowledgemotion | 1,903 | 1,669 | 2.1% |
3,262 | 1,638 | 2.0% | |
Medovate | 1,593 | 1,593 | 2.0% |
1,472 | 1,366 | 1.7% | |
Clarilis | 1,092 | 1,301 | 1.6% |
------------ | ------------ | ------------ | |
26,823 | 36,791 | 45.9% | |
Other venture capital investments | 35,374 | 21,281 | 26.5% |
------------ | ------------ | ------------ | |
Total venture capital investments | 62,197 | 58,072 | 72.4% |
Listed equity investments | 9,099 | 7,765 | 9.7% |
------------ | ------------ | ------------ | |
Total fixed asset investments | 71,296 | 65,837 | 82.1% |
------------ | |||
Cash and cash equivalents | 14,478 | 18.0% | |
Debtors less creditors | (87) | (0.1)% | |
------------ | ------------ | ||
Net assets | 80,228 | 100.0% | |
------------ | ------------ | ||
RISK MANAGEMENT
The board carries out a regular and robust assessment 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 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 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 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 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.
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. Mitigation: the board regularly reviews the system of internal controls, both financial and non-financial, operated by the company and the 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
OTHER MATTERS
The unaudited half-yearly financial statements for the six months ended
Each of the directors confirms that to the best of their knowledge the half-yearly financial statements have been prepared in accordance with the Statement “Half-yearly financial reports” issued by the
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 return per share is based on the return on ordinary activities after tax for the six months ended
The calculation of the net asset value per share is based on the net assets at
The interim dividend of 1.5p per share for the year ending
A copy of the half-yearly financial report for the six months ended
Neither the contents of the
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