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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Northern 2 Vct Plc | LSE:NTV | London | Ordinary Share | GB0005356430 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 54.50 | 53.00 | 56.00 | 54.50 | 53.00 | 54.50 | 0.00 | 08:00:18 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Investors, Nec | -2.96M | -3.46M | -0.0177 | -30.79 | 106.47M |
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TIDMNTV
12 NOVEMBER 2018
NORTHERN 2 VCT PLC
UNAUDITED HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHSED 30 SEPTEMBER 2018
Northern 2 VCT PLC is a Venture Capital Trust (VCT) managed by NVM
Private Equity LLP. It invests mainly in unquoted venture capital
holdings and aims to provide high long-term tax-free returns to
shareholders through a combination of dividend yield and capital growth.
Financial highlights (comparative figures as at 30 September 2017 and 31
March 2018)
Six months to Six months to Year to
30 September 30 September 31 March
2018 2017 2018
--------------- --------------- -----------
Net assets GBP85.0m GBP69.3m GBP87.0m
Net asset value per share 64.9p 68.4p 66.9p
Return per share:
Revenue 0.5p 1.0p 1.3p
Capital 1.0p (0.6)p (0.4)p
Total 1.5p 0.4p 0.9p
Dividend per share declared
in respect of the period 2.0p 2.0p 5.5p
Cumulative returns to shareholders
since launch:
Net asset value per share 64.9p 68.4p 66.9p
Dividends paid per share* 115.4p 109.9p 111.9p
Net asset value plus dividends paid per share 180.3p 178.3p 178.8p
Mid-market share price at end of period 60.0p 64.5p 63.5p
Share price discount to net asset value 7.6% 5.7% 5.1%
Tax-free dividend yield (based on net asset value
per share)** 8.0% 7.1% 7.2%
*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
For further information, please contact:
NVM Private Equity LLP
Simon John/James Bryce 0191 244 6000
Website: www.nvm.co.uk
HALF-YEARLY MANAGEMENT REPORT TO SHAREHOLDERS
Results and dividend
The unaudited net asset value (NAV) per share at 30 September 2018 was
64.9 pence (66.9 pence (audited) at 31 March 2018) and is stated after
deducting the final dividend of 3.5 pence per share in respect of the
2017/18 financial year which was paid in July 2018.
The return per share as shown in the income statement for the six months
ended 30 September 2018 was 1.5 pence, compared with 0.4 pence in the
corresponding period last year, reflecting a number of investment
realisations completed during the period.
The board has declared an unchanged interim dividend for the year ending
31 March 2019 of 2.0 pence per share, which will be paid on 25 January
2019 to shareholders who are on the register on 4 January 2019. We
remain committed to building a portfolio of investments in innovative UK
smaller companies across a diverse range of sectors with significant
growth potential. As previously reported, these investments will
generally be structured with a view to achieving capital growth rather
than income generation and the timing and quantum of potential capital
gains from realisations may be less predictable. Your directors believe
it is important to set the annual dividend at a level which has regard
to the company's changing asset base and to its recurring income, and
which avoids as far as possible erosion of the net asset value per
share. After careful consideration we have decided that in the absence
of unforeseen circumstances we expect in due course to propose a final
dividend also of 2.0 pence per share, making a total of 4.0 pence for
the year. This is equivalent to a tax-free yield of approximately 6% by
reference to the net asset value at the start of the year.
Our aim in the medium term, subject to regular review, would be to
generate a return on ordinary activities sufficient to support an annual
dividend yield of 5%, whilst retaining the flexibility to declare
additional special dividends where appropriate, for example in the event
of a significant capital gain.
Portfolio
Further progress was made on the development of the portfolio during the
period. Six new holdings were added to the venture capital portfolio
for a total consideration of GBP4.2 million:
-- Clarilis (GBP1,012,000) -- automated document preparation solutions for
the legal sector, Leamington Spa
-- Grip-UK (GBP964,000) -- indoor climbing wall facility operator, Liverpool
-- Ridge Pharma (GBP898,000) -- provider of branded generic prescription
medicines, Reading
-- Seahawk Bidco (GBP479,000) -- business-to-business energy cost comparison
and procurement service, Bolton
-- Newcells Biotech (GBP484,000) -- specialist testing services for the drug
development sector, Newcastle upon Tyne
-- Ablatus Therapeutics (GBP322,000) -- developer of tissue ablation
technology for the treatment of tumours, Cambridge
In addition to the new investments, GBP0.8 million of capital was
provided to three existing investee companies to support further growth.
The proportion of investment activity directed to follow-on funding will
increase in the coming years as early stage companies by their nature
often require multiple rounds of finance in order to achieve their
business plans. Additional third party investors may be introduced as
part of subsequent funding rounds in order to broaden the shareholder
and capital base of the investee.
Proceeds from investment sales and repayments from the venture capital
portfolio amounted to GBP6.1 million during the period,
producing a realised gain of GBP1.7 million over the 31 March 2018
carrying values. Love Saving Group was the subject of a secondary
management buy-out financed by Lloyds Development Capital (LDC),
delivering a return of over 3.5 times the original cost over the life of
the investment. The opportunity was taken to re-invest GBP0.5 million
alongside LDC in the newly formed acquisition vehicle, Seahawk Bidco,
which will continue the group's activities. Wear Inns was sold to
Aprirose, a specialist investment fund, delivering over two times the
original cost over the life of the investment.
Both of the significant realisations during the period were of
investments in mature private businesses originally acquired before
November 2015, when the VCT rules were updated. Our remaining holdings
of such investments still constitute over 60% by value of the venture
capital portfolio and are expected to provide the main source of
realisations in the coming years as the early stage portfolio grows and
develops.
Shareholder issues
We have reviewed the current pipeline with NVM both in terms of new
investment prospects and of opportunities to support existing portfolio
companies as they continue to develop. The volume of attractive
opportunities to deploy capital in the coming years is expected to grow
and your board has therefore proposed a non-prospectus top-up share
offer to launch early in 2019 to raise up to GBP6.6 million.
Gross proceeds of GBP0.8 million were received during the period through
the issue of new shares under our dividend investment scheme.
The company has maintained its policy of buying back its own shares in
the market from time to time, at a discount of 5% to NAV. During the
period, 519,000 shares were repurchased for cancellation, for a total
consideration of GBP313,000.
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 manager, 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.
VCT legislation
As previously reported, the VCT rules have continued to evolve to meet
the UK Government's aim of driving investment towards the smaller
companies most in need of capital to grow. The Finance Act 2018 was
enacted in March 2018 and included measures to ensure that a greater
proportion of the assets of each approved VCT are held in qualifying
investments and that the proceeds of new share issues are invested in
qualifying investments more quickly.
Prospects
Over the past two years, we have operated against a background of
economic and legislative uncertainty and limited clarity has thus far
been obtained as to the likely nature of the UK's future relationship
with the European Union. Our manager, NVM, continues to ably navigate
this period of change whilst working with portfolio companies to build
their businesses and drive shareholder value. The pipeline of
investment opportunities is currently solid and we expect to complete
further investments in the second half of the year which meet our key
investment criteria of good value, growth potential, strong management
and an ability to generate cash in the medium to long term. We continue
to have confidence that our portfolio and investment strategy will
deliver good returns to shareholders in the years ahead.
On behalf of the Board
David Gravells
Chairman
The unaudited half-yearly financial statements for the six months ended
30 September 2018 are set out
below.
INCOME STATEMENT
(unaudited) for the six months ended 30 September 2018
Six months ended Six months ended
30 September 2018 30 September 2017
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gain on
disposal of
investments - 1,773 1,773 - 376 376
Movements in
fair value
of
investments - 27 27 - (560) (560)
---------- ---------- ---------- ---------- ---------- ----------
- 1,800 1,800 - (184) (184)
Income 1,194 - 1,194 1,526 - 1,526
Investment
management
fee (195) (584) (779) (195) (586) (781)
Other
expenses (200) - (200) (187) - (187)
---------- ---------- ---------- ---------- ---------- ----------
Return on
ordinary
activities
before tax 799 1,216 2,015 1,144 (770) 374
Tax on
return on
ordinary
activities (125) 125 - (186) 186 -
---------- ---------- ---------- ---------- ---------- ----------
Return on
ordinary
activities
after tax 674 1,341 2,015 958 (584) 374
---------- ---------- ---------- ---------- ---------- ----------
Return per 0.5p 1.0p 1.5p 1.0p (0.6)p 0.4p
share
Year ended 31 March 2018
Revenue Capital Total
GBP000 GBP000 GBP000
Gain on disposal of investments - 709 709
Movements in fair value of
investments - (202) (202)
---------- ---------- ----------
- 507 507
Income 2,482 - 2,482
Investment management fee (393) (1,180) (1,573)
Other expenses (350) (11) (361)
---------- ---------- ----------
Return on ordinary activities
before tax 1,739 (684) 1,055
Tax on return on ordinary
activities (277) 277 -
---------- ---------- ----------
Return on ordinary activities
after tax 1,462 (407) 1,055
---------- ---------- ----------
Return per share 1.3p (0.4)p 0.9p
BALANCE SHEET
(unaudited) as at 30 September 2018
30 September 2018 30 September 2017 31 March 2018
GBP000 GBP000 GBP000
Fixed asset
investments 62,450 55,220 61,432
---------- ---------- ----------
Current assets:
Debtors 129 638 205
Cash and cash
equivalents 22,494 13,590 25,540
---------- ---------- ----------
22,623 14,228 25,745
Creditors (amounts
falling due
within one year) (76) (100) (134)
---------- ---------- ----------
Net current assets 22,547 14,128 25,611
---------- ---------- ----------
Net assets 84,997 69,348 87,043
---------- ---------- ----------
Capital and
reserves:
Called-up equity
share capital 6,544 5,070 6,505
Share premium 1,132 8,390 392
Capital redemption
reserve 135 83 110
Capital reserve 69,916 47,028 71,629
Revaluation reserve 6,351 7,415 7,836
Revenue reserve 919 1,362 571
---------- ---------- ----------
Total equity
shareholders'
funds 84,997 69,348 87,043
---------- ---------- ----------
Net asset value per 64.9p 68.4p 66.9p
share
STATEMENT OF CHANGES IN EQUITY
(unaudited) for the six months ended 30 September 2018
-----------------Non-distributable reserves----------------- Distributable reserves Total
Capital
Called up share Share redemption Revaluation Capital Revenue
capital premium reserve reserve reserve reserve
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
At 1 April 2018 6,505 392 110 7,836 71,629 571 87,043
Return on
ordinary
activities
after tax - - - (1,485) 2,826 674 2,015
Dividends paid - - - - (4,228) (326) (4,554)
Net proceeds of
share issues 64 740 - - - - 804
Shares
purchased for
cancellation (25 ) - 25 - (311 ) - (311 )
---------- ---------- ---------- ---------- ---------- ---------- ----------
At 30 September 2018 6,544 1,132 135 6,351 69,916 919 84,997
---------- ---------- ---------- ---------- ---------- ---------- ----------
STATEMENT OF CHANGES IN EQUITY
(unaudited) for the six months ended 30 September 2017
-----------------Non-distributable reserves----------------- Distributable reserves Total
Capital
Called up share Share redemption Revaluation Capital Revenue
capital premium reserve reserve reserve reserve
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
At 1 April 2017 4,678 3,029 83 9,049 53,908 900 71,647
Return on
ordinary
activities
after tax - - - (1,634) 1,050 958 374
Dividends paid - - - - (7,930) (496) (8,426)
Net proceeds of
share issues 392 5,361 - - - - 5,753
---------- ---------- ---------- ---------- ---------- ---------- ----------
At 30 September
2017 5,070 8,390 83 7,415 47,028 1,362 69,348
---------- ---------- ---------- ---------- ---------- ---------- ----------
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2018
-----------------Non-distributable reserves----------------- Distributable reserves Total
Capital
Called up share Share redemption Revaluation Capital Revenue
capital premium reserve reserve reserve reserve
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
At 1 April 2017 4,678 3,029 83 9,049 53,908 900 71,647
Return on
ordinary
activities
after tax - - - (1,213) 806 1,462 1,055
Dividends paid - - - - (9,226) (1,791) (11,017)
Net proceeds of
share issues 1,854 23,853 - - - - 25,707
Shares
purchased
for cancellation (27) - 27 - (349) - (349)
Cancellation
of share
premium
reserve - (26,490 ) - - 26,490 - -
---------- ---------- ---------- ---------- ---------- ---------- ----------
At 31 March 2018 6,505 392 110 7,836 71,629 571 87,043
---------- ---------- ---------- ---------- ---------- ---------- ----------
STATEMENT OF CASH FLOWS
(unaudited) for the six months ended 30 September 2018
Six months ended Six months ended Year ended
30 September 30 September
2018 2017 31 March 2018
GBP 000 GBP 000 GBP 000
Cash flows from
operating
activities:
Return on ordinary
activities before tax 2,015 374 1,055
Adjustments for:
Gain on disposal of
investments (1,773) (376) (709)
Movement in fair value of
investments (27) 560 202
Decrease/(increase) in
debtors 76 (47) 386
Decrease in creditors (58) (616) (582)
---------- ---------- ----------
Net cash inflow/(outflow)
from operating activities 233 (105) 352
---------- ---------- ----------
Cash flows from
investing
activities:
Purchase of investments (12,373) (3,716) (10,265)
Sale/repayment of
investments 13,155 6,507 7,535
---------- ---------- ----------
Net cash inflow/(outflow)
from investing activities 782 2,791 (2,730)
---------- ---------- ----------
Cash flows from
financing
activities:
Issue of ordinary shares 823 5,842 26,248
Share issue expenses (19) (89) (541)
Share subscriptions held
pending allotment - (4,297) (4,297)
Purchase of ordinary shares
for cancellation (311) - (349)
Equity dividends paid (4,554) (8,426) (11,017)
---------- ---------- ----------
Net cash (outflow)/inflow
from financing activities (4,061) (6,970) 10,044
---------- ---------- ----------
Net (decrease)/increase in
cash and cash equivalents (3,046) (4,284) 7,666
Cash and cash equivalents at
beginning of period 25,540 17,874 17,874
---------- ---------- ----------
Cash and cash equivalents at
end of period 22,494 13,590 25,540
---------- ---------- ----------
INVESTMENT PORTFOLIO SUMMARY
as at 30 September 2018
Cost Valuation % of net assets
GBP000 GBP000 by valuation
No 1 Lounges 1,977 3,205 3.8
Agilitas IT Holdings 1,638 3,125 3.7
Lineup Systems 975 2,910 3.4
MSQ Partners Group 1,672 2,886 3.4
Sorted Holdings 1,946 2,856 3.4
Closerstill Group 1,683 2,479 2.9
Entertainment Magpie Group 1,503 1,871 2.2
Biological Preparations Group 2,166 1,741 2.0
It's All Good 1,145 1,578 1.9
Volumatic Holdings 1,251 1,543 1.8
Graza 1,522 1,522 1.8
Medovate 1,450 1,450 1.7
Channel Mum 875 1,387 1.6
Intuitive Holding 1,508 1,352 1.6
Hello Soda 1,332 1,332 1.6
---------- ---------- -------
Fifteen largest venture capital
investments 22,643 31,237 36.8
Other venture capital investments 25,326 23,095 27.2
---------- ---------- -------
Total venture capital investments 47,969 54,332 64.0
Listed equity investments 6,787 6,797 8.0
Listed interest-bearing investments 1,343 1,321 1.5
---------- ---------- -------
Total fixed asset investments 56,099 62,450 73.5
----------
Net current assets 22,547 26.5
---------- -------
Net assets 84,997 100.0
---------- -------
BUSINESS RISKS
The board carries out a regular and robust review of the risk
environment in which the company operates. The principal risks and
uncertainties identified by the board which might affect the company's
business model and future performance, and the steps taken with a view
to their mitigation, are as follows:
Investment and liquidity risk: investment in smaller and unquoted
companies, such as those in which the company invests, involves a higher
degree of risk than investment in larger listed companies because they
generally have limited product lines, markets and financial resources
and may be more dependent on key individuals. The securities of smaller
companies in which the company invests are typically unlisted, making
them illiquid, and this may cause difficulties in valuing and disposing
of the securities. The company may invest in businesses whose shares
are quoted on AIM - the fact that a share is quoted on AIM does not mean
that it can be readily traded and the spread between the buying and
selling prices of such shares may be wide. Mitigation: the directors
aim to limit the risk attaching to the portfolio as a whole by careful
selection, close monitoring and timely realisation of investments, by
carrying out rigorous due diligence procedures and maintaining a wide
spread of holdings in terms of financing stage and industry sector. The
board reviews the investment portfolio with the 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. Mitigation: the company invests in a
diversified portfolio of investments spanning various industry sectors,
and maintains sufficient cash reserves to be able to provide additional
funding to investee companies where appropriate.
Stock market risk: some of the company's investments are quoted on the
London Stock Exchange or AIM and will be subject to market fluctuations
upwards and downwards. External factors such as terrorist activity can
negatively impact stock markets worldwide. In times of adverse
sentiment there may be very little, if any, market demand for shares in
smaller companies quoted on AIM. Mitigation: the company's quoted
investments are actively managed by specialist managers, including NVM
in the case of 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, 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 manager 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 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 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 30 September 2018 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 31 March 2018 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 31 March 2018. Each of the directors confirms that to the best of his or her 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 D P A Gravells (Chairman), Mr A M Conn, Mr S P Devonshire, Miss C A McAnulty and Mr F L G Neale. 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 130,595,942 (2017 99,880,309) 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 30 September 2018 divided by the 130,872,145 (2017 101,400,355) ordinary shares in issue at that date. The interim dividend of 2.0 pence per share for the year ending 31 March 2019 will be paid on 25 January 2019 to shareholders on the register at the close of business on 4 January 2019. A copy of the half-yearly financial report for the six months ended 30 September 2018 is expected to be posted to shareholders by 27 November 2018 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.
(END) Dow Jones Newswires
November 12, 2018 07:30 ET (12:30 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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