Annual Financial Report
12 NOVEMBER 2010
NORTHERN VENTURE TRUST PLC
RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2010
Northern Venture Trust PLC is a Venture Capital Trust (VCT) managed by NVM
Private Equity 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.
Financial highlights:
(with comparative figures as at 30 September 2009)
ORDINARY SHARES 2010 2009
- Net assets* £50.4m £32.6m
- Net asset value per share 85.2p 80.3p
- Return per share:
 Revenue 1.2p 3.3p
 Capital 6.8p 9.4p
 Total 8.0p 12.7p
- Dividend per share declared
 in respect of the year:
 Revenue 1.0p 2.5p
 Capital 6.5p 5.0p
 Total 7.5p 7.5p
- Cumulative return to shareholders
 since launch:
 Net asset value per share 85.2p 80.3p
 Dividends paid per share 89.0p 86.0p
 Net asset value plus dividends
 paid per share 174.2p 166.3p
- Share price at end of year 72.5p 56.25p
*On 29 October 2009 19,009,157 new ordinary shares were issued at a deemed value
of 80.3p per share on conversion of the company's C share capital. The net
assets attributable to the C share capital at 30 September 2009 were £15.3
million.
For further information, please contact:
NVM Private Equity Limited
Alastair Conn/Christopher Mellor 0191 244 6000
Website:Â www.nvm.co.uk
CHAIRMAN'S STATEMENT
Against a background of continuing difficulties in the UK economy and financial
markets, Northern Venture Trust has continued to build on its strong long-term
performance record. The proposed final dividend payable in December 2010 will
take the company's cumulative dividend distributions to over £36 million, an
average annual payment of 6.1p per share over a 15 year period, and the tender
offer announced recently will return up to a further £4.6 million to
shareholders at a narrow discount to net asset value (NAV). I am glad to report
that our company's achievements were recognised publicly in July 2010 when it
was named as Best Venture Capital Trust in the What Investment Investment Trust
of the Year Awards.
Results and dividend
The NAV per ordinary share at 30 September 2010 was 85.2p, compared with 80.3p a
year earlier. Our key performance indicator in terms of value created for
shareholders is the return per share as shown in the income statement, which
this year was 8.0p per share - equivalent to 10.0% of the opening net asset
value. This is a creditable outcome in a period which has presented many
challenges to the smaller private companies which represent a large proportion
of our assets.
An interim dividend of 3.0p per share for the year ended 30 September 2010 was
paid in June 2010 and in the light of the results for the year we are pleased to
recommend a final dividend of 4.5p, making a total of 7.5p (the same level as in
the two preceding years). The total ordinary dividends declared by the company
in the 15 years since launch amount to 93.5p per share. Looking to the future,
it remains your board's objective to maintain an annual dividend payment of at
least 6.0p per ordinary share.
Investment portfolio
The business review in the annual report gives details of movements in the
investment portfolio during the year. The highlight was the sale in June 2010
of our investment in Weldex (International) Offshore, the largest UK-based
crawler crane hire company, for a total of £7.1 million. Weldex is well placed
to continue its recent rapid growth and the opportunity was taken to re-invest
£3.3 million of the sale proceeds in a new Weldex group holding company funded
primarily by another venture capital firm. Other additions to the unquoted
portfolio totalled £7.3 million, reflecting an improvement in the flow of new
opportunities compared with the preceding year. Despite the generally difficult
conditions, many of the companies in the portfolio have continued to make
encouraging progress. However we believe that in the short term there are
likely to be only limited opportunities to achieve further exits.
Shareholder issues
In October 2009 the C shares issued by the company in the 2005/06 tax year were
converted into new ordinary shares, with a total of 19,009,157 new ordinary
shares being issued on conversion. The issued share capital at 30 September
2010 comprised 59,139,418 ordinary shares.
We are pleased that the secondary market in the company's shares has become
increasingly active, reflecting the attractions of a strong tax-free dividend
yield in an era of low interest rates and the new 50% top rate of income tax.
In August 2010 we announced that the company would buy back its shares in the
market at a discount of 15% to the latest published NAV, subject to market
conditions. We will however continue our efforts to communicate the attractions
of the secondary market in the hope that the company will not be called on to
buy back significant numbers of shares. The quoted share price has continued to
recover from the low point reached in late 2008 and at 30 September 2010 stood
at 72.5p.
As a further aid to shareholder liquidity your board has recently announced a
tender offer by the company to acquire up to 10% of the issued ordinary share
capital at a 3% discount to the audited NAV as at 30 September 2010, adjusted to
reflect the impending final dividend. If fully taken up this initiative, which
follows a similar exercise in 2005, will result in the return of approximately
£4.6 million of capital to shareholders.
Your board has also announced a public offer of new ordinary shares, opening in
November 2010, with a target of raising up to £15 million. Shareholders who re-
invest their proceeds from the tender offer in new shares should be eligible for
the 30% initial income tax relief on the amount invested as well as the ongoing
tax-free dividends.
VCT qualifying status
The company has maintained its approved venture capital trust status with HM
Revenue & Customs. Â The company's compliance with the VCT qualifying conditions
is closely monitored by the board, who receive regular reports from our managers
and from our VCT taxation advisers, PricewaterhouseCoopers LLP.
Corporate governance
The board's statement on corporate governance matters is set out in the annual
report. The company continues to comply with the provisions of the Association
of Investment Companies Code of Corporate Governance, and the directors
undertake an annual review of the role and effectiveness of the board, its
committees and individual directors measured against the recommendations of the
Code. The board's remit includes approving all investment and divestment
decisions and during the year we met eight times in person and 15 times by
conference call.
Board of directors
Primrose Scott, one of the founding directors of the company, has indicated her
intention to retire from the board at the close of the annual general meeting in
December 2010. We have enjoyed working with Primrose and I would like to thank
her for her valuable contribution to our company, most recently as chairman of
the audit committee. We wish her a long and happy retirement.
Annual general meeting and shareholder presentation
The annual general meeting will take place in Edinburgh on 16 December 2010 and
will include a presentation by our managers. Details of the formal business to
be transacted at the meeting are contained in a separate circular which is being
sent to shareholders with the annual report. Your directors look forward to
seeing as many shareholders as possible at the meeting. Shareholders should
have received an invitation to a seminar for all investors in VCTs managed by
NVM Private Equity, to be held in London on 26 November 2010, and we hope to
meet some of you on that occasion also.
Outlook
Our company has a strong balance sheet which should be further enhanced by the
forthcoming share issue. Conditions in the UK economy continue to be
challenging, but the Government appears determined to address the public sector
deficit and encourage business enterprise, and in the medium to longer term this
should have a positive impact on our existing investments and the flow of new
opportunities. We believe that the results of the past two years demonstrate
what can be achieved, even in a difficult market, by careful selection and close
monitoring of investments. The importance of taking a long-term view has also
been reinforced. We intend to continue following our well-established
investment approach and believe that this should continue to deliver good
performance for our shareholders.
John Hustler
Chairman
The audited financial statements for the year ended 30 September 2010 are set
out below.
INCOME STATEMENT
for the year ended 30 September 2010
  Ordinary shares
  -------------------------------------------------
    Revenue Capital Total
£000 £000 £000
Gain on disposal of   - 3,119 3,119
investments
Movements in fair value of   - 1,493 1,493
investments
    ---------- ---------- ----------
    - 4,612 4,612
Income    1,350 - 1,350
Investment management    (244) (733) (977)
fee
Recoverable VAT Â Â Â - -Â -
Other expenses    (326) - (326)
    ---------- ---------- ----------
Return on ordinary    780 3,879 4,659
activities before tax
Tax on return on    (95) 95 -
ordinary activities
    ---------- ---------- ----------
Return on ordinary    685 3,974 4,659
activities after tax
    ---------- ---------- ----------
Return per share    1.2p 6.8p 8.0p
INCOME STATEMENT
for the year ended 30 September 2009
 Ordinary shares C shares
 ------------------------------------------------- -------------------------------------------------
 Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gain/(loss)
on disposal
of -Â 6,776Â 6,776Â -Â (170) (170)
investments
Movements
in fair
value
of -Â (2,744) (2,744) -Â (829) (829)
investments
 ---------- ---------- ---------- ---------- ---------- ----------
 - 4,032 4,032 - (999) (999)
Income 2,021Â -Â 2,021Â 715Â -Â 715
Investment (155) (466) (621) (83) (248) (331)
management
fee
Recoverable -Â -Â -Â 8Â 23Â 31
VAT
Other (211) -Â (211) (196) -Â (196)
expenses
 ---------- ---------- ---------- ---------- ---------- ----------
Return on
ordinary
activities
before tax 1,655Â 3,566Â 5,221Â 444Â (1,224) (780)
Tax on (335) 131Â (204) (120) 63Â (57)
return on
ordinary
activities
 ---------- ---------- ---------- ---------- ---------- ----------
Return on
ordinary
activities
after tax 1,320Â 3,697Â 5,017Â 324Â (1,161) (837)
 ---------- ---------- ---------- ---------- ---------- ----------
Return per 3.3p 9.4p 12.7p 1.6p (5.7)p (4.1)p
share
 Company
  -------------------------------------------------
    Revenue Capital Total
   £000 £000 £000
Gain/(loss) on disposal of
investments   - 6,606 6,606
Movements in fair value    - (3,573) (3,573)
of investments
    ---------- ---------- ----------
    - 3,033 3,033
Income    2,736 - 2,736
Investment management    (238) (714) (952)
fee
Recoverable VAT Â Â Â 8Â 23Â 31
Other expenses    (407) - (407)
    ---------- ---------- ----------
Return on ordinary    2,099 2,342 4,441
activities before tax
Tax on return on    (455) 194 (261)
ordinary activities
    ---------- ---------- ----------
Return on ordinary    1,644 2,536 4,180
activities after tax
    ---------- ---------- ----------
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 30 September 2010
 Ordinary shares C shares Total
 £000 £000 £000
Equity shareholders' funds at
1 October 2009 32,603Â 15,272Â 47,875
Conversion of C shares 15,273Â (15,273) -
Return on ordinary activities after tax 4,658Â 1Â 4,659
Dividends recognised in the year (1,781) -Â (1,781)
Net proceeds of share issues (35) -Â (35)
Shares purchased for cancellation (304) -Â (304)
 ---------- ---------- ----------
Equity shareholders' funds at
30 September 2010 50,414Â -Â 50,414
 ---------- ---------- ----------
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 30 September 2009
 Ordinary shares C shares Total
 £000 £000 £000
Equity shareholders' funds at
1 October 2008 31,118Â 17,461Â 48,579
Return on ordinary activities after tax 5,017Â (837) 4,180
Dividends recognised in the year (4,758) (1,233) (5,991)
Net proceeds of share issues 1,258Â -Â 1,258
Shares purchased for cancellation (32) (119) (151)
 ---------- ---------- ----------
Equity shareholders' funds at
30 September 2009 32,603Â 15,272Â 47,875
 ---------- ---------- ----------
BALANCE SHEET
as at 30 September 2010
 30
September 30 September 2009
2010
------------------------------------------------------------------------
 Ordinary Ordinary C shares Total
shares shares £000 £000
£000 £000
Fixed asset
investments:
Venture
capital
investments
  Unquoted 26,308 13,573 6,667 20,240
  Quoted 2,566 1,341 1,525 2,866
 ---------- ---------- ---------- ----------
Total venture 28,874Â 14,914Â 8,192Â 23,106
capital
investments
Listed fixed- 6,222Â 2,932Â 5,882Â 8,814
interest
investments
 ---------- ---------- ---------- ----------
Total fixed 35,096Â 17,846Â 14,074Â 31,920
asset
investments
 ---------- ---------- ---------- ----------
Current
assets:
  Debtors 1,063 1,781 904 2,685
  Cash and 14,323 13,266 407 13,673
deposits
 ---------- ---------- ---------- ----------
 15,386 15,047 1,311 16,358
Creditors
(amounts
falling due
within one (68) (290) (113) (403)
year)
 ---------- ---------- ---------- ----------
Net current 15,318Â 14,757Â 1,198Â 15,955
assets
 ---------- ---------- ---------- ----------
Net assets 50,414Â 32,603Â 15,272Â 47,875
 ---------- ---------- ---------- ----------
Capital and
reserves:
Called-up 14,785Â 10,145Â 15,307Â 25,452
equity share
capital
Share premium 12,222Â 10,227Â 2,030Â 12,257
Capital 12,875Â 2,015Â 193Â 2,208
redemption
reserve
Capital 14,280Â 10,404Â (432) 9,972
reserve
Revaluation (5,020) (1,282) (1,913) (3,195)
reserve
Revenue 1,272Â 1,094Â 87Â 1,181
reserve
 ---------- ---------- ---------- ----------
Total equity 50,414Â 32,603Â 15,272Â 47,875
shareholders'
funds
 ---------- ---------- ---------- ----------
Net asset 85.2p 80.3p 74.8p
value per
share
CASH FLOW STATEMENT
for the year ended 30 September 2010
 Year ended
30
September Year ended 30 September 2009
2010
  --------------------------------------------------------------
 Ordinary Ordinary C shares Total
shares shares
 £000 £000 £000 £000
Net cash
inflow/(outflow)
from operating 1,595Â 1,559Â (491) 1,068
activities
Taxation:
Corporation tax (261) (188) (113) (301)
paid
Financial
investment:
+-----------+--------------------------------------------------------------+
Purchase of | (8,688)| (3,617) (1,469) (5,086)|
investments | | |
| | |
Sale/repayment of | 10,124Â | 9,946Â 2,732Â 12,678Â |
investments | | |
+-----------+--------------------------------------------------------------+
Net cash inflow
from
financial 1,436Â 6,329Â 1,263Â 7,592
investment
Equity dividends (1,781) (4,758) (1,233) (5,991)
paid
 ---------- ---------- ---------- ----------
Net cash
inflow/(outflow)
before financing 989Â 2,942Â (574) 2,368
Financing:
+-----------+--------------------------------------------------------------+
Issue of shares | -Â | 1,320Â -Â 1,320Â |
| | |
Share issue | (35)| (62) -Â (62)|
expenses | | |
| | |
Purchase of shares | (304)| (32) (119) (151)|
for cancellation | | |
+-----------+--------------------------------------------------------------+
Net cash (339) 1,226Â (119) 1,107
inflow/(outflow)
from financing
 ---------- ---------- ---------- ----------
Increase/(decrease)
in cash at bank 650Â 4,168Â (693) 3,475
 ---------- ---------- ---------- ----------
Reconciliation of
return before tax
to
net cash flow from
operating
activities
Return on ordinary 4,659Â 5,221Â (780) 4,441
activities before
tax
(Gain)/loss on (3,119) (6,776) 170Â (6,606)
disposal of
investments
Movements in fair (1,493) 2,744Â 829Â 3,573
value of
investments
(Increase)/decrease 1,622Â 386Â (738) (352)
in debtors
Increase/(decrease) (74) (16) 28Â 12
in creditors
 ---------- ---------- ---------- ----------
Net cash
inflow/(outflow)
from
operating 1,595Â 1,559Â (491) 1,068
activities
 ---------- ---------- ---------- ----------
Analysis of
movement in net
funds
  1 October  30 Sept
2009 Cash flows 2010
  £000 £000 £000
Cash and deposits  13,673 650 14,323
  ---------- ---------- ----------
INVESTMENT PORTFOLIO SUMMARY
as at 30 September 2010
 Cost Valuation % of net assets
£000 £000 by valuation
Weldex (International) Offshore Holdings 3,262 3,262 6.5
CloserStill Holdings 1,750 2,114 4.2
Promanex Group Holdings 1,695 1,853 3.7
Kerridge Commercial Systems 1,740 1,740 3.4
CGI Group Holdings 3,449 1,725 3.4
Alaric Systems 2,174 1,351 2.7
Arleigh International 809 1,224 2.4
Paladin Group 1,452 1,167 2.3
Axial Systems Holdings 1,004 1,146 2.3
Envirotec 813 1,063 2.1
Evolve Investments 995 995 2.0
KPJ Software Services 995 995 2.0
RCC Lifesciences 995 995 2.0
Wear Inns 979 979 1.9
Promatic Group 1,229 922 1.8
 ---------- ---------- ----------
Fifteen largest venture capital 23,341 21,531 42.7
investments
Other venture capital investments 10,422 7,343 14.6
 ---------- ---------- ----------
Total venture capital investments 33,763 28,874 57.3
Listed fixed-interest investments 6,353 6,222 12.3
 ---------- ---------- ----------
Total fixed asset investments 40,116 35,096 69.6
 ----------
Net current assets  15,318 30.4
  ---------- ----------
Net assets  50,414 100.0
  ---------- ----------
BUSINESS RISKS
The board carries out a regular review of the risk environment in which the
company operates. The main areas of risk identified by the board are as
follows:
Investment risk:Â The majority of the company's investments are in small and
medium-sized unquoted and AIM-quoted companies which are VCT qualifying
holdings, and which by their nature entail a higher level of risk and lower
liquidity than investments in large quoted companies. The directors aim to limit
the risk attaching to the portfolio as a whole by careful selection and timely
realisation of investments, by carrying out rigorous due diligence procedures
and by maintaining a wide spread of holdings in terms of financing stage,
industry sector and geographical location. The board reviews the investment
portfolio with the investment managers on a regular basis.
Financial risk:Â As most of the company's investments involve a medium- to long-
term commitment and many are relatively illiquid, the directors consider that it
is inappropriate to finance the company's activities through borrowing except on
an occasional short-term basis. Accordingly they seek to maintain a proportion
of the company's assets in cash or cash equivalents in order to be in a position
to take advantage of new unquoted investment opportunities. The company has
very little exposure to foreign currency risk and does not enter into derivative
transactions.
Economic risk: Â events such as economic recession or general fluctuations in
stock markets and interest rates may affect the valuation of investee companies
and their ability to access adequate financial resources, as well as affecting
the company's own share price and discount to net asset value.
Liquidity risk: The company's investments may be difficult to realise. The
fact that a stock is quoted on a recognised stock exchange does not guarantee
its liquidity and there may be a large spread between bid and offer prices.
Unquoted investments are not traded on a recognised stock exchange and are
inherently illiquid.
Internal control risk:Â The board regularly reviews the system of internal
controls, both financial and non-financial, operated by the company and the
manager. Â These include controls designed to ensure that the company's assets
are safeguarded and that proper accounting records are maintained.
VCT qualifying status risk:Â the company is required at all times to observe the
conditions laid down in the Income Tax Act 2007 for the maintenance of approved
VCT status. The loss of such approval could lead to the company losing its
exemption from corporation tax on capital gains, to investors being liable to
pay income tax on dividends received from the company and, in certain
circumstances, to investors being required to repay the initial income tax
relief on their investment. Â The manager keeps the company's VCT qualifying
status under continual review and reports to the board on a quarterly basis.
 The board has also retained PricewaterhouseCoopers LLP to undertake an
independent VCT status monitoring role.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the annual financial report in
accordance with applicable law and regulations. Company law requires the
directors to prepare financial statements for each financial year. Â Under that
law the directors have elected to prepare the financial statements in accordance
with UK Accounting Standards. The financial statements are required by law to
give a true and fair view of the state of affairs of the company at the end of
the financial period and of the return of the company for that period. In
preparing these financial statements, the directors are required to (i) select
suitable accounting policies and then apply them consistently;Â (ii) make
judgements and estimates that are reasonable and prudent;Â (iii) state whether
applicable UK Accounting Standards have been followed, subject to any material
departures disclosed and explained in the financial statements; Â and (iv)
prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
In relation to the financial statements for the year ended 30 September 2010
each of the directors has confirmed that to the best of his or her knowledge (i)
the financial statements, which have been 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;Â and (ii) the
directors' report includes 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 which it faces.
The directors are also responsible for keeping proper accounting records that
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. Â They 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 directors' report, directors' remuneration report and corporate
governance statement that comply with that law and those regulations.
The company's financial statements are published on the NVM Private Equity
Limited website, www.nvm.co.uk. The maintenance and integrity of this website
is the responsibility of NVM and not of the company. Visitors to the website
should be aware that legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
The directors of the company at the date of this announcement were Mr J R
Hustler (Chairman), Mr N J Beer, Mr E M P Denny, Mr R S Peters, Miss P S Scott
and Mr H P Younger.
OTHER MATTERS
The above summary of results for the year ended 30 September 2010 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;Â the independent auditors' report on those financial
statements under Section 495 of the Companies Act 2006 is unqualified and does
not contain a statement under Section 498(2) or (3) of the Companies Act 2006.
The proposed final dividend of 4.5p per share for the year ended 30 September
2010 will, if approved by shareholders, be paid on 17 December 2010 to
shareholders on the register at the close of business on 26 November 2010.
The full annual report including financial statements for the year ended 30
September 2010 is expected to be posted to shareholders on 18 November 2010 and
will be available to the public at the registered office of the company at
Northumberland House, Princess Square, Newcastle upon Tyne NE1 8ER and on the
NVM Private Equity Limited website, www.nvm.co.uk.
Neither the contents of the NVM Private Equity Limited website nor the contents
of any website accessible from hyperlinks on the NVM Private Equity Limited
website (or any other website) is incorporated into, or forms part of, this
announcement.
[HUG#1462215]
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Northern Venture Trust PLC via Thomson Reuters ONE
Friday, 22nd November 2024
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