ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MARCH 2024
18 JUNE 2024
NORTHERN 2 VCT PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MARCH
2024
Northern 2 VCT PLC is a Venture Capital Trust (VCT) managed by
Mercia Fund Management Limited. It invests mainly in unquoted
venture capital holdings in growing UK companies and aims to
provide long-term tax-free returns to shareholders through a
combination of dividend yield and capital growth.
Financial highlights (comparative figures as at
31 March 2023):
|
|
Year ended |
Year ended |
|
|
31 March |
31 March |
|
|
2024 |
2023 |
|
|
|
|
Net assets |
|
£119.5m |
£109.6m |
|
|
|
|
Net asset value per share |
57.3p |
59.0p |
|
|
|
|
Return per share |
|
|
|
Revenue |
|
0.8p |
(0.2)p |
Capital |
|
0.6p |
(1.7)p |
Total |
|
1.4p |
(1.9)p |
|
|
|
|
Dividend per share declared in respect of the
period |
|
|
Interim dividend |
|
1.8p |
2.0p |
Proposed final dividend |
1.2p |
1.3p |
Total |
|
3.0p |
3.3p |
|
|
|
|
Return to shareholders since launch |
|
|
Net asset value per
share |
57.3p |
59.0p |
Cumulative dividends
paid per share* |
139.1p |
136.0p |
Cumulative
return per share |
196.4p |
195.0p |
|
|
|
|
Mid-market share price at end of period |
54.5p |
54.5p |
|
|
|
|
Share price discount to net asset value |
4.9% |
7.6% |
|
|
|
|
Annualised tax-free dividend yield** |
5.1% |
5.1% |
* Excluding proposed final dividend payable on 23 August
2024
** Based on net asset value per share at the start of the
period
Enquiries:
James Sly / Sarah Williams, Mercia Asset
Management PLC – 0330 223 1430
Website: www.mercia.co.uk/vcts/n2vct/
Chair’s statement
I am pleased to report that investment activity during the year
remained buoyant with a total of £14.8 million invested across 20
promising early stage businesses, of which six were new
investments. It is reassuring to find that entrepreneurial spirit
and drive remain active in the UK.
Our investment rate was in line with the past three years and
comes despite the headwinds facing the UK economy including
continued inflationary pressures, higher interest rates, and a
technical recession during the financial year. Geopolitical events,
conflict and the upcoming worldwide election cycles have created
volatility in financial markets. While the UK listed equity markets
staged a late rally on the prospect of interest rate cuts, the AIM
market, which focusses on smaller companies, was down more than 8%
in the year to March 2024.
Against this challenging backdrop we were delighted that our
share offer of £20 million was oversubscribed. I would like to
thank those existing shareholders who continued to support the
Company and warmly welcome the many new shareholders who have
joined our ranks. Proceeds from the share offer together with sales
proceeds from investments mean that the Company is well positioned
both to pursue new opportunities to support emerging businesses and
to work with existing portfolio companies to realise their growth
plans.
Results and dividend
In the year ended 31 March 2024 the Company delivered a return of
1.4 pence per share (2023: minus 1.9 pence), equivalent to 2.4% of
the opening net asset value (NAV) per share. Gains in the unquoted
portfolio were partly offset by declines in our listed venture
investments. The NAV per share as at 31 March 2024, after deducting
dividends paid during the year totalling 3.1 pence, was 57.3 pence
compared with 59.0 pence as at 31 March 2023.
While realisation activity was lower than in previous years, a
notable realisation was Evotix, sold for initial net proceeds of
£11.5 million compared to an original cost of £2.5 million, a 4.6
times initial return. As Evotix continued to hit its forecasts
following its sale, contractual deferred proceeds of £0.7 million
were also received after the balance sheet date and have been
included in these results.
In 2018 your Directors set an objective of paying an annual
dividend representing a yield of at least 5% of the opening NAV per
share in each year whilst endeavouring to protect the NAV from
erosion over the medium term. Your Board is conscious of the need
to balance payment of dividends while also growing NAV per share
and sees this as a medium term target. Given the number of
profitable realisations over the past few years and the prospects
for good realisations from the current portfolio, the Board
considers that that the 5% dividend target is still
appropriate.
Having already declared an interim dividend of 1.8 pence per
share which was paid in January 2024, your Directors now propose a
final dividend of 1.2 pence per share. The total of 3.0 pence per
share is equivalent to 5.1% of the opening NAV of 59.0 pence per
share. The proposed final dividend will be paid on 23 August 2024,
subject to approval by shareholders at the Annual General
Meeting.
The target dividend yield will remain subject to regular review
and the level of future dividend distributions will continue to
reflect the level of returns generated by the Company in the medium
term, the timing of investment realisations, the availability of
distributable reserves and continuing compliance with the VCT
scheme rules.
Investment portfolio
The Company continues to be a generalist investor, with allocations
in the software, life sciences, health-tech and consumer sectors.
Given the prevailing market sentiment towards consumer investments
and a softer market for software over the past year, investment has
been predominantly directed at a number of new health-tech and life
science businesses, while we continue to seek opportunities across
all sectors as they arise.
Investment levels have remained strong, with £7.3 million of
capital provided to six new venture capital investments and £7.5
million of follow-on capital invested into fourteen existing
portfolio investments.
Over the year the Company saw increases in the valuations of its
unquoted portfolio by an aggregate of £2.6 million and reductions
in its quoted portfolio of an aggregate £0.8 million. Unquoted
portfolio investments benefitted from strong trading in a number of
portfolio companies such as Pure Pet Food, Project Glow TopCo (t /
a Currentbody.com) and Pimberly, while the value of the Company’s
unquoted portfolio reduced, predominantly as a result of the £0.8
million reduction in the value of musicMagpie. Your Directors
always consider the state of the investment markets and how these
might impact the valuations of the unquoted venture portfolio and
have updated valuations to reflect current market conditions where
appropriate.
Share offer and liquidity
In April 2023 gross proceeds of £6.0 million were received from the
fully subscribed 2022/2023 share offer as 10,290,184 new ordinary
shares were issued. The Board was also recently pleased to announce
the successful subscription of the 2023/2024 share offer, which
amounted to £20 million. In relation to this offer, an interim
allotment of 15,720,030 new ordinary shares was issued in December
2023, generating £9.6 million in gross proceeds, and 17,376,231 new
ordinary shares were issued just after the end of the period in
April 2024, yielding gross proceeds of £10.4 million.
The Board continues to monitor liquidity carefully and will
publish details of the plans to fundraising in the 2024/25 tax year
in due course.
Our dividend investment scheme continues to operate. This
enables shareholders to 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. During the year
around 15% of total dividends were reinvested by shareholders.
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 year, a total of
4,602,428 shares were repurchased for cancellation, equivalent to
approximately 2.5% of the opening share capital.
Responsible Investment
The Company continues to be mindful of its Environmental, Social
and Governance (ESG) responsibilities and we have outlined our
evolving approach in the annual report.
VCT legislation and qualifying status
The Company has continued to meet the stringent and complex
qualifying conditions laid down by HM Revenue & Customs for
maintaining its approval as a VCT. The Manager monitors the
position closely and reports regularly to the Board. Philip Hare
& Associates LLP has continued to act as independent adviser to
the Company on VCT taxation matters.
The Board were pleased to note the recognition by the UK
Government of the vital role that VCTs perform, following the
announcement of the extension to the VCT tax reliefs for a further
10 years. The Board considers that the Company, and VCTs more
generally, are successfully delivering in-line with the
Government’s mandate, which is to channel money into higher-risk,
early-stage businesses.
Whilst no further amendments to VCT legislation have been
announced, it is possible that further changes will be made in the
future. We will continue to work closely with the Manager to
maintain compliance with the scheme rules at all times.
Board succession
The Board continues to maintain a process of ordinary succession.
Upon the retirement of Frank Neale at the 2022 Annual General
Meeting (AGM), your Board has actively searched for a new
Non-executive Director, and has appointed Tom Chambers, effective
from 19 June 2024. Tom brings a wealth of experience and will be a
valuable addition to the Board as we look to make senior succession
plans over coming years.
During the year, Cecilia McAnulty was appointed to the role of
Senior Independent Director and Ranjan Ramparia was appointed as
Chair of the Audit Committee.
Investor communications
The Board is conscious of its responsibility to communicate
transparently and regularly with shareholders. Aside from the
recent newsletter, we look forward to welcoming shareholders to our
AGM and to our forthcoming investor seminar to be held on 22
October 2024 in London. A copy of the recent newsletter and details
of how to register for the October seminar can be found on the
Company’s website at www.mercia.co.uk/vcts/n2vct/
Annual General Meeting
The Company’s AGM will take place on 31 July 2024. The AGM provides
an excellent opportunity for shareholders, directors and the
Manager to meet in person, exchange views and comment. We intend to
hold the 2024 AGM in person at Howard Kennedy LLP, No. 1 London
Bridge, London SE1 9BG. Following positive feedback received from
the last three years, we also intend to offer remote access for
shareholders through an online webinar facility for those who would
prefer not to travel. Please note that shareholders attending
remotely must register their votes ahead of time, as it will not be
possible to count votes from online participants at the AGM.
Outlook
Despite the challenging macroeconomic environment, our commitment
remains steadfast in providing patient capital to nurture
innovative early-stage businesses across the UK. The Board is
encouraged by the sustained robust deployment rates and will
continue to support innovative early stage UK businesses. We
maintain confidence in the portfolio's ability to drive sustained
long-term shareholder value and as we look ahead, are optimistic
about its continued success.
We thank our investors for their continuing support.
David Gravells
Chair
18 June 2024
Extracts from the audited financial statements for the year
ended 31 March 2024 are set out below.
Income statement
for the year ended 31
March 2024 |
Year ended 31 March 2024 |
|
Year ended 31 March 2023 |
|
Revenue |
Capital |
Total |
|
Revenue |
Capital |
Total |
|
£000 |
£000 |
£000 |
|
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
Gain / (loss) on disposal of
investments |
- |
933 |
933 |
|
- |
(219) |
(219) |
Unrealised fair value gains / (losses) on investments |
- |
1,839 |
1,839 |
|
- |
(1,302) |
(1,302) |
|
- |
2,772 |
2,772 |
|
- |
(1,521) |
(1,521) |
|
|
|
|
|
|
|
|
Dividend and interest
income |
2,738 |
- |
2,738 |
|
598 |
- |
598 |
Investment management fee |
(515) |
(1,545) |
(2,060) |
|
(505) |
(1,514) |
(2,019) |
Other
expenses |
(602) |
- |
(602) |
|
(522) |
- |
(522) |
|
|
|
|
|
|
|
|
Return before
tax |
1,621 |
1,227 |
2,848 |
|
(429) |
(3,035) |
(3,464) |
Tax on
return |
73 |
(73) |
- |
|
109 |
(109) |
- |
Return after tax |
1,694 |
1,154 |
2,848 |
|
(320) |
(3,144) |
(3,464) |
|
|
|
|
|
|
|
|
Return per share |
0.8p |
0.6p |
1.4p |
|
(0.2)p |
(1.7)p |
(1.9)p |
Balance sheet
as at 31 March
2024 |
31 March 2024 |
31 March 2023 |
|
£000 |
£000 |
|
|
|
Fixed
assets |
|
|
Investments |
75,779 |
80,314 |
|
|
|
Current
assets |
|
|
Debtors |
911 |
118 |
Cash and cash equivalents |
42,999 |
29,318 |
|
43,910 |
29,436 |
|
|
|
Creditors (amounts
falling due within one year) |
(163) |
(174) |
|
|
|
Net current
assets |
43,747 |
29,262 |
|
|
|
Net
assets |
119,526 |
109,576 |
|
|
|
Capital and
reserves |
|
|
Called-up equity share
capital |
10,434 |
9,282 |
Share premium |
52,737 |
38,165 |
Capital redemption
reserve |
1,079 |
849 |
Capital reserve |
54,973 |
59,176 |
Revaluation reserve |
(853) |
2,015 |
Revenue reserve |
1,156 |
89 |
Total equity shareholders' funds |
119,526 |
109,576 |
|
|
|
Net asset value per
share |
57.3p |
59.0p |
Statement of changes in equity
for the
year ended 31 March 2024 |
|
--------- |
Non
Distributable reserves |
------------ |
Distributable Reserves |
|
|
Called up share capital |
Share premium |
Capital redemption reserve |
Revaluation reserve |
Capital reserve |
Revenue reserve |
Total |
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
At 1 April
2023 |
9,282 |
38,165 |
849 |
2,015 |
59,176 |
89 |
109,576 |
Return after tax |
- |
- |
- |
(2,868) |
4,022 |
1,694 |
2,848 |
Dividends paid |
- |
- |
- |
- |
(5,664) |
(627) |
(6,291) |
Net proceeds of share
issues |
1,382 |
14,572 |
- |
- |
- |
- |
15,954 |
Shares purchased for
cancellation |
(230) |
- |
230 |
- |
(2,561) |
- |
(2,561) |
At 31 March 2024 |
10,434 |
52,737 |
1,079 |
(853) |
54,973 |
1,156 |
119,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 March
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 April
2022 |
8,145 |
21,952 |
615 |
9,765 |
63,642 |
735 |
104,854 |
Return after tax |
- |
- |
- |
(7,750) |
4,606 |
(320) |
(3,464) |
Dividends paid |
- |
- |
- |
- |
(6,408) |
(326) |
(6,734) |
Net proceeds of share
issues |
1,371 |
16,213 |
- |
- |
- |
- |
17,584 |
Shares purchased for
cancellation |
(234) |
- |
234 |
- |
(2,664) |
- |
(2,664) |
At 31 March
2023 |
9,282 |
38,165 |
849 |
2,015 |
59,176 |
89 |
109,576 |
Statement of cash flows
for the year ended 31
March 2024 |
Year ended |
|
Year ended |
|
31 March 2024 |
|
31 March 2023 |
|
£000 |
|
£000 |
Cash flows from operating
activities |
|
|
|
Return before tax |
2,848 |
|
(3,464) |
Adjustments for: |
|
|
|
(Gain) / loss on disposal of
investments |
(933) |
|
219 |
Movements in fair value of
investments |
(1,839) |
|
1,302 |
(Increase) / decrease in
debtors |
(85) |
|
(75) |
Increase / (decrease) in
creditors |
(11) |
|
21 |
Net cash inflow / (outflow) from operating
activities |
(20) |
|
(1,997) |
|
|
|
|
Cash flows from investing
activities |
|
|
|
Purchase of investments |
(15,569) |
|
(17,600) |
Proceeds on disposal of
investments |
22,168 |
|
13,643 |
Net cash inflow / (outflow) from investing
activities |
6,599 |
|
(3,957) |
|
|
|
|
Cash flows from financing
activities |
|
|
|
Issue of ordinary shares |
16,507 |
|
18,075 |
Share issue expenses |
(553) |
|
(491) |
Purchase of ordinary shares for
cancellation |
(2,561) |
|
(2,664) |
Equity dividends paid |
(6,291) |
|
(6,734) |
Net cash inflow / (outflow) from financing
activities |
7,102 |
|
8,186 |
|
|
|
|
Increase / (decrease) in
cash and cash equivalents |
13,681 |
|
2,232 |
Cash and cash equivalents at beginning of year |
29,318 |
|
27,086 |
Cash and cash
equivalents at end of year |
42,999 |
|
29,318 |
INVESTMENT PORTFOLIO SUMMARY
as at 31 March 2024
|
|
Cost |
Valuation |
Like for like valuation increase / (decrease) over
year** |
% of net assets |
|
|
£'000 |
£'000 |
£'000 |
by value |
Fifteen largest venture capital investments |
|
|
|
1 |
Gentronix |
1,164 |
3,689 |
1,059 |
3.1% |
2 |
Project Glow Topco (t / a
Currentbody.com) |
1,544 |
3,257 |
1,714 |
2.7% |
3 |
Pimberly |
1,876 |
3,170 |
1,294 |
2.7% |
4 |
Tutora (t / a Tutorful) |
3,023 |
3,023 |
(105) |
2.5% |
5 |
Rockar |
1,766 |
2,979 |
349 |
2.5% |
6 |
Newcells Biotech |
2,741 |
2,965 |
187 |
2.5% |
7 |
Pure Pet Food |
1,605 |
2,905 |
1,236 |
2.4% |
8 |
Netacea |
2,486 |
2,486 |
– |
2.1% |
9 |
Adludio |
2,395 |
2,404 |
9 |
2.0% |
10 |
Grip-UK (t / a The Climbing
Hangar) |
3,536 |
2,372 |
(1,164) |
2.0% |
11 |
Buoyant Upholstery |
1,057 |
2,314 |
607 |
2.0% |
12 |
Ridge Pharma |
1,387 |
2,009 |
619 |
1.7% |
13 |
Biological Preparations
Group |
2,166 |
1,986 |
(84) |
1.7% |
14 |
Broker Insights |
1,961 |
1,969 |
8 |
1.7% |
15 |
Volumatic Holdings |
216 |
1,921 |
(1,354) |
1.6% |
Other venture capital investments |
|
|
|
|
16 |
LMC Software |
1,842 |
1,842 |
– |
1.6% |
17 |
Forensic Analytics |
1,836 |
1,836 |
– |
1.6% |
18 |
Clarilis |
1,828 |
1,828 |
– |
1.5% |
19 |
Camena Bioscience |
1,702 |
1,702 |
– |
1.4% |
20 |
Turbine Simulated Cell
Technologies |
1,503 |
1,700 |
197 |
1.4% |
21 |
Social Value Portal |
1,680 |
1,680 |
– |
1.4% |
22 |
Locate Bio |
1,597 |
1,597 |
– |
1.4% |
23 |
VoxPopMe |
1,518 |
1,518 |
12 |
1.3% |
24 |
Risk Ledger |
1,509 |
1,509 |
– |
1.3% |
25 |
Enate |
1,394 |
1,394 |
– |
1.2% |
26 |
Administrate |
2,148 |
1,353 |
(367) |
1.1% |
27 |
Moonshot |
1,235 |
1,235 |
– |
1.0% |
28 |
Optellum |
1,206 |
1,206 |
– |
1.0% |
29 |
Centuro Global |
1,109 |
1,109 |
– |
0.9% |
30 |
MIP Discovery |
1,094 |
1,094 |
– |
0.9% |
31 |
Wobble Genomics |
1,034 |
1,034 |
– |
0.9% |
32 |
Send Technology Solutions |
1,023 |
1,023 |
– |
0.9% |
33 |
Wonderush Ltd (t / a Hownow) |
1,009 |
1,009 |
– |
0.8% |
34 |
iOpt |
1,006 |
1,006 |
– |
0.8% |
35 |
Axis Spine Technologies |
1,002 |
1,002 |
– |
0.8% |
36 |
Warwick Acoustics |
1,002 |
1,002 |
– |
0.8% |
37 |
Seahawk Bidco |
479 |
926 |
490 |
0.8% |
38 |
Naitive Technologies |
731 |
731 |
– |
0.6% |
39 |
Oddbox |
1,002 |
730 |
41 |
0.6% |
40 |
Intuitive Holding |
1,508 |
669 |
50 |
0.6% |
41 |
Northrow |
1,406 |
648 |
(102) |
0.5% |
42 |
Duke & Dexter |
1,132 |
589 |
(550) |
0.5% |
43 |
Rego Technologies (t / a Upp)
(formerly Volo) |
2,223 |
532 |
92 |
0.4% |
44 |
Synthesized |
482 |
482 |
– |
0.4% |
45 |
Fresh Approach (UK) Holdings |
911 |
471 |
(375) |
0.4% |
46 |
Thanksbox (t / a Mo) |
1,524 |
375 |
(207) |
0.3% |
47 |
Atlas Cloud |
648 |
356 |
(291) |
0.3% |
48 |
musicMagpie* |
222 |
282 |
(755) |
0.2% |
49 |
Sen Corporation |
643 |
280 |
(363) |
0.2% |
50 |
Arnlea Holdings |
1,287 |
234 |
11 |
0.2% |
51 |
Sorted |
164 |
164 |
(26) |
0.1% |
52 |
Customs Connect Group |
1,431 |
106 |
(8) |
0.1% |
53 |
Angle* |
134 |
46 |
(29) |
0.0% |
54 |
Velocity Composites* |
84 |
30 |
(1) |
0.0% |
55 |
Quotevine |
1,187 |
– |
– |
0.0% |
56 |
Nutshell |
675 |
– |
(354) |
0.0% |
57 |
Ablatus Therapeutics |
559 |
– |
– |
0.0% |
Total venture capital investments |
76,632 |
75,779 |
|
63.4% |
Net current assets |
|
43,747 |
|
36.6% |
Net assets |
|
119,526 |
|
100.0% |
*Quoted on AIM
**This change in ‘like for like’ valuations is a comparison of the
31 March 2024 valuations with the 31 March 2023 valuations (or
where a new investment has been made in the year, the investment
amount), having adjusted for any partial disposals, loan stock
repayments or new and follow-on investments in the year
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
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 recently
by inflationary pressures, interest rate increases, and supply
shortages.
Mitigation: the Company invests in a
diversified portfolio of investments spanning various industry
sectors, and maintains sufficient cash reserves to be able to
provide additional funding to investee companies where it is
appropriate and in the interests of the Company to do so. The
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.
Stock market risk: some of the Company’s
investments are quoted on AIM and will be subject to market
fluctuations upwards and downwards. External factors such as
terrorist activity, political activity or global health crises can
negatively impact stock markets worldwide. In times of adverse
sentiment there may be very little, if any, market demand for
shares in smaller companies quoted on AIM.
Mitigation: the Company’s AIM
quoted investments are actively managed by the Manager, and the
Board keeps the portfolio and the actions taken under ongoing
review.
Credit risk: the Company holds a number of
financial instruments and cash deposits and is dependent on the
counterparties discharging their commitment.
Mitigation: the Directors review the
creditworthiness of the counterparties to these instruments and
cash deposits and seek to ensure there is no undue concentration of
credit risk with any one party.
Legislative and regulatory risk: in order to
maintain its approval as a VCT, the Company is required to comply
with current VCT legislation in the UK. Changes to UK legislation
in the future could have an adverse effect on the Company’s ability
to achieve satisfactory investment returns whilst retaining its VCT
approval.
Mitigation: the Board and the 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 which is able to operate effectively even during times of
disruption.
Mitigation: the Board regularly reviews the
system of internal controls, both financial and non-financial,
operated by the Company and the 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 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.
The Board continually assesses and monitors emerging risks that
could impact the Company's operations and strategic objectives. As
part of the risk assessment process, the Board evaluates a wide
range of potential threats and uncertainties that may arise from
evolving market dynamics, regulatory changes, technological
advancements, geopolitical developments, and other external
factors. By remaining aware of emerging risks, the Board ensures
that the Company is better equipped to anticipate challenges and
adapt swiftly to changing circumstances.
Directors’ responsibilities
The Directors are responsible for preparing the annual report and
financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law they are
required to prepare the financial statements in accordance with UK
accounting standards, including FRS 102 ‘The Financial Reporting
Standard applicable in the UK and Republic of Ireland’.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of its profit or
loss for the year.
In preparing these financial statements, the Directors are
required to:
- select suitable accounting
policies and then apply them consistently;
- make judgements and estimates
that are reasonable and prudent;
- state whether applicable UK
accounting standards have been followed, subject to any material
departures disclosed and explained in the financial
statements;
- assess the Company’s ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern; and
- use the going concern basis of
accounting unless they either intend to liquidate the Company or to
cease operations, or have no realistic alternative but to do
so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
its financial statements comply with the Companies Act 2006. They
are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance Statement
that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors confirm that to the best of their knowledge:
- the financial statements,
prepared in accordance with the applicable set of accounting
standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
- the Strategic Report and
Directors’ Report includes a fair review of the development and
performance of the business and the position of the issuer,
together with a description of the principal risks and
uncertainties that they face.
The Directors consider the annual report and accounts, taken as
a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
The Directors of the company at the date of this
announcement were Mr D P A Gravells (Chair), Mr S P Devonshire,
Miss C A McAnulty and Miss R K Ramparia.
Other matters
The above summary of results for the year ended
31 March 2024 does not constitute statutory financial statements
within the meaning of Section 435 of the Companies Act 2006 and has
not been delivered to the Registrar of Companies. Statutory
financial statements will be filed with the Registrar of Companies
in due course; the independent auditor’s report on those financial
statements under Section 495 of the Companies Act 2006 is
unqualified, does not include any reference to matters to which the
auditor drew attention by way of emphasis without qualifying the
report and does not contain a statement under Section 498 (2) or
(3) of the Companies Act 2006.
The calculation of the return per share is based
on the profit after tax for the year of £2,848,000 (2023: loss
£3,464,000) and on 199,198,196 (2023: 187,331,778) shares, being
the weighted average number of shares in issue during the year.
The calculation of net asset value per share as at 31 March 2024
is based on net assets of £119,526,000 (2023: £109,576,000) divided
by the 208,675,544 (2023: 185,640,724) ordinary shares in issue at
that date.
If approved by shareholders, the proposed final dividend of 1.2
pence per share for the year ended 31 March 2024 will be paid on 23
August 2024 to shareholders on the register at the close of
business on 26 July 2024.
The full annual report including financial statements for the
year ended 31 March 2024 is expected to be made available to
shareholders on or around 28 June 2024 and will be available to the
public at the registered office of the company at Forward House, 17
High Street, Henley-in-Arden B95 5AA and on the Company’s
website.
The contents of the Mercia Asset Management PLC website and the
contents of any website accessible from hyperlinks on the Mercia
Asset Management PLC website (or any other website) are not
incorporated into, nor form part of, this announcement.
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