Funds managed by Newcastle's NVM Private Equity see returns fall

NVM Private Equity detailed the performance of three of its venture capital trusts in the six months to the end of March

Newcastle castle keep and the Tyne Bridge
Newcastle castle keep and the Tyne Bridge

Several venture capital trusts managed by Newcastle-based NVM Private Equity generated returns of £9.3m in the six months to the end of March.

Three of NVM’s trusts — Northern Venture Trust PLC, Northern 2 VCT PLC and Northern 3 VCT PLC — saw return on ordinary activities drop from £17.8m in the corresponding period in 2014.

Chairman Simon Constantine said the outcome of the general election had reduced uncertainty but suggested further economic growth will be “hard-won”.

Mr Constantine also said small, unquoted companies — the type NVM’s trusts invest in — were unlikely to enjoy an easy ride in the future.

NVM’s Northern Venture Trust, which launched on the London Stock Exchange in 1995, saw overall return per share before dividends drop from 5.3p to 3.8p.

Return per share for the Northern 2 VCT — which includes investments in the likes of furniture manufacturer Buoyant Upholstery and North East pub group Wear Inns — fell from 8.6p to 3.4p.

Meanwhile, return per share for Northern 3 VCT — which includes investments in airport lounge operator No.1 Traveller and tortilla chip producers It’s All Good — dropped from 10.5p to 3.9p.

NVM pointed to a number of realisations in the Northern Venture Trust which generated £18.7m in cash from investments of £5.5m.

The effect of the gain was partly offset by a £1.5m reduction in the valuation of the portfolio, which reflected a number of companies that were performing below expectations.

During the period the trust sold its stake in Kerridge Commercial Systems in an £8.6m secondary management buy-out. An exit from events firm CloserStill Group generated a gain of £2.4m and the trust reinvested £1.7m into a successor company, CloserStill Media.

New venture capital investments by the trust totalled £4.6m and included two new AIM-quoted holdings.

Mr Constantine added: “We will have to maintain a strong rate of new investment in a competitive marketplace, whilst ensuring that existing investee companies are as well placed as possible to grow and succeed.

“Set against this background, and with our past record of coming through periods of challenge in good shape, I believe we are well placed to make continued progress as we approach our 20th anniversary later this year.”

Turning to the regulatory outlook of the venture capital trust sector, Mr Constantine said the Government’s support was “not in doubt”, but warned that investment rules are becoming more restrictive due to European Commission views on businesses which should be eligible for investment by state-aided funds.

He said: “We agree that financing should be readily available for start-up and early stage companies, particularly in knowledge-based industry sectors; however the increasing focus on such companies means that the VCT rules are becoming less friendly to many of the small and medium-sized businesses which have formed an important part of our investment activities in the past, and which have demonstrably made a substantial contribution to the economic well-being and growth of the UK.”

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