Announcements

Northern Investors Company PLC.

19 NOVEMBER 2012

NORTHERN INVESTORS COMPANY PLC

UNAUDITED HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012

Northern Investors Company PLC is a private equity investment trust managed by NVM Private Equity Limited.  The trust was launched in 1984 and has been listed on the London Stock Exchange since 1990.  In July 2011 shareholders approved a change in investment strategy, whereby the trust ceased making new investments and began an orderly realisation of its portfolio with a view to returning capital to shareholders.

Financial highlights (comparative figures as at 30 September 2011):

            2012           2011
Net assets£51.6m£59.6m
Number of shares in issue at end of period15,128,44019,395,440
Net asset value per share340.9p307.4p
Cash distributions to shareholders
(dividends paid plus share buy-backs):
  During period
  Since change in investment policy in July 2011


£1.0m
£15.3m


£1.1m
£1.1m
Total return for the period:
  Pence per share
  As % of opening net asset value

22.2p
6.8%

9.1p
3.0%
Interim dividend per share 
declared in respect of the period*2.2p
Mid-market share price275.5p208.5p
Share price discount to net asset value19.2%32.2%

*The company announced in November 2011 that no interim dividend would be declared in respect of the year ending 31 March 2013 and subsequent years

For further information, please contact:

Northern Investors Company PLC
Nigel Guy/Christopher Mellor                   0191 244 6000

Oriel Securities
Joe Winkley/Emma Griffin                       020 7710 7600

HALF-YEARLY MANAGEMENT REPORT TO SHAREHOLDERS

During the six month period under review your board and manager have continued the implementation of the corporate strategy approved by shareholders in July 2011.  Under this strategy the company is no longer making new investments and is seeking to realise its assets in an orderly manner with a view to distributing capital to shareholders, whilst striking a balance between maximisation of value and an efficient return of cash.

The portfolio has shown an encouraging degree of resilience in the face of continuing weakness in the UK economy and financial markets.  Since 31 March 2012 Closerstill Holdings and Paladin Group have both been sold for cash at prices in excess of their carrying value, enabling us to announce today a tender offer to return up to a further £10 million to shareholders by re-purchasing up to 3,000,000 ordinary shares at a price of 335p per share.  Further details of the tender offer are set out in a separate circular published today.

This will take the total cash distributed to shareholders since July 2011 to £25.3 million, equivalent to 42.9% of the net assets at the time of the change in strategy.

Performance
Over the six month period to 30 September 2012 the company's NAV, after deducting the 2011/12 final dividend of 6.8p per share paid in July, rose by 15.4p to 340.9p.  The return per share for the half year was 22.2p, compared with 9.1p in the corresponding period.  The underlying level of investment income from the portfolio, after adjusting for a one-off receipt of £1.0 million on the sale of Promanex Group Holdings in 2011, was slightly higher despite the reduction in the company's asset base.  The principal driver of the rise in NAV was the increase of £2.5 million (equivalent to 16.5p per share) in the net unrealised surplus on revaluation of investments.

The mid-market share price rose from 261.0p at 31 March 2012 to 275.5p at 30 September 2012, reducing the discount to NAV from 19.8% to 19.2%.  Adjusting for cash balances, the implied discount to the directors' valuation of the portfolio at 30 September 2012 was 22.9%.

Dividend
As previously announced, it is intended that for the financial year ending 31 March 2013 and subsequent years the annual dividend will be paid in the form of a single final dividend, with no interim dividend being declared.  It is envisaged that the net revenue available for distribution in respect of each year will decrease as income-producing investments are realised and cash is returned to shareholders.  The directors will in any case declare annual dividends sufficient to maintain the company's authorised investment trust status.

Investment portfolio
No new holdings were acquired during the period, in line with the revised investment policy followed since July 2011.  Within the existing portfolio a further commitment of £185,000 was made to CGI Group Holdings as part of a funding package alongside other shareholders for a strategic acquisition which is expected to enhance the ultimate value and exit prospects of the investment.  £74,000 of this was drawn down in September.

In May 2012 the investment in Closerstill Holdings, which organises business-to-business exhibitions, was sold to Phoenix Equity Partners for £3.7 million in cash - a gain of £0.3 million over the March 2012 carrying value.  A further £1.1 million was realised from other investments, mainly through loan stock redemptions, taking the total cash proceeds for the half year to £4.8 million.  Subsequent to 30 September 2012 we have completed the sale of the investment in Paladin Group for £3.4 million in cash.

Following the divestment of Paladin Group the remaining investment portfolio comprises 26 unquoted holdings with an aggregate carrying value of £40.4 million.  Consistent with the objectives of an orderly realisation, our manager continues to work with the investee company management teams and other significant shareholders to develop exit plans whilst maintaining relationships with corporate finance advisers to keep up to date with the latest M&A landscape.  Whilst M&A activity generally remains subdued, several of these companies are currently in active sale processes.  Whilst we would hope that these would lead in due course to exits on satisfactory terms, selling businesses in the current market environment requires patience and perseverance.  Your board has continued to review the portfolio regularly and in detail with the manager, focussing in each case on trading performance and the realisation strategy.

Overall the portfolio performance remains satisfactory despite the continuation of some of the toughest trading conditions most seasoned commentators can recall.  Our largest investment, Kerridge Commercial Systems, continues to make good progress and develop in accordance with its business plan.  The announcement of a recent contract win with leading European building materials supplier SIG is an important first step in its major strategic objective to win larger projects which will ultimately be a considerable driver of exit value.  As we have previously emphasised, there are a number of investments, including some of the larger holdings, which are still at a relatively early stage in the cycle and which will take time to be developed to achieve the best exit outcome.  It should also be remembered that in most of our investments, the investee companies' management hold significant shareholdings thus making them pivotal to determining exit timing.  However the latest review confirms that the projected range of outcomes indicated at the time of the change in investment policy remains valid.

Outlook
The company's new strategic direction has been clearly set out and I believe that we are making good progress towards our objective.  The tender offer announced today is a further significant step in the process, bringing the total distributed since the change in strategy to £25.3 million or 42.9% of the net assets at 31 March 2011.  Your board and manager will continue to work closely together to optimise the cash returns to shareholders consistent with the strategy of an orderly portfolio realisation.

On behalf of the Board

Nigel Guy
Chairman

The unaudited half-yearly financial statements for the six months ended 30 September 2012 are set out below.

INCOME STATEMENT
(unaudited) for the six months ended 30 September 2012

Six months ended
30 September 2012
Six months ended
30 September 2011
Revenue 
£000 
Capital 
£000 
Total 
£000 
Revenue 
£000 
Capital 
£000 
Total 
£000 
Gain on disposal of investments 509  509  385  385 
Movements in fair value of investments 2,506  2,506  663  663 
----------  ----------  ----------  ----------  ----------  ---------- 
3,015  3,015  1,048  1,048 
Income 947  947  1,886  1,886 
Investment management fee (75) (300) (375) (90) (360) (450)
Other expenses (200) (200) (514) (20) (534)
----------  ----------  ----------  ----------  ----------  ---------- 
Return on ordinary activities before tax 672  2,715  3,387  1,282  668  1,950 
Tax on return on ordinary activities (102) 75  (27) (277) 94  (183)
----------  ----------  ----------  ----------  ----------  ---------- 
Return on ordinary activities after tax 570  2,790  3,360  1,005  762  1,767 
----------  ----------  ----------  ----------  ----------  ---------- 
Return per share 3.8p 18.4p 22.2p 5.2p 3.9p 9.1p

Year ended 31 March 2012
Revenue 
£000 
Capital 
£000 
Total 
£000 
Gain on disposal of investments 591  591 
Movements in fair value of investments 3,025  3,025 
----------  ----------  ---------- 
3,616  3,616 
Income 2,771  2,771 
Investment management fee (180) (720) (900)
Other expenses (679) (20) (699)
----------  ----------  ---------- 
Return on ordinary activities before tax 1,912  2,876  4,788 
Tax on return on ordinary activities (287) 247  (40)
----------  ----------  ---------- 
Return on ordinary activities after tax 1,625  3,123  4,748 
----------  ----------  ---------- 
Return per share 9.0p 17.3p 26.3p

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
(unaudited) for the six months ended 30 September 2012

Six months ended 
30 September 2012 
£000 
Six months ended 
30 September 2011 
£000 
Year ended 
31 March 2012 
£000 
Equity shareholders' funds at 1 April 2012 49,241  58,988  58,988 
Return on ordinary activities after tax 3,360  1,767  4,748 
Dividends recognised in the period (1,029) (1,125) (1,458)
Shares re-purchased for cancellation (13,037)
----------  ----------  ---------- 
Equity shareholders' funds at 30 Sept 2012 51,572  59,630  49,241 
----------  ----------  ---------- 

BALANCE SHEET
(unaudited) as at 30 September 2012

30 September 2012 
£000 
30 September 2011 
£000 
31 March 2012 
£000 
Fixed asset investments 43,405  43,689  45,139 
----------  ----------  ---------- 
Current assets:
  Investments 1,948  43  1,043 
  Debtors 51  199  89 
  Cash and deposits 6,487  16,098  3,268 
----------  ----------  ---------- 
8,486  16,340  4,400 
Creditors (amounts falling due
  within one year) (319) (399) (298)
----------  ----------  ---------- 
Net current assets 8,167  15,941  4,102 
----------  ----------  ---------- 
Net assets 51,572  59,630  49,241 
----------  ----------  ---------- 
Capital and reserves
Called-up equity share capital 3,782  4,849  3,782 
Capital redemption reserve 1,373  306  1,373 
Capital reserve 27,109  37,420  24,537 
Special reserve 12,674  12,674  12,674 
Revaluation reserve 4,909  2,484  4,691 
Revenue reserve 1,725  1,897  2,184 
----------  ----------  ---------- 
Total equity shareholders' funds 51,572  59,630  49,241 
----------  ----------  ---------- 
Net asset value per share 340.9p 307.4p 325.5p

CASH FLOW STATEMENT
(unaudited) for the six months ended 30 September 2012

Six months ended 
30 September 2012 
Six months ended 
30 September 2011 
Year ended 
31 March 2012 
£000 £000 £000 £000 £000 £000 
Cash flow statement
Net cash inflow from operating activities 404  247  669 
Taxation:
Corporation tax paid
Financial investment:
Purchase of investments (74) (399) (735)
Sale/repayment of investments 4,823  5,196  6,650 
----------  ----------  ---------- 
Net cash inflow from financial investment 4,749  4,797  5,915 
Equity dividends paid (1,029) (1,125) (1,458)
----------  ----------  ---------- 
Net cash inflow before use
  of liquid resources and financing 4,124  3,919  5,126 
Financing:
Shares re-purchased for cancellation (13,037)
----------  ----------  ---------- 
Net cash inflow/(outflow) before use
  of liquid resources 4,124  3,919  (7,911)
Net cash outflow from
  use of liquid resources (905) (1) (1,001)
----------  ----------  ---------- 
Increase/(decrease) in cash and deposits 3,219  3,918  (8,912)
----------  ----------  ---------- 
Reconciliation of revenue return before tax
to net cash flow from operating activities
Revenue return on ordinary activities before tax 672  1,282  1,912 
Decrease in debtors 38  66  176 
Decrease in creditors (6) (721) (679)
Management expenses charged to capital (300) (380) (740)
----------  ----------  ---------- 
Net cash inflow from operating activities 404  247  669 
----------  ----------  ---------- 
Reconciliation of movement in net funds
1 April 2012 Cash flows 30 September 2012 
£000 £000 £000 
Cash at bank 3,268  3,219  6,487 
Short-term investments 1,043  905  1,948 
----------  ----------  ---------- 
Net funds 4,311  4,124  8,435 
----------  ----------  ---------- 
          

INVESTMENT PORTFOLIO SUMMARY
as at 30 September 2012

CompanyCost
£000
Valuation
£000
% of net assets
by valuation
Kerridge Commercial Systems 3,978 11,513 22.3
Control Risks Group Holdings 3,731 5,843 11.3
Kitwave One 3,633 3,690 7.2
Paladin Group 1,657 3,027 5.9
Alaric Systems 1,578 2,301 4.5
Wear Inns 1,304 1,884 3.7
Weldex (International) Offshore Holdings 3,253 1,697 3.3
Axial Systems Holdings 2,311 1,542 3.0
Arleigh Group 898 1,506 2.9
Cawood Scientific 1,196 1,308 2.5
---------- ---------- -------
Ten largest investments 23,539 34,311 66.6
Promatic Group 1,195 1,260 2.4
IG Doors 119 1,001 1.9
Closerstill Group 866 866 1.7
Lanner Group 891 836 1.6
CGI Group Holdings 1,797 804 1.6
e-know.net 480 786 1.5
Optilan Group 1,900 670 1.3
Mantis Deposition Holdings 763 635 1.2
Interlube Systems 62 533 1.0
Envirotec 387 499 1.0
---------- ---------- -------
Twenty largest investments 31,999 42,201 81.8
Other investments 6,295 1,204 2.3
---------- ---------- -------
Total fixed asset investments 38,294 43,405 84.1
----------
Net current assets 8,167 15.9
---------- -------
Net assets 51,572 100.0
---------- -------

BUSINESS RISKS

Investment risk:  the majority of the company's investments are in small and medium-sized unquoted companies, which by their nature entail a higher level of risk and lower liquidity than investments in large quoted companies.  Following the adoption of the company's revised investment policy in July 2011, the portfolio will become more concentrated as investments are realised and cash is returned to shareholders.  The investment manager aims to limit the risk attaching to the portfolio as a whole by close monitoring of individual holdings, including appointment of investor directors where appropriate.  The board reviews the portfolio with the investment manager on a regular basis.

Financial risk:  as most of the company's investments involve a medium- to long-term commitment and 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 meet expenditure commitments including any investments which may be made under the company's revised investment policy.  The company has very little exposure to foreign currency risk and does not enter into derivative transactions.

Economic risk:  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:  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.

OTHER MATTERS

The above summary of results for the six months ended 30 September 2012 does not constitute statutory financial statements within the meaning of Section 434 of the Companies Act 2006, has not been reviewed or audited by the company's independent auditor and has not been delivered to the Registrar of Companies.  The figures for the year ended 31 March 2012 have been extracted from the audited financial statements for that year, which have been delivered to the Registrar of Companies;  the independent auditor's report on those financial statements was unqualified and 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 2012.  The financial statements have not been prepared on a going concern basis, since the company's current objective is to conduct an orderly realisation of the investment portfolio and return cash to shareholders.  No adjustments were necessary to the investment valuations or other assets and liabilities included in the financial statements as a consequence of the change in the basis of preparation.

The directors of the company at the date of this announcement were Mr N R A Guy (Chairman), Mr J C Barnsley, Mr P W F Marsden and Mr M P Nicholls.

Each of the directors confirms that to the best of his 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 calculation of the revenue and capital return per share is based on the return on ordinary activities after tax for the six months ended 30 September 2012 and on 15,128,440 (2011 19,395,440) 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 2012 divided by the 15,128,440 (2011 19,395,440) ordinary shares in issue at that date.

A copy of the half-yearly financial report for the six months ended 30 September 2012 is expected to be posted to shareholders by 4 December 2012 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.




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Source: Northern Investors Co PLC via Thomson Reuters ONE

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