Northern Investors Company PLC.

13 MAY 2013



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 unquoted investments and began an orderly realisation of the portfolio with a view to returning funds to shareholders through a series of tender offers over a period of several years.

Financial highlights (comparative figures as at 31 March 2012):

            2013               2012
Net assets£44.1m£49.2m
Number of shares in issue at end of year12,128,44015,128,440
Net asset value per share363.8p325.5p
Cash distributions to shareholders 
(dividends paid plus share buy-backs): 
During year£11.1m£14.3m
Since change in investment policy in July 2011£25.4m£14.3m
Total return for the year: 
Pence per share43.1p26.3p
As % of opening net asset value13.2%8.7%
Proposed dividend per share for the year9.5p9.0p
Mid-market share price at end of year292.5p261p
Share price discount to net asset value19.6%19.8%

For further information, please contact:

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

Oriel Securities:  Neil Winward, 020 7710 7600



After the significant change of investment policy approved by shareholders in July 2011, the focus of your board and the manager during the past year has been to continue to implement the agreed orderly realisation strategy.  Our objective is to strike a balance between returning cash to shareholders efficiently and timing each disposal so as to achieve the best value.  Despite the continuing economic malaise, I am pleased to report that the results for the year show good progress on both fronts.

Corporate strategy update
The £10.1 million tender offer completed in December 2012 took the total cash distributed to shareholders since the change in investment policy to £25.4 million, equivalent to 43% of the company's net assets of £59.0 million at the start of the realisation process.

The remaining net assets on the company's balance sheet at 31 March 2013 amounted to £44.1 million.  Adding this to the £25.4 million of cash already distributed, the total value attributable to shareholders from the realisation process and the residual assets is now £69.5 million - an 18% increase over the starting position two years ago.

Your board, through the manager, has sought to develop a detailed understanding of both the corporate and the shareholder strategy for each investee company, and in particular of the position of the respective management teams or other large shareholders whose attitude to exit is pivotal to both the timing and outcome of any future realisations.  We continue to review the portfolio in detail with the manager at regular intervals to ensure that the exit plan for each investment is consistent with your company's strategic objective and that progress is in line with our expectations.

We also review periodically the manager's updated projection of the range of possible financial outcomes over the next four years.  Prior to the first tender offer in November 2011, we estimated that the ultimate cash distribution to shareholders by 2017 could be in the range from 120% to 160% of the net assets at 31 March 2011 of £59.0 million.  Our current view is similar and sets the range at between 125% and 160%, representing a value uplift in absolute terms of between £15 million and £35 million.  We also estimated in November 2011 that the proportion of the March 2011 net assets to be distributed by 31 March 2015 would be between 60% and 80%, representing £35 million and £47 million respectively.  Following our latest review, our projection is that the proportion could be 70%-90% (£41-53 million).

These projections are inevitably sensitive to the timing of a small number of significant disposals and the more general issues of market conditions, the future performance of investee companies, the behaviour of other shareholders in investee companies and the level of activity in the mergers and acquisitions market, and should not be relied upon.  Furthermore, a natural consequence of implementing a successful realisation strategy is that the portfolio becomes highly concentrated and results become dependent on a decreasing number of assets which may individually be material to the final outcome.  It must also be remembered that the UK economy remains subdued and present market conditions are not ideal for obtaining a steady flow of realisations at attractive valuations.  Notwithstanding all these factors, our degree of confidence in the eventual result naturally tends to increase over time as investments are sold and cash is returned to shareholders.  Further updates will be issued in due course.

Despite the unhelpful environment, proceeds of investment disposals during the year ended 31 March 2013 totalled £9.5 million, equivalent to 16% of the March 2011 net assets and an uplift of 34% over the carrying value of the relevant holdings at 31 March 2012.  This supports our view that the portfolio has the potential to produce further value gains as the orderly realisation process continues.

Investment portfolio
The business review in the annual report gives detailed information about developments within the portfolio during the year.  In accordance with the agreed investment policy and realisation strategy, new investment is restricted to those cases where the directors consider it necessary in order to protect the value of an existing investment or facilitate a quicker or more profitable exit.  During the year £185,000 was invested in CGI Group Holdings to help finance a strategic acquisition, but we declined the opportunity to participate in a major fund-raising by Wear Inns.  This was in line with the follow-on financing guidelines we introduced last year.  The investments in Closerstill Holdings, Interlube Systems and Paladin Group were exited on excellent terms, delivering a combined money multiple on cost of 2.7 times, and there were several part realisations through loan stock repayments as well as receipts of deferred consideration from sales in earlier years.  At 31 March 2013 the portfolio comprised 23 unquoted holdings with an aggregate directors' valuation of £42.8 million.

Market conditions for smaller companies generally remain challenging although the industry sector diversity of the portfolio is helpful.  M&A activity is taking place as demonstrated by our realisations during the year.  In my report last year I noted that I expected to see an increase in the recent rate of exits and this was achieved with the three disposals already mentioned.  At the current time, a number of our portfolio companies are working with corporate finance advisers but each exit remains an unpredictable process with lengthening timelines and acquirers' enhanced due diligence requirements adding to the uncertainty.

Financial results
The NAV per share at 31 March 2013 was 363.8p, up by 11.8% from the corresponding figure of 325.5p at 31 March 2012.  During the year 3,000,000 shares were re-purchased for cancellation through a tender offer at a price of 335p per share.  The number of shares remaining in issue at the year end was 12,128,440.

The total return per share for the year as shown in the income statement was 43.1p, equivalent to 13.2% of the opening NAV.  Net realised and unrealised gains on investments contributed 50.3p per share to the total.  Investment income at £1.6 million was lower than in the preceding year, reflecting the reduced size of the portfolio, but revenue expenses fell from £0.9 million to £0.5 million as a result of the phased reduction in the management fee and the non-recurrence of the preceding year's costs relating to the review of investment policy and corporate strategy.  The revenue return per share, calculated on the reduced share capital, fell by 2.5p to 6.5p.

The mid-market share price rose by 12.0% during the year, from 261p to 292.5p.  The share price discount to NAV at the year end was 19.6% (31 March 2012 19.8%).

The manager, NVM Private Equity, is entitled to receive a performance-related incentive fee once cash distributions to shareholders exceed the equivalent of net assets at 31 March 2011 plus a 7% annual hurdle rate.  Last year no provision in respect of the performance fee was made in the financial statements, as the directors did not believe it was possible at that stage to foresee the realisations and subsequent cash distributions with sufficient accuracy or certainty.  As a result of the progress made over the past twelve months, we now consider that the likelihood of a fee becoming payable in due course has increased to the point where a provision should be made.  Accordingly the financial statements for the year ended 31 March 2013 include a provision of £1,496,000, equivalent to the performance fee which would have been payable if the value of the remaining net assets as at 31 March 2013 had been available for distribution in cash to shareholders on that date.  The corresponding amount at 31 March 2012, in respect of which no provision was made, was £564,000.

As previously announced, it is intended that for the 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.  The proposed dividend for the year ended 31 March 2013 is 9.5p per share, a 5.6% increase from last year's total of 9.0p.  Subject to approval by shareholders at the annual general meeting, the final dividend will be paid on 5 July 2013 to shareholders on the register on 14 June 2013.

The directors will determine the dividend to be proposed each year in the light of the level of investment income and expenses, and the amount available for distribution in each year may reduce 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.

Board of directors
After a period of considerable change in its membership, the board has benefitted during the past year from a welcome period of stability and I believe its current composition is well suited to the task in hand.  This has allowed us to continue the effective monitoring of investee company performance whilst maintaining an appropriate degree of challenge to the investment manager.  The complexities of the shareholder dynamics across our investee companies greatly influence the incidence of exits, and therefore a deep understanding of these aspects is critical to assessing progress.

Following the encouraging progress of the past two years, the challenge now is to maintain momentum despite a market environment which offers little help to the process of realising a portfolio of minority interests in relatively small unquoted companies.  Your board and the manager are closely focussed on the task, and we believe that through the implementation of a carefully managed realisation programme, combined with persistence and patience, your company's strategy will continue to deliver strong cash returns to shareholders over the remainder of its projected life.

Nigel Guy

The audited financial statements for the year ended 31 March 2013 are set out below.

for the year ended 31 March 2013

Year ended 31 March 2013 Year ended 31 March 2012 
Gain on disposal of
  Investments 2,405  2,405  591  591 
Movements in fair value
  of investments 4,755  4,755  3,025  3,025 
----------  ----------  ----------  ----------  ----------  ---------- 
7,160  7,160  3,616  3,616 
Income 1,596  1,596  2,771  2,771 
Investment management fee (150) (2,096) (2,246) (180) (720) (900)
Other expenses (346) (346) (679) (20) (699)
----------  ----------  ----------  ----------  ----------  ---------- 
Return on ordinary
  activities before tax 1,100  5,064  6,164  1,912  2,876  4,788 
Tax on return on
  ordinary activities (172) 144  (28) (287) 247  (40)
----------  ----------  ----------  ----------  ----------  ---------- 
Return on ordinary
  activities after tax 928  5,208  6,136  1,625  3,123  4,748 
----------  ----------  ----------  ----------  ----------  ---------- 
Return per share 6.5p 36.6p 43.1p 9.0p 17.3p 26.3p

for the year ended 31 March 2013

Year ended 
31 March 2013 
Year ended 
31 March 2012 
Equity shareholders' funds at 1 April 2012 49,241  58,988 
Return on ordinary activities after tax 6,136  4,748 
Dividends recognised in the year (1,028) (1,458)
Shares repurchased for cancellation (including expenses) (10,230) (13,037)
----------  ---------- 
Equity shareholders' funds at 31 March 2013 44,119  49,241 
----------  ---------- 

as at 31 March 2013

31 March 2013 
31 March 2012 
Fixed assets:
  Investments 42,799  45,139 
----------  ---------- 
Current assets:
  Investments 1,451  1,043 
  Debtors 165  89 
  Cash and deposits 1,285  3,268 
----------  ---------- 
2,901  4,400 
Creditors (amounts falling due within one year) (1,581) (298)
----------  ---------- 
Net current assets 1,320  4,102 
----------  ---------- 
Net assets 44,119  49,241 
----------  ---------- 
Capital and reserves:
Called-up equity share capital 3,032  3,782 
Capital redemption reserve 2,123  1,373 
Capital reserve 14,381  24,537 
Special reserve 12,674  12,674 
Revaluation reserve 9,825  4,691 
Revenue reserve 2,084  2,184 
----------  ---------- 
Total equity shareholders' funds 44,119  49,241 
----------  ---------- 
Net asset value per share 363.8p 325.5p

for the year ended 31 March 2013

Year ended 
31 March 2013 
Year ended 
31 March 2012 
£000 £000 £000 £000 
Cash flow statement
Net cash inflow from operating activities 451  669 
Corporation tax paid (36)
Financial investment:
Purchase of investments (185) (735)
Sale/repayment of investments 9,453  6,650 
----------  ---------- 
Net cash inflow from financial investment 9,268  5,915 
Equity dividends paid (1,028) (1,458)
----------  ---------- 
Net cash inflow before financing
  and use of liquid resources 8,655  5,126 
Shares re-purchased for cancellation (including expenses) (10,230) (13,037)
----------  ---------- 
Net cash outflow before
  use of liquid resources (1,575) (7,911)
Net cash outflow from
  management of liquid resources (408) (1,001)
----------  ---------- 
Decrease in cash at bank (1,983) (8,912)
----------  ---------- 
Reconciliation of revenue return before tax
to net cash flow from operating activities
Revenue return on ordinary activities before tax 1,100  1,912 
(Increase)/decrease in debtors (46) 176 
Increase/(decrease) in creditors 1,493  (679)
Expenses charged to capital reserve (2,096) (740)
----------  ---------- 
Net cash inflow from operating activities 451  669 
----------  ---------- 
Reconciliation of movement
in net funds
1 April 2012 Cash flows 31 March 2013 
£000 £000 £000 
Cash at bank 3,268  (1,983) 1,285 
Short-term investments 1,043  408  1,451 
----------  ----------  ---------- 
Net funds 4,311  (1,575) 2,736 
----------  ----------  ---------- 

as at 31 March 2013

% of
net assets
by value
Kerridge Commercial Systems 3,978 12,398 28.1
Control Risks Group Holdings 3,731 6,573 14.9
Kitwave One 3,633 3,730 8.5
Alaric Systems 1,578 3,493 7.9
Wear Inns 1,304 1,884 4.3
Arleigh Group 811 1,694 3.9
IG Doors 118 1,509 3.4
Weldex (International) Offshore Holdings 3,253 1,473 3.3
Cawood Scientific 1,196 1,282 2.9
Optilan Group 1,900 1,199 2.7
---------- ---------- --------
Ten largest investments 21,502 35,235 79.9
CGI Group Holdings 1,908 1,183 2.7
Promatic Group 1,195 1,122 2.5 480 1,034 2.4
Lanner Group 891 880 2.0
Closerstill Group 866 866 2.0
Mantis Deposition Holdings 763 843 1.9
Axial Systems Holdings 2,311 494 1.1
Envirotec 387 459 1.0
Direct Valeting 338 457 1.0
S&P Coil Products 165 226 0.5
---------- ---------- --------
Twenty largest investments 30,806 42,799 97.0
Crantock Bakery 1,061 - -
Longhirst Venues 289 - -
Warmseal Windows (Newcastle) 818 - -
---------- ---------- --------
Total fixed asset investments 32,974 42,799 97.0
Net current assets 1,320 3.0
---------- --------
Net assets 44,119 100.0
---------- --------


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:  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.  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.

Portfolio concentration risk:  Following the adoption of the company's new investment policy in July 2011, the portfolio will become more concentrated as investments are realised and cash is returned to shareholders.  This will increase the proportionate impact of changes in the value of individual investments on the value of the company as a whole.

Financial risk:  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 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.


The directors are responsible for preparing the annual report and the 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 the directors have elected to prepare the financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).

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 the profit or loss of the company for the period.  In preparing these financial statements, the directors are required to (i) select suitable accounting policies and then apply them consistently;  (ii) make judgements and estimates that are reasonable and prudent;  (iii) state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;  and (iv) prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.  As noted below, the directors do not believe it is appropriate to prepare the financial statements for the year ended 31 March 2013 on a going concern basis.

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 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 website,  The maintenance and integrity of this website is the responsibility of NVM and not of the company.  Legislation in the United Kingdom 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 accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company, and 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 that the company faces.

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.


The above summary of results for the year ended 31 March 2013 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 and does not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

In July 2011 shareholders approved a change in the investment policy of the company, with the objective of conducting an orderly realisation of the assets of the company in a manner that seeks to achieve a balance between an efficient return of cash to shareholders and maximising the value of the company's investments.  As it is likely that this process, which is expected to have a duration of several years, will ultimately lead to the liquidation of the company, the financial statements have not been prepared on a going concern basis.  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 proposed final dividend of 9.5p per share for the year ended 31 March 2013 will, if approved by shareholders, be paid on 5 July 2013 to shareholders on the register at the close of business on 14 June 2013.

The full annual report including financial statements for the year ended 31 March 2013 is expected to be posted to shareholders on 21 May 2013 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,

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.

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 Investors Co PLC via Thomson Reuters ONE