Announcements

Northern Investors Company PLC.

RNS Number : 8283H
Northern Investors Co PLC
10 November 2008
 

10 NOVEMBER 2008


NORTHERN INVESTORS COMPANY PLC


UNAUDITED HALF-YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008



Northern Investors Company PLC is an investment trust managed by NVM Private Equity Limited. Launched in 1984 and listed on the London Stock Exchange since 1990, it invests mainly in unquoted venture capital holdings and aims to provide high long-term returns to shareholders through a combination of capital growth and dividend yield. 

Financial highlights (comparative figures as at 30 September 2007 in italics):



    2008

    2007

  • Net assets

£49.7m

£56.1m

  • Net asset value per share

255.9p

286.3p

  • Mid-market share price

156.0p

226.5p

  • Share price discount to



net asset value

39.0%

20.9%

  • Return per share after tax:
      Revenue

      Capital

      Total


3.9p
(40.3)p
(36.4)p


3.
5p
7.9p
11.4p

  • Interim dividend per share
    declared in respect of the period


2.2p


2.2p



For further information, please contact:


NVM Private Equity Limited

Alastair Conn/Christopher Mellor

Website:  www.nvm.co.uk


0191 244 6000

Lansons Communications

Karen Mignon


020 7294 3685



HALF-YEARLY MANAGEMENT REPORT TO SHAREHOLDERS


The period since 31 March 2008 has seen the onset of almost unprecedented turmoil in the world's financial markets, and this has inevitably had some impact on our half-yearly results. Net asset value per share fell by 13.9% over the six months to 30 September 2008although this compares favourably with the fall of 15.1% in the FTSE All-Share index over the same period.  New investment activity has been at a low level but several significant realisations have been achieved, resulting in a net cash inflow from operations of over £7.5 million during the half year. This has further enhanced the strength of the company's balance sheet and accordingly the interim dividend has been maintained at 2.2p per share.


Net asset value and share price

The following table shows the net asset value (NAV) per share, mid-market share price and discount as at 30 September 2008 compared with the corresponding figures at 31 March 2008 and 30 September 2007:



30 September 2008

31 March 2008

30 September 2007

NAV per share

255.9p

297.3p

286.3p

Share price

156.0p

195.0p

226.5p

Share price discount to NAV

39.0%

34.4%

20.9%


The increase in the discount to NAV reflects the general trend in the private equity investment trust sector, where many other companies have experienced steep declines in share price over the past six months.  Subsequent to 30 September 2008 the stock market has continued its downward movement and our share price has fallen further, to the point where the discount to NAV is almost 50% and (adjusting for cash and quoted investments) the implied discount to the unquoted investment portfolio is well over 60%.


The percentage movement in NAV and share price compared with the movement in the FTSE All-Share index over the six and 12 month periods to 30 September 2008 is as follows:



NAV per share

Share price

FTSE All-Share

Past six months

-13.9%

-20.0%

-15.1%

Past 12 months

-10.6%

-31.1%

-25.1%


Revenue and dividend

Investment income for the half year was at a slightly higher level than in the corresponding period and, with the benefit of VAT exemption on management fees, the revenue return per share rose from 3.5p to 3.9p. The directors have declared an unchanged interim dividend of 2.2p per share, payable on 9 January 2009 to shareholders on the register on 5 December 2008. In the absence of unforeseen circumstances it is envisaged that the dividend for the full year will be at least maintained at last year's level of 7.2p.


Investment portfolio

New investment activity in the half year was subdued, reflecting the increasingly difficult economic and market background. An initial investment of £1.2 million was made in CloserStill Holdings, a new vehicle formed by the management team responsible for the success of the business-to-business exhibitions group Ithaca Holdings from which we exited in 2007. The other significant new holdings, in Tikit Group and CGI Group Holdings, resulted from the sale or re-structuring of existing investments.


Investment sale proceeds amounted to £11.5 million, generating a net surplus of £1.7 million over carrying value and £3.7 million over original cost. The outstanding success in the period was the sale of the logistics contractor Product Support (Holdings) to Wincanton plc, which generated cash proceeds of £7.4 million and a surplus of £1.6 million over the 31 March 2008 carrying value.  Over a holding period of only 18 months the cash return was more than twice our original investment.  TFB Group, which develops software for professional practice management, was sold to the AIM-quoted IT company Tikit Group plc for a total of £1.5 million in cash and shares, and CGI Group was re-structured under a new holding company, CGI Group Holdings, in a transaction which realised £0.5 million in cash and left us with a slightly enhanced equity stake in the new company. Several other companies have been in discussions with a view to possible exit, some of which may yet come to fruition despite the general slowdown in the corporate transactions market.


The uncertainty as to the immediate prospects for the UK economy has made it unusually difficult to determine the fair value of the company's portfolio of unquoted investments, against a background of falling price/earnings ratios in the stock markets and revisions to the expectations of individual businesses. In a number of cases we have felt it appropriate to make significant provisions against holdings where we nevertheless believe the long-term outlook is good provided that short-term trading conditions can be overcome. Examples of this include Astbury Marsden HoldingsForeman Roberts Group and Promanex Group Holdings. Companies with a direct involvement in the construction industry, such as John Laing PartnershipBritspace Holdings and IG Doors, are inevitably finding the environment challenging. However our long-standing investment in Weldex (International) Offshore is performing very well and more recent additions such as Axial Systems HoldingsEnvirotec and Optilan Group are making encouraging progress.


In the current climate the attitude of the UK clearing banks to their corporate customers' requirements is not invariably supportive, and it is likely that in a number of cases we will have to provide further funding either to supplement bank facilities or in some cases to replace the bank altogether. This will require both a steady nerve and a careful distinction between those companies which have a sustainable business model and those which may find it difficult to survive in a harsher economic climate.


VAT on management fees

The management fees payable to NVM Private Equity have been exempt from VAT since 1 January 2008 and this represents a cost saving of approximately £175,000 in the current financial year. An asset of £600,000 was recognised in the financial statements as at 31 March 2008 in respect of VAT expected to be recovered in respect of prior periods, and the process of obtaining repayment is well advanced.


Prospects

We expect that conditions in the UK economy will worsen before there is any significant improvement, and this calls for an essentially defensive approach to portfolio management in the short to medium term. This will not be the first recession which your company and managers have experienced. A highly selective approach is being taken to assessing potential new investment opportunities, whilst existing investee companies will continue to be closely monitored and supported, if appropriate, with additional funding. We have a strong reserve of liquidity to assist us in this process and although performance in the short term is likely to remain depressed, the company is well placed to make further progress when conditions eventually become more favourable.


On behalf of the Board


Peter Haigh

Chairman



The unaudited half-yearly financial statements for the six months ended 30 September 2008 are set out below.


INCOME STATEMENT

(unaudited) for the six months ended 30 September 2008



Six months ended

30 September 2008

Six months ended

30 September 2007


Revenue 

£000 

Capital 

£000 

Total 

£000 

Revenue 

£000 

Capital 

£000 

Total 

£000 

Gain on disposal of investments

1,679 

1,679 

630 

630 

Movements in fair value







  of investments 

- 

(9,251)

(9,251)

- 

1,279 

1,279 


------ 

------ 

------ 

------ 

------ 

------ 


- 

(7,572)

(7,572)

- 

1,909 

1,909 

Income

1,271 

- 

1,271 

1,158 

- 

1,158 

Investment management fee

(152)

(354)

(506)

(169)

(396)

(565)

Recoverable VAT

Other expenses

(178)

- 

(178)

(182)

- 

(182)


------ 

------ 

------ 

------ 

------ 

------ 

Return on ordinary activities







  before tax

941 

(7,926)

(6,985)

807 

1,513 

2,320 

Tax on return on ordinary activities

(192)

99 

(93)

(120)

48 

(72)


------ 

------ 

------ 

------ 

------ 

------ 

Return on ordinary activities







  after tax

749 

(7,827)

(7,078)

687 

1,561 

2,248 


------ 

------ 

------ 

------ 

------ 

------ 

Return per share

3.9p

(40.3)p

(36.4)p

3.5p

7.9p

11.4p




Year ended 31 March 2008





Revenue 

£000 

Capital 

£000 

Total 

£000 

Gain on disposal of investments




830 

830 

Movements in fair value







  of investments 




- 

2,596 

2,596 





------ 

------ 

------ 





- 

3,426 

3,426 

Income




2,626 

- 

2,626 

Investment management fee




(327)

(896)

(1,223)

Recoverable VAT




166 

434 

600 

Other expenses




(329)

- 

(329)





------ 

------ 

------ 

Return on ordinary activities







  before tax




2,136 

2,964 

5,100 

Tax on return on ordinary activities




(559)

139 

(420)





------ 

------ 

------ 

Return on ordinary activities







  after tax




1,577 

3,103 

4,680 





------ 

------ 

------ 

Return per share




8.0p

15.8p

23.8p



RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

(unaudited) for the six months ended 30 September 2008



Six months ended 

30 September 2008 

£000 

Six months ended 

30 September 2007 

£000 

Year ended 

31 March 2008 

£000 

Equity shareholders' funds




  at 1 April 2008

57,755 

55,043 

55,043 

Return on ordinary activities after tax

(7,078)

2,248 

4,680 

Dividends recognised in the period

(971)

(923)

(1,354)

Shares purchased for cancellation

(281)

(614)


------ 

------ 

------ 

Equity shareholders' funds




  at 30 September 2008

49,706 

56,087 

57,755 


------ 

------ 

------ 



BALANCE SHEET

(unaudited) as at 30 September 2008



30 September 2008 

£000 

30 September 2007 

£000 

31 March 2008 

£000 

Fixed asset investments




  Unquoted

36,462 

51,406 

52,114 

  Quoted

736 

593 

329 


------ 

------ 

------ 

Total fixed asset investments

37,198 

51,999 

52,443 


------ 

------ 

------ 

Current assets:




  Investments

906 

2,222 

861 

  Debtors

675 

854 

1,073 

  Cash at bank

11,214 

1,113 

3,722 


------ 

------ 

------ 


12,795 

4,189 

5,656 

Creditors (amounts falling due




  within one year)

(287)

(101)

(344)


------ 

------ 

------ 

Net current assets

12,508 

4,088 

5,312 


------ 

------ 

------ 





Net assets

49,706 

56,087 

57,755 


------ 

------ 

------ 

Capital and reserves




Called-up equity share capital

4,856 

4,898 

4,856 

Share premium

12,694 

12,694 

12,694 

Capital redemption reserve

299 

257 

299 

Capital reserve:




  Realised

30,631 

27,010 

27,177 

  Unrealised

(957)

9,282 

10,324 

Revenue reserve

2,183 

1,946 

2,405 


------ 

------ 

------ 

Total equity shareholders' funds

49,706 

56,087 

57,755 


------ 

------ 

------ 

Net asset value per share

255.9p

286.3p

297.3p



CASH FLOW STATEMENT

(unaudited) for the six months ended 30 September 2008



Six months ended 

30 September 2008 

Six months ended 

30 September 2007 

Year ended 

31 March 2008 


£000 

£000 

£000 

£000 

£000 

£000 

Cash flow statement







Net cash inflow from







  operating activities


835 


468 


1,407 

Taxation:







Corporation tax paid


- 


- 


- 

Financial investment:







Purchase of investments

(3,831)


(8,035)


(13,336)


Sale/repayment of investments

11,504 


4,993 


11,367 



------ 


------ 


------ 


Net cash inflow/(outflow) from







  financial investment


7,673 


(3,042)


(1,969)

Equity dividends paid


(971)


(923)


(1,354)



------ 


------ 


------ 

Net cash inflow/(outflow) before







  use of liquid resources and financing


7,537 


(3,497)


(1,916)

Financing:







Purchase of shares for cancellation



(281)


(614)



------ 


------ 


------ 

Net cash inflow/(outflow) before







  use of liquid resources


7,537 


(3,778)


(2,530)

Net cash inflow/(outflow) from







  use of liquid resources


(45)


3,751 


5,112 



------ 


------ 


------ 

Increase/(decrease) in cash at bank


7,492 


(27)


2,582 



------ 


------ 


------ 

Reconciliation of revenue return







before tax to net cash flow from







operating activities







Revenue return on ordinary







  activities before tax


941 


807 


2,136 

(Increase)/decrease in debtors


398 


229 


(232)

Decrease in creditors


(150)


(172)


(35)

Management fees charged to capital


(354)


(396)


(462)



------ 


------ 


------ 

Net cash inflow from







  operating activities


835 


468 


1,407 



------ 


------ 


------ 

Reconciliation of movement







  in net funds








1 April 2008 

Cash flows 

30 September 2008 



£000 


£000 


£000 

Short-term investments


861 


45 


906 

Cash at bank


3,722 


7,492 


11,214 



------ 


------ 


------ 

Net funds


4,583 


7,537 


12,120 



------ 


------ 


------ 










INVESTMENT PORTFOLIO SUMMARY

as at 30 September 2008


Company

Cost

£000

Valuation

£000

% of net assets

by valuation

Weldex (International) Offshore

200

3,832

7.7

Axial Systems Holdings

2,301

2,301

4.6

Envirotec

1,008

1,926

3.9

Optilan Group

1,900

1,900

3.8

Paladin Group

1,407

1,862

3.7

Stainton Metal Company

1,100

1,855

3.7

CGI Group Holdings

1,723

1,723

3.5

Pivotal Laboratories Holdings

1,000

1,542

3.1

Longhirst Venues

374

1,432

2.9

Britspace Holdings

1,763

1,425

2.9


------

------

-----

Ten largest investments

12,776

19,798

39.8

Crantock Bakery

1,061

1,384

2.8

Liquidlogic

292

1,353

2.7

DxS

841

1,306

2.6

Astbury Marsden Holdings

2,590

1,295

2.6

CloserStill Holdings

1,234

1,234

2.5

Arleigh International

480

1,082

2.2

Abermed

800

1,073

2.1

S&P Coil Products

660

1,039

2.1

Promanex Group Holdings

1,974

987

2.0

Foreman Roberts Group

3,914

978

2.0


------

------

-----

Twenty largest investments

26,622

31,529

63.4

Other investments

11,533

5,669

11.4


------

------

-----

Total fixed asset investments

38,155

37,198

74.8


------



Net current assets


12,508

25.2



------

-----

Net assets


49,706

100.0



------

-----







The above half-yearly financial statements for the six months ended 30 September 2008 do not constitute statutory financial statements within the meaning of Section 240 of the Companies Act 1985 and have not been delivered to the Registrar of Companies. The figures for the year ended 31 March 2008 have been extracted from the audited financial statements for that year, which have been delivered to the Registrar of Companies the independent auditors' report on those financial statements under Section 235 of the Companies Act 1985 was unqualified.  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 2008.


The directors confirm that to the best of their 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 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 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 period and on 19,425,440 (2007 19,640,134) ordinary shares, being the weighted average number of shares in issue during the period.


The interim dividend of 2.2p for the year ending 31 March 2009 will be paid on 9 January 2009 to shareholders on the register at the close of business on 5 December 2008.


A copy of the half-yearly financial report for the six months ended 30 September 2008 is expected to be posted to shareholders on 21 November 2008 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.


ENDS


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